“The Link”
Chelsea Nabergall - Isabella Espinal - Maria Brady - Oudulin Chen FASM 415 - Spring 2015
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Table of Contents I.
THE CREATIVE BRIEF
Overview of Tiffany & Co. Company History Mission/Vision Statement Ownership Structure & Revenue Growth Plans SWOT Analysis Current Positioning in the Market Price/Accessibility Map Unique Point of Difference Current Placement Channels of Distribution Sales Volume Distribution Distribution Models Communication & Promotional Initiatives Annual Advertising Expenditures Advertising Activities CRM Activities Business Issues & Objectives Current Problems/Obstacles Strategic Initiative Goals
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Market overview 28 Retail Sales Volume Cooper Hewitt Initiative Target Customer Identification Porter’s 5 Forces Analysis 29
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THE NEW STRATEGIC INITIATIVE Key Objectives 27 Distribution Marketing & Communications Justification Benefits Technology & Implementation 30
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MARKET ANALYSIS
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COMMUNICATION PROMOTIONAL FINANCIAL & PLANS 3
Executive Summary Since its founding in 1837, Tiffany & Co. has defined style and celebrated the world’s greatest love stories. With over 175 years of expertise in matters of the heart, Tiffany is there for everything from choosing the perfect ring to creating the perfect proposal. Tiffany & Co. is committed to providing a lifetime of the finest customer service. Through this initiative, we plan to take advantage of the absence of in-store technology to provide an even higher level of customer experience.
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Company Overview 6
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History In 1837, Charles Lewis Tiffany and John B. Young founded Tiffany & Young. Within the same year, the company introduced what became the company’s trademark, Tiffany Blue Box. Three years later, during the 1840’s, Tiffany & Young broadened their product mix to include silverware, timepieces, perfumes, and other luxury goods. In 1845, the company began selling jewelry and also published their first mail-order catalog, The Tiffany Blue Book. In 1851, Tiffany & Young added the design and manufacturing of silver to its business with the purchase of silversmith John Moore. Two years later, Charles Lewis renamed the company Tiffany & Co.
Mission Statement “To be the world’s most respected and successful designer, manufacturer and retailer of the finest jewelry.”
Tiffany & Co.’s first location was on Fifth Avenue in New York, and in 1963, the company grew to open more locations in San Francisco, and later established operations in Japan. In 1987 Tiffany & Co. was listed on the New York Stock Exchange, and in 1999 the company launched its e-commerce site. Shortly after the Tiffany’s acquired Little Switzerland, a specialty retailer of watches, jewelry, china, crystal, and giftware. In 2003, Tiffany & Co. introduced their Tiffany Legacy collection featuring diamond engagement and wedding rings.
8 Company Overview
Company Overview
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SWOT Analysis
Ownership
Structure & Revenue STRENGTHS Tiffany is the parent of Tiffany and Company that sells fine jewelry and other items that it manufactures or gets manufactured by others to its specifications. The company operates in the American, European and Asia-Pacific regions. Tiffany’s stores are located strategically based on the demographics of the area to be served, consumer demand, and the proximity of other luxury brands and existing company locations.
Strong brand recognition
In 2014, Tiffany recorded revenues of $4,031.1 million, an increase of 6.2% over fiscal year 2013. For FY2014, the Americas, the company’s largest geographic market, accounted for 47.8% of the total revenues. The company has organized its operations into five segments, based on geographic presence. However, the company has also provided a break-up of revenues by product categories. Tiffany generates revenues through four product categories: fashion jewelry (39.8% of the total revenues in FY2014), engagement jewelry and wedding bands (29.3%), statement, fine and solitaire jewelry (23.1%) and all other (7.8%).
Average price of products is low
Strong sourcing and manufacturing capabilities Brand name synonymous with high quality Strong presence in the direct selling channel increases potential customer base
WEAKNESSES Declining profitability Distilled brand image
Future
Growth Plans
OPPORTUNITIES
Increasing presence in the fast growing Asian luxury market, especially China As part of Tiffany’s long-term strategy to expand its store locations, management plans to add approximately 12 -15, Company-operated stores in 2015, with the majority of expansion planned in Asia-Pacific and the remaining in the Americas and Europe. The Company currently operates e-commerce enabled websites in 13 countries as well as informational websites in several additional countries. The Company invests in continuing website enhancements and intends to evaluate expanding its e-commerce sites to additional countries in the future.
