I was recently fortunate enough to be invited to the GIA Leadership Program at Harvard Business School. The course was a tremendous opportunity to interact with 50 people from the jewellery industry worldwide. Apart from the significant American contingency, there were attendees from around the world including India, Japan, UAE, Germany, France, Italy, Israel and even a couple of us from Australia.
The method of teaching employed by the Harvard Business School is one of case studies. The course was not structured around the jewellery industry, but rather focused on digital innovation. We were given a number of case studies to study before we arrived. Each day we would work through them, analyse the businesses named and seek to identify the key pivot points which allowed these businesses to transform or fail.
We looked at Amazon, Flipkart, Alibaba (and its off-shoot Ant Financial), as well as models like Uber, the monolith GE and the retailer Target, just to name a few.
I could regale you with incredible stats (which are fun and I included a few below), but this will miss the key points.
We are in a transformational age, which is so earth shattering that I can’t really do it justice in this article. So, I will share with you a few morsels and try and explain why I use such confronting language.
The digital revolution as we studied it has to do with companies creating their own eco-systems which we enter. The most obvious are Google, Apple and Facebook. These companies employ two strategies - “value creation” and “value capture”. Historically, a business would offer a product or service, promote it, and you would either buy it or not. Today these companies focus on creating tools which, in effect, are free for us to use. Think of Gmail, Google Maps and Google Translate. Apple gives us iTunes, Maps, Podcast, Facetime and iCloud. Facebook speaks for itself, creating community groups and a phone function (it helps that they bought WhatsApp) to name but a few. As we enter their eco-system at no charge, depending on what we do, they now ‘capture value’. This can be by way of data mining, advertising, downloads or purchases. Imagine how easy it would be for Google to say to all of us that they will now be charging you $1 a week for the use of Gmail. That could be worth $52 billion per year to them (as they have a billion active users).
What we learned is that the model for giving things for free, “creating value”, is incredibly powerful. All of these mega companies (and yes, the monster of them all Amazon which I’ll expand on later) are focused on collecting our data. This, coupled with analytics, provides insight into our preferences, and ultimately allows them to craft a funnel which tracks our behaviour online and feeds us exactly what we think we want to buy. It was interesting that at Harvard we were asked “do we like being targeted online”. The millennials in the class said “absolutely - just show us what we want to see, you know what it is”. The rest of us initially shook our head, but then backtracked when we were reminded that when we search for a holiday online and suddenly a good deal pops up for a hotel we actually don’t mind that at all.
When we read almost daily how Amazon are expanding and that all the big retailers are seriously concerned, they have reason to be. One of the class members at Harvard described their experience with Amazon. They put a range of diamond rings on the site. Immediately they started to sell out. Within a few days Amazon started to ask a whole variety of questions and they started to feel like Amazon was making it more difficult for them. A week after that their sales started to drop. They looked up their post on Amazon and low and behold, Amazon had made an identical copy of the ring. They simply undercut them on price and shifted their offering down the list. All the questions they had asked was just to provide Amazon with the marketing material needed to push them to the top. Needless to say they just pulled out of Amazon after learning a good lesson. This is typical of Amazon’s behaviour. Their analytics pick up on any and every successful offering. Once they understand the offering, they either go direct to your supplier or find one who will undercut you to enable them to sell it cheaper.
Don’t think that Amazon is only about selling cheap, they are an incredibly diversified company. Here are some of the crazy numbers: they have 300 million active users; they have a subscription called Prime which gives a whole variety of benefits to the buyer such as 1 million eBooks free to download; 70% of all their sales are done on mobiles; they have 30 million clothing items for sale; they sell an item every 35 seconds; in 2015 they launched Amazon exclusives, which provides hundreds of emerging brands, or handmade at Amazon selling genuine hand made products created and sold from artisan’s…..hmmm I wonder where jewellery fits in here.
Well when you sell $136 billion per year you get a sense of their power and magnitude.
There are two things which were bouncing around in my head during this week. How much analysis does the typical jewellery retailer really do? And how can we, as the diamond jewellery industry, compete with such giants? I can tell you that I saw some tremendous analytics from Retail Edge software, demonstrating how they can provide their users with a variety of industry benchmarking in terms of sales and margins.
Analysing one’s data doesn’t have to be some massive data set or require artificial intelligence. It could be just normal intelligence . It’s going to depend on the complexity and answers you are looking for. Are you looking at your customers previous sales and analysing what you could recommend to them? Are you being proactive? Are you just waiting until they come into your store because you don’t want to be pushy? Bottom line, if you are not touching your customer multiple times per year, you won’t have any customers at the end of the year because your competition knows what they eat, watch, like and do 24/7. The internet retailer eco-system is working as long as that phone is on. The mantra of all eco-systems and web retailers is how can they make it as easy as possible for the consumer to deal with them.
We never believed the consumer would buy a diamond sight unseen for $20k or $50k. But I can tell you that in my insurance business, we see these numbers weekly for diamonds purchased on the web.
So here is a simple question I pose to you. When Amazon recommends a pair of GIA certified diamond earrings for an upcoming birthday and we know that there is such an enormous trust already built up, do you really think there will be any hesitation to make the purchase even at a few thousand dollars?
The answer to the above is one which was discussed at a recent meeting. If you have deep pockets and a lot of free time, you might be able to employ a whole variety of consultants to provide you the necessary tools like the big guns. If not, you may look to join an organisation, a group of colleagues or trade body, who you feel has the vision and desire to leverage the group in bringing the necessary skills and technology to you and to show you how to combine these tools into your business. The difference is that a group or trade body requires you to give something back, it can’t be a one-way street. You may look to mentor a young jeweller, or teach some business skills you have learnt over the years to someone new in the trade. That person might be from interstate so you can remove the fear factor of creating more competition on your door step.
I know these are big and daunting issues and I have only scratched the surface. The pace of change isn’t slowing down and you can’t afford to wait to take action or get involved.
Participating in the program at Harvard both opened my eyes and taught me a number of new things. It also confirmed what I have been preaching for a while.