A recent Business Week article pitted Tiffany’s Silver Bauble collection against its high end jewelry to determine what was actually the cash cow for the company. As a lover of all things Tiffany’s – there’s just something about that blue box! – I read intently worried my affordable trinkets might soon disappear. What will I treat myself with for those big accomplishments? Will something other than that box really feel like a reward? Despite the drool factor of the high end gems, I just could not see myself upgrading my treat past the silver bauble price tags. As the panic attack set in, I finally started to focus on the words in the article, and not my thoughts, and was happy to see these baubles will not going anywhere.
It seems I’m not the only girl who can’t stomach the super high end gem tags but loves a good silver bauble treat every now and then. Tiffany’s silver jewelry has actually become a stable market for the company, and through most of the recession has assisted with profits. In fact, I was surprised to see that the profit margin, due to the lower cost of labor, is actually higher for the lower prices silver jewelry. As noted below, it appears the fun, silvery jewelry lines may be here to stay:
“Problem is, glam items aren't as profitable as cheaper adornments. The cost of materials and labor to make a diamond-and-platinum necklace is high relative to the price Tiffany can charge; it can mark up less expensive jewelry more. In general, diamond jewelry has a gross margin of about 50%, vs. 70% for silver goods, estimates JPMorgan Chase. With Tiffany saying the "greatest growth" is coming from products with precious stones, lower-margin items likely account for a bigger slice of the pie. That helped send Tiffany's gross profit margin to 53.5%, from 54.1%. It doesn't sound like much, but in the jewelry biz, every fraction of a point counts.”
It appears that Tiffany’s strategy, whether to attract girls younger or appeal to the entry level working class female, of creating a few affordable and trendy lines might be just what the recession doctor ordered. When money is tight we know that people “treat” themselves less – less salon time, less pricey dinners, fewer nights on the town, and even less accessorizing – after all, it’s hard to justify those little extras with all the uncertainty. Even those big accomplishments or promotions may cause us to put the reward off and err on the side of money savings. But with the silver baubles, Tiffany’s is still appealing to us by allowing a smaller, guilt-free purchase. This will keep us in the door during tough times, and will most likely create the blue box obsession that should help lift the more expensive lines back up post recession. With graduation and hopefully a job on the horizon, I’m glad to hopefully find a guilt free bauble reward!
Bridget Wilson
Nice job, Bridget. I think your example further illustrates the power of a brand and its associations. When people think of Tiffany, they automatically visualize a blue box and the grandeur and prestige associated with that name. In fact, I know people who not only keep the Tiffany item that was purchased for them (or by them), but also hold on to the box itself in which the Tiffany product was placed. More than likely this act is due to the emotional high one feels towards the Tiffany brand. Additionally, the appeal of the “blue box” indicates the power of the packaging, one of the elements of the 4 Ps that Tiffany un-disputably got right. Admittedly, I have not purchased anything from this particular company, nor have I received an item that carries its storied name, but its legacy no doubt has carried forward. And the sheer willingness for individuals to purchase “anything Tiffany” speaks volumes about the continued power of the brand, despite these current economic times. Finally, kudos to Tiffany & Co. for realizing the unaffordable nature of their higher-end products and capitalizing on lower-tiered offerings that speak to consumers, particularly those who desire an affiliation with the Tiffany brand but who are unwilling to break their bank accounts in order to do so.
ReplyDeleteD.J. Vaughn