10 Company Overview
Low digital competency
Positive outlook for the global retail industry Implementation of in-store technology to drive digital competency
THREATS Increased counterfeit crime will hurt brand image and will convert into losses Intense competition pressurizes margins Increased labor wages in the US Company Overview 11
Strengths
Strong s ou rc ing and m a n u fa c t u r i n g c a p a b i l i t i e s Tiffany & Co. has established strong sourcing and manufacturing capabilities proactively over the years. In recent years, about 60%–70% (by dollar value) of the polished diamonds acquired by Tiffany were produced from rough diamonds. Tiffany & Co. has established diamondprocessing operations in Belgium, Botswana, Mauritius, Namibia, South Africa and Vietnam. These diamond-processing operations engage in the purchase, sort, cut and/or polish of rough diamonds for use by Tiffany & Co. Direct sourcing of raw diamonds from the mines warrants access to rare and high-end diamonds supplies. It also allows better margins as the middlemen are eliminated.
Weaknesses
Decli n i n g prof i t ab i li t y The company witnessed a decline in its profitability in the recent years. Although Tiffany’s revenues increased 6.2% in FY2014 over FY2013, the operating profit and net profit declined significantly. The operating profit of the company was $304.3 million in FY2014, a decrease of 56.4% compared to FY2013. The net profit was $181.4 million in FY2014, a decrease of 56.4% compared to FY2013. On the other hand, the company’s competitors have registered a strong growth in profitability. Therefore, declining profitability may have an adverse impact on the company’s ability to compete in terms of price and to invest in future growth prospects.
In order to have better control over the quality of final goods, the company itself manufactures approximately 60% of Tiffany & Co. merchandise sold. The remaining, which includes mostly non-jewelry items, is purchased from third parties. Internal manufacturing maximizes efficiency, which is beneficial from the cost and the quality perspective and also helps in maintaining the positioning. Additionally, the quality image of Tiffany’s brand can be better preserved as these capabilities enable quality control.
Opportunities
Br and nam e s yno nym ou s w i t h hi g h qua l i t y
The global luxury goods market has been growing at a fast pace driven by strong growth in the Asian markets. Especially in China, due to the quick economic development and higher disposable income in the hands of customers, the demand for luxury goods has been seeing strong growth over the years. China has become a key market for luxury retailers with an attractive growth rate because of its large population, high number of densely populated large cities, growing affluence, and local consumers’ taste for luxury. According to industry estimates, Chinese consumers purchased more than 45% of all luxury goods in the world in 2013. Furthermore, China is projected to become the world’s largest luxury goods market by 2020. Also, according to MarketLine estimates, the Asia-Pacific apparel, accessories and luxury goods market grew by 5.8% in 2012 to reach a value of $553.6 billion. In 2017, the market is forecast to have a value of $823.6 billion, an increase of 48.8% since 2012. China accounts for 42.6% of the Asia-Pacific apparel, accessories and luxury goods market value.
Tiffany & Co. is one of the most well-known luxury brands all over the world. The company was ranked among top 50 US retail brands in 2014 by an industry source specializing in brand services and activities. Tiffany & Co. was also featured among the world’s best corporate brands list released by another industry source in 2014. The brand’s strength stems from consumer perceptions. Consumers associate Tiffany & Co. with high-quality jewelry, in particular diamond jewelry. The classic positioning of Tiffany’s product line also supports the brand. The distinctive packaging materials, especially the Tiffany blue box used by the company also adds to its brand value. The company’s management undertakes several other measures to support Tiffany’s brand. Its stores are located in some of the best ‘high street’ and luxury malls. Although these locations are expensive and command high maintenance, they are necessary because they associate the brand with luxury. In addition, Tiffany & Co. employs knowledgeable professionals in its stores who, in turn, provide excellent service to customers. Most of the Tiffany’s advertisements enable it to support the brand’s association with luxury, sophistication, style and romance. Quality, reputation, customer perception, professional sales advice, and excellent shopping experience are some of the most important factors that drive customers’ decisions when buying jewelry. Strong brand name also enables Tiffany & Co. to charge a premium for its merchandise.
