Adams jewelry.

Khanfar, Nile ; Loudon, David

CASE DESCRIPTION

The primary subject matter of this case concerns the operational philosophy and actions of a small retail jewelry store. Secondary issues examined include the nature of the jewelry and diamond market, selecting an appropriate target market, developing a merchandise mix to satisfy target customers, pricing and promotion strategies for a small retail jeweler, and store location decisions. The case has a difficulty level of four, appropriate for senior level. The case is designed to be taught in one class hour and is expected to require one hour of outside preparation by students.

CASE SYNOPSIS

Jack Adams owns and manages an independent jewelry store in Florida. He is facing a number of issues concerning the store's competitive effectiveness in the local jewelry market. The immediate decision is whether he should move from his long-established store location. Although his store is not very up-to-date, it is in a high-traffic location and receives a lot of exposure. He caters to a middle class clientele, but fancies his business as a higher quality, upscale operation. Thus, there are issues of image and positioning in the local jewelry market among competitors. Other questions concern his lack of effective promotion activities and hours and days of operation. All of Jack's decisions relate to the issue of his customer service and marketing orientation. The case also incorporates global dimensions as it describes the nature of the diamond market.

INSTRUCTORS' NOTES

Recommendations for Teaching Approaches

This case is designed for use in a variety of undergraduate business courses to help students learn about the operation of a typical small business organization. The case offers students an opportunity to evaluate the marketing philosophy and actions of a small retail jewelry store. It provides insights into the jewelry and diamond markets and describes the operations of a small local independent retailer in this sector. Students may critique the retailing approach and develop improved strategies for the small business. It is very suitable for a written report and/or oral presentation by students. It can also be used for examination purposes. The case lends itself to a variety of Small Business/Entrepreneurship courses, Marketing courses (such as Retailing and Services Marketing), and Business Strategy. Faculty and students should access one of the many diamond industry websites, such as www.gia.edu, for a comprehensive discussion of diamond characteristics, including cut, carat, color, clarity, and prices. This will aid class interaction on these matters. Faculty may want to cover the following elements in their discussion of the case.

DISCUSSION ISSUES

Planning

Ask students how effectively Jack Adams appears to plan for his store's future. Jewelers need to plan for selling seasons such as Mother's Day, Valentine's Day, and, most importantly, Christmas. Planning includes forecasting for the future based on current data received from the market. Unfortunately, Jack not only failed to plan for inventory but also failed to open Adams Jewelry during the busiest shopping day of the year, the Friday after Thanksgiving. Another weakness in Jack's planning was that he did not anticipate changes in the global diamond market. Jack should have detected the price increase trend in diamonds and gold. Rather than being reactive, he should have been proactive.

He could handle financial issues more effectively. This includes finding better and more flexible methods to finance new inventory purchased from wholesalers. As the case mentioned, customers were turned away and bought from other jewelry stores as a result of lack of inventory (especially larger diamond stones).

Jack should also evaluate his priorities. Is it more important to invest $15,000 to grow the firm and improve its effectiveness in numerous ways, or to finance changes in his personal situation, such as adding a room to his house or buying a new truck? The business is what pays for other bills, not the other way around.

Environmental Scanning

Ask students to critique Jack Adams' effectiveness with regard to environmental scanning. Have them provide specific examples where they feel the process was weak. It is important to scan the environment to gather information regarding potential threats and opportunities. Jack did not keep up with the competition and pay attention to who was entering and exiting the local market. Several stores emerged in Jack's city after he opened Adams Jewelry. These stores include Marvin's, Transitions, The Jewelry Place, Roland Samson, and several others in the regional mall. He should ask himself "Why are they entering the market and what are they doing right to grow that fast while I am not?" He should also try to find opportunities available in the market. An example includes visiting the stores in the mall and asking for their service and repair business. The case illustrated the lucrative nature of this service.

Another point that scanning will reveal is what style of jewelry and designs are selling in the market. People's tastes change over time. What worked for customers ten years ago may not work today. Therefore, carrying beautiful and desirable designs is as important as the high quality stone that is embodied in the design.

