Situation analysis for strategic business marketing at Signet Jewelers

Signet Group competes in the jewelry market in both the United States and the United Kingdom. The company holds the number one market share in the United Kingdom and is number four in the United States behind Wal-Mart, Zale and Tiffany (Business Wire, 2006). Signet's U.S. sales, which are 76% of total corporate sales, were $2.536 billion in 2009 giving it a 3.9% share of the $65.8 billion U.S. market (Form 20-F). UK sales were $808 million in 2009, giving the company a 10% share in that market, making it the market leader. Signet bills itself as the world's largest specialty jeweler.

Wal-Mart is the industry leader in the U.S. That channel -- the department store and discounter market -- represents about half of the total jewelry market. Specialty jewelers such as Signet, Zale and Tiffany make up the other 50% of the market, with Signet being the largest of the chains by sales. The top 10 chain specialty jewelers make up less than 25% of the total U.S. jewelry market (Business Wire, 2006). In the jewelry market, demand is driven in large part by the state of the economy, since most jewelry is considered to be a luxury item. Even non-luxury items, such as engagement rings, are subject to the economy because consumers are willing to spend less for such items. The cost of jewelry at the wholesale level has been impacted by the development of synthetic diamonds, which has reduced diamond costs at the wholesale level. In addition, discounters such as Wal-Mart have taken advantage of the industry's high gross margins to undercut the specialty retailers and drive costs down further (Business Wire, 2006).

B. Signet's sales have remained relatively stable over the past five years. The company had revenues of $3.179 billion in fiscal 2005. These sales increased over a couple of years to $3.726 billion in 2007, and have steadily declined since then to $3.344 billion in fiscal 2009 (MSN Moneycentral, 2010). The company has seen its market share fluctuate over the past years. Wal-Mart and other discounters have reduced the market share of the specialty jeweler category as a whole, and this has affected Signet's market share.

Signet was once Ratner, and covered all ends of the market, from $500,000 watches to 99p earrings. The company was forced to abandon this strategy as the result of a famous incident known as 'doing a Ratner', in which the CEO joked that the low end products were 'crap' (Ratner, 2007). As a result of this, the company was renamed and took on a medium-to-high-end focus, all but abandoning the low end segment of the market. The company has seen its gross margins improve in recent years. Pricing pressures had the gross margin five years ago at just 15%; today it is 32.2% (MSN Moneycentral, 2010). This reveals a more aggressive pricing strategy from the firm and a shift further towards the high end of the market. The company has seen its selling, general and administrative expenses increase dramatically in the past couple of years, although this coincides with the increase in gross margin so may simply represent a change of accounting policy rather than a shift in cost structure. The company has remained profitable over the past five years, with profit ranging from $358 million to $435 million. The lone exception was fiscal 2009, which saw a loss of $297 million. This, however, is attributable to a $527 million writedown, without which the firm would have turned a profit of $230.1 million, still its lowest in the past five years. By comparison, Tiffany has turned steady profits between $220 million and $323 million over the past five years, on revenues ranging between $2.2 billion and $2.9 billion, slightly lower than those of Signet. Zale's has been less profitable, including a $189.5 million loss in fiscal 2009 and flatlining or declining revenues over the past five years (MSN Moneycentral, 2010).

C. Signet's is a retailer, and its distribution runs through a number of different national and regional store brands. The stores include Jared, Kay Jewelers, Ernest Jones, Leslie Davis, H. Samuel, Marks & Morgan, and a variety of other regional names. For the most part, Signet stores compete in the same middle mass market segment, with some brands such as Ernest Jones competing in the upper middle market. Most consumers buy jewelry as an expression of love, making it a relatively discretionary purchase. Only the wedding and gift-giving segments are considered by the company to be non-discretionary, although consumers may choose to purchase non-jewelry gifts in tighter economic times. Consumers in this segment focus their buying on the holiday season, which accounts for 40% of annual sales. Nearly half of all consumers buy on credit. Signet operates in own credit, rather that working through a third party. Credit and selling policies are roughly in line with those of the competition.

With regard to promotion, Signet is able to leverage its size to use national advertising campaigns for its national brands. This includes television advertising for Jared and Kay. The company also utilizes a marketing database to help implement customer relationship marketing strategies. Signet outspends its competitors on advertising (2009 Form 20-F). Signet also focuses on the merchandising function, to ensure that product mix at its stores is consistent with the local purchasing trends and to ensure that product is available within 24 hours.

D. Approximately half of the U.S. adult population purchases jewelry in a given year. There are a couple of major demographic groups that are targeted by Signet. The most important group is comprised of relatively wealthy, older, Caucasian women. This group purchases for themselves and views jewelry as both a symbol of status and of beauty. Another key group targeted by the industry is men, who are buying for women. This is included but is not confined to the engagement and anniversary ring markets. Customers are focused more on quality and design in their purchasing decisions, with price often being a secondary or tertiary consideration. Price-conscious consumers avoid specialty jewelry retailers and shop at discounters such as Wal-Mart. Trust in the sales staff and the store is an important consideration. Jewelry is not typically an impulse purchase, although there is an element of that with women's jewelry. Almost half of purchases are done on credit. Marketing is focused on driving demand from women, even if men are doing the purchasing. This emphasizes the gift-giving/romance component of jewelry purchases. Signet spends more on marketing than any of their competitors and has superior advertising impressions to show for it.

E. Signet covers most of the market at the middle and upper mass market, and ventures occasionally into the high end of the jewelry market. This approach follows on the abandonment of the low end in the 1990s. For the most part, pieces have low customization, and a wide range of pieces are offered throughout the Signet family. The company places emphasis on service and delivery knowing that trust is an important factor in the buying decision. Signet's logistics investments allow it to deliver pieces within 24 hours to its stores when needed. The company's performance is comparable to its competition. There is little evidence that Signet outperforms other specialty jewelers, but in general they outperform the discounters. All firms in the industry have undergone similar revenue fluctuations in recent years, indicating a similar standard of performance.