Summary
Despite some evidence to the contrary, fine jewelry may be less important to Walmart. If so, that would be good news for small specialty jewelers if they choose to take advantage of the opportunity. Here's more.
Analysis
Just what Walmart’s plans are for jewelry remains a mystery. Despite reports that the company is currently giving “prime placement” to the jewelry category in some of its stores, there are too many examples of the opposite happening to believe the reports are indicative of any strategic emphasis whatsoever. In fact, there’s probably more evidence to the contrary.
It ‘s difficult understand what’s happen to the jewelry category at Walmart. That is, unless you study product changes that are occurring in the company’s stores in combination with company’s new store –remodel programs. For instance, Walmart began moving jewelry counters to the front of most of its small town stores as they transitioned to Supercenters in the late 1990’s. Now, many of those stores are being renovated. What is interesting about the process is that in the case of a total renovation or relocation, jewelry is often losing its upfront position to consumer goods and household products, which are strategic categories for Walmart. In contrast, the jewelry department isn’t moving in many stores that are just being refurbished. Clearly, Walmart is carefully prioritizing its cap-ex to maximize the company’s near ROI first and medium term product strategies second.
Jewelry positioning in its urban stores are likely undergoing similar changes, but that doesn’t preclude upfront placement if the sales warrant it. The point, ROI is driving many of these decisions. So, if the cost of moving the jewelry show cases into the lady’s apparel department means the company has to reduce its return or increase the payback period, planners will leave the category where it is. Regardless, it would be wrong to conclude jewelry is getting “prime placement”. Product variety is a similar story.
In the case of a complete remodel, Walmart has probably allocated more floor space to all jewelry, while reducing linear showcase space devoted to fine jewelry. By fine jewelry, I mean karat gold, semiprecious, precious, and diamond jewelry. In particular, in many completely remodeled stores, diamond rings and jewelry are now presented in multi-shelved, deep base showcase located at eye level off-center to the main line of showcases.
The focal point of the jewelry presentation is silver, stainless steel, and large pieces of costume jewelry. The overall effect is quite impressive, but clearly reduces fine jewelry to a secondary category. The additional floor space is devoted to inexpensive watches, expanded lines of costume earrings, and a variety jewelry/fashion accessory items, most selling for under $50.00.
In contrast to other analysts, I would be surprised if Walmart was prepared to increase its total invest in fine jewelry today. One reason is the environment. Clearly, consumers are more value conscious than ever and the high cost of gold keeps even the lowest quality jewelry items above Walmart’s critical price points, despite the company’s low margins.
Another reason is the company’s decision to move its jewelry department to New York City under the control of its Fashion/apparel buying office. Some may see that as renewed interest in fine jewelry. Another view is that fine jewelry will take a back seat to fashion and accessories in terms of both inventory investment and showcase space, which appears to be exactly what is happening.
While Walmart may sell more jewelry than any other retailer in North America, its estimated $2.9 billion in sales represents only about 0.2% of its $405 billion in total sales. Clearly, it is less important to Walmart than the 22,000 plus fine jewelers that makes up the bulk of the specialty retail jewelers in the US. In fact, in a twisted turn of fate, Walmart’s interest in higher ROI could benefit smaller jeweler’s sales line if they seize the opportunity.