Customer Orientation and Service

Ask students to illustrate examples of good and bad service cited in the case and explain how that confirms the existence or lack of a customer orientation as part of the marketing concept. Although the staff is congenial with customers, Jack should seek training on personal selling. He should learn to start conversations with customers and not be so serious and introverted. He needs to establish greater rapport and share his expertise with customers, particularly given his valuable diamond knowledge. He should also learn how to deal more effectively with wholesalers. For example, Jack needlessly low-balled the part-time wholesaler who offered to sell him jewelry bought from pawn shops at 30% below wholesale value. Jack does not fully understand that wholesalers are not only suppliers but can assist him in his marketing. They can refer customers and, perhaps most importantly, offer their insights about the market to the retailer. Wholesalers are more in touch with the jewelry market in terms of supply and demand than are jewelers. Also, it is important to treat people fairly and recognize that the source of the merchandise and the price that was paid for it should have no bearing on the price that should be offered for it. The case mentioned that Jack offered the wholesaler a price equivalent to 50% below wholesale value for his merchandise just because he knew that the wholesaler's merchandise was bought from a pawn shop and the cost was assumed to be quite low. By doing so, Jack passed up an economic opportunity to make a higher return on the merchandise if he bought it. Instead, the wholesaler sold to another store for a more equitable price and probably will not consider Jack for future dealings.

Image and Positioning

Ask students to describe the image and positioning they believe exists for Adams Jewelry. Ask them to provide evidence to support these perceptions the market may have. Jack wants to position his products as medium- to high-quality. However, his customers are upper-lower to middle class; and his strategy has been to offer a low-cost approach for customers. Jack would like to attract more affluent customers to his store. There are two issues involved in the store's current image and positioning. First, due to the higher quality of the jewelry Jack wishes to buy and sell in his store, he will have to demand a higher price for them than usual. The problem is that his positioning strategy does not fit with his customer profile. His customers are looking for inexpensive items that they can afford and also want a flexible payment method. Second, factors such as Jack's comfortable attire at work (wearing shorts), the interior of the store (shabby carpet, discolored window drapes, and dated display fixtures), and Ralph's son (Barry) appearing behind the sales counter do not reflect a high-quality jewelry operation. If he wishes to position his products as high quality and wants to attract affluent customers then he must change his and his store's appearance.

Promotion

Have students evaluate the promotion philosophy of Adams Jewelry. Ask them to recommend a course of action that would build Jack's business while conserving his meager resources. Jack needs to pay very close attention to promoting his merchandise. He should have conducted a marketing audit to find out why his previous promotional activities did not work and why he does not sell more jewelry on his website. Seemingly minor issues such as proofreading copy on his website may be significant stumbling blocks to attracting more upscale and educated customers.

The electronic sign purchase illustrates an important issue. His action shows that he does not carefully evaluate feedback and advice or recommendations from others who may have better jewelry marketing insights than he. He was advised to purchase a sign to place outside; instead he bought a less expensive (but rather ineffective) one and placed it inside. The issue of affordability was more important than promotional effectiveness.

Another important issue to mention is that Jack should scan competitors' ads in the local media, including newspapers, TV, radio, and also note event sponsorships by them. By doing so he will know the selection of inventory they carry and their special prices. He will also know if a newcomer in the market is having a grand opening and what prices, etc they are offering. Jack should also visit the competition. He needs to get out from behind his repair bench and see what the competition is doing. He apparently has little direct knowledge of his adversaries.

He should consider a low-cost, guerilla-style ad campaign that makes the most of his lack of dollars. He should focus on ways he can generate favorable word of mouth and buzz while not breaking the bank. However, many issues need to be resolved prior to doing anything. For instance, any advertising in an upscale manner will not be congruent with the current look of the store, Jack's casual attire, and his merchandise mix.

Jack might also want to consider having only a promotional website rather than one designed to also sell merchandise. Since the latter is greatly more complicated, he may simply want to switch the orientation to an Internet presence that favorably showcases his store, location, personnel, services provided (illustrating the fine quality of jewelry craftsmanship that is provided by the store), and perhaps quotes prices for standard work.

Location

Ask students to evaluate whether Adams Jewelry should make the move to a new location or stay put. Moving to a new location takes thorough planning and preparation. A careful examination of the current situation will probably reveal that Adams Jewelry' current location is better than the one to which he is planning to relocate. Saving a small amount of money in rent should not be an overriding concern. Given that the difference in rents amounts to the sale of one typical ring each month, the rent costs should not be the deciding issue. More important is the issue of the store's image and customer convenience. The current location can probably generate more money assuming that the factors contributing to the problem are resolved. If Jack were to move to a perceived "classier" location, will it make a big difference? His present location, once remodeled, could accomplish his goals. The limiting factor seems to be not so much the store's location, but Jack's marketing and business philosophy. If he were to continue wearing shorts to work, stick with his dated display cases, etc., a new location will not help greatly with the image and attracting a more upscale clientele. Also, the case alludes to a limited amount of store parking. If Jack and his mother occupy the two spots in front of the new store, where will customers park?

Nile Khanfar, Nova Southeastern University

David Loudon, Samford University