I think this may be interesting to some
All-You-Can-Eat Breakfast at Tiffany's
Leigh Gallagher, 04.15.02
Retail's sterling name is going mainstream. Can it withstand the dilution?
The Tiffany & Co. store in suburban Philadelphia's King of Prussia mall was a madhouse in late December. Shoppers clutching Gap and Benetton bags clogged the aisles and elbowed one another to get to the store's self-service corner, where boxes of sterling-silver key rings, pendants and charm bracelets, many priced under $100, were stacked and preboxed in Tiffany's trademark robin's-egg blue. For customers needing service, staffers roved the sales floor passing out beepers.
If it sounds like Outback Steakhouse, that's because Tiffany is slowly and subtly embracing the middle class, a dangerous game for one of retail's most exclusive names. Over the past decade the luxury jewelry retailer--best known for baubles so aspirational that Audrey Hepburn's Holly Golightly could only gaze longingly through its Fifth Avenue windows in Breakfast at Tiffany's--has nearly tripled its stores in the U.S. and changed its promotions to highlight more lower-price wares.
"We've always had a ********ic vision of what luxury retailing should be. I would hope that Tiffany would never become the type of jeweler where you need to press a button to be admitted," says Chief Executive Michael Kowalski, a 20-year company veteran who took the top job in 1999. "Balancing ourselves on that line is the single most challenging task that we have."
The self-service corner at the King of Prussia store was new this past holiday season; so were the beepers. In February Kowalski upped his expansion plans to a total of 80 to 100 U.S. stores within the next 10 to 15 years, up from a prior 70 to 75. It currently has 44 U.S. locations and another 82 overseas. Tiffany's new 5,000-square-foot format (versus a traditional 7,500 to 10,000) will allow it to expand into smaller markets and double up in bigger towns.
Kowalski says focus groups have shown that consumers have no problem with store expansion. Nor does Wall Street. Tiffany's earnings rose at 24% compound annual growth rate from 1996 to 2001, to $174 million on $1.6 billion in sales. Shares are up sixfold since 1996 to $36, or 31 times earnings.
Big-ticket items still move: Tiffany's average engagement-ring sale in the U.S. last year was $10,000, up from $9,000 three years ago. It has sold or taken orders for all 450 of a limited-edition $22,000 Patek Philippe watch due out this fall.
But Tiffany is no longer intimidating to shoppers like Pat Fleming. A 52-year-old teacher from the blue-collar Northeast Philadelphia neighborhood of Mayfair, Fleming shopped the King of Prussia store one Saturday last month with her 22-year-old daughter, Jennifer. "I never would have thought I could afford anything from Tiffany," she says. Urged by Jennifer, she first went in to browse two years ago and was shocked to find silver pendants for under $100. Mother and daughter now own several pieces each. "I like the styles," says Fleming. "And they're affordable."
Tiffany's sales and earnings were off 4% and 9% last year, respectively, but some blame must fall on the lousy economy. In the U.S., sales at stores open longer than a year fell 8%. A steep drop in New York City tourism after Sept. 11 cut sales 15% at the flagship Fifth Avenue location, which accounts for 11% of the company's revenue.
But trading down has been a two-year trend. Tiffany's average jewelry purchase has dropped from $360 to $317 since 1999, thanks to surging sales of sterling silver merchandise--the company's least expensive jewelry and the stuff the King of Prussia shoppers were fighting over.
In the process of making itself less intimidating, Tiffany may be driving away some of its core customers. Alexis Conrad, 29, a New York City-based former project manager at TheKnot.com, a wedding Web site, used to wear a Tiffany silver heart necklace every day, but stopped. "I'd come into the office, and everyone else would be wearing it," she says. Before she got engaged, she told her fiancé she didn't want a Tiffany engagement ring. Her ring (and the diamond pendant she wears around her neck) come from a one-store jeweler in Santa Barbara.
Pamela Jaccard, a 47-year-old marketing executive in West Chester, Pa., says she spends $3,000 a year at Tiffany but winces at the concept of 100 stores. "How's that going to be any different than Baskin-Robbins?" she says. "People should have to travel to get to Tiffany. That's part of the thrill."
Tiffany still has a long way to go before it is as accessible as, say, Zales, which has 755 U.S. stores, but certain of its products--the Tiffany Heart Tag silver bracelet, for one--have become required wear in junior high school cafeterias across the country. "The brand is more stretchable than others because of its strength. But it's a very dangerous development that they're going through," says Stefan Daiberl, a director at Interbrand, a New York marketing consultancy.
That blue box? Says Cynthia Cohen of Strategic MindShare, retail consultants in Menlo Park, Calif.: "It doesn't have the ‘wow' factor of the red box with the gold Cs" of Cartier.
1837 Charles Lewis Tiffany and John B. Young found Tiffany & Young, Manhattan dry-goods emporium. Robin's-egg shade of blue chosen as trademark color.
1853 Charles Tiffany assumes control of company, renames it Tiffany & Co.
1940 Moves headquarters to Fifth Avenue at 57th Street.
1961 Paramount releases Breakfast at Tiffany's starring Audrey Hepburn, based on 1958 Truman Capote novella.
1963 Tiffany opens first branch store, in San Francisco.
1969 Opens first mall-based store, Phipps Plaza, Atlanta.
1972 Enters Japan via boutique in Mitsukoshi department store.
1979 Avon Products purchases Tiffany & Co. for $94 million in stock.
1984 Chief Executive William Chaney and team of investors buy back company in $136 million LBO.
1987 Initial public offering on New York Stock Exchange. Total U.S. store count: 8.
1993 Ends year with 16 U.S. stores; begins current phase of U.S. store expansion.
1999 Michael Kowalski becomes chief executive. Reports record sales and earnings: Revenues climb 25% to $1.46 billion, earnings rise 62%.
2001 Sales for the year drop 4%; earnings decline 9%.
2002 Begins year with 44 stores in U.S., 126 worldwide. Announces new U.S. target of 80 to 100 stores.