Strong Pre s e nc e in the d i re ct s e l l i n g cha n n e l i n cre a s es poten ti al cu stomer b as e Apart from the retail stores, Tiffany’s direct marketing consists of Internet and catalog sales. The company offers a wide range of products through its websites, www.tiffany.com, www.tiffany.ca, www.tiffany.com.au, www.tiffany.co.jp, and in other countries in Europe through its websites, which are accessible through www.tiffany.com. The company also distributes catalogs of selected merchandise to its exclusive list of customers in the US and Canada. The Internet and catalog channels have been gaining popularity in recent years as they offer a more convenient shopping experience. Tiffany’s multi-channel approach has been replicated across various geographical markets to attain similar advantages as in the US market. Through this strategy, Tiffany is able to address a large potential customer base and also accommodate the varied preferences of their customers. 12 Company Overview
Increas i ng p res ence i n t he fa st g row i n g A si a n l u x u r y ma rket , e sp e c i a l l y C hi n a
Tiffany has been focusing on increasing its presence in the emerging markets. In FY2014, the company opened seven stores in Asia-Pacific. As a result of this, the company’s revenues increased 16.6% in FY2014 from this geographical segment, the highest from any geographic endeavor. In FY2014, Tiffany generated 23.4% of its revenue from the Asia-Pacific region. The strong growth in the luxury markets in emerging markets will facilitate increased revenues.
Pos i ti ve ou tlook for the g l o bal t r ave l ind ust r y The travel and the jewelry market are intricately linked. Stores located at travel locations such as airports allow luxury brands to target customers when they are likely to have spare time, and would be looking to shop for gifts. These locations also have the advantage of fewer non-retail distractions. Thus, the increase in global travel industry can lead to growth in sales at these stores. According to industry estimates, the global travel industry is expected to grow at a rate of 5.4% per annum over the next 10 years. Furthermore, China is expected to surpass the US at the world’s largest business travel market by 2016 according to industry sources. Tiffany has been expanding its presence in the emerging nations in the recent times. By expanding its presence on the terminals of some of the key airports in the world, Tiffany can strategically tap the demand from its prime target audience. Company Overview 13
Threats Increased counterfeit crime will hurt brand image and will convert into losses The market for counterfeit goods and accessories has been growing world over, and in turn, affecting sales of branded merchandise. According to the Intellectual Property Rights (IPR) Seizure Statistics by Customs and Border Protection (CBP) Office of International Trade, the number of IPR seizures in 2013 reached 24,361. The counterfeit trade in watches/jewelry accounted for 29% of the total manufacturer’s suggested retail price of the seizures in 2013. Tiffany has been exposed to the counterfeit crime in several instances. For instance, in 2013, Tiffany filed a lawsuit in Florida Federal Court against 36 websites for allegedly selling counterfeit versions of its products. In the same year, Tiffany filed a lawsuit in the US District Court for the Southern District of New York against Costco for allegedly selling counterfeit versions of its diamond engagement rings. Counterfeit crime is very difficult to stop especially with the advent of Internet where the sellers identity can be undisclosed. As can be seen in the lawsuit of Tiffany against eBay few years back, wherein the court did not hold eBay responsible for the sale of counterfeit Tiffany products on its website by third parties, the company has limited amount of power to exercise control on third party selling sites and this will increase the vulnerability of Tiffany’s brand to counterfeit products. The continued sale of counterfeit merchandise can have an adverse effect on Tiffany’s brand by undermining its reputation for quality goods and making such goods appear less desirable to consumers of luxury goods.
Intense c o mpetitio n pre s s u r i z e s ma rg i n s The global jewelry industry is highly fragmented and competitive. Tiffany’s major competitors are other specialty jewelers like Blue Nile, Zale Corporation, and Signet Jewelers. In addition, the company also faces competition from other retailers including department stores, discount stores, apparel outlets and Internet retailers that sell jewelry. The company also faces intense competition from the new entrants who are directly competing with Tiffany, as well as from many top-tier luxury brands that are targeting jewelry market. The company competes on the basis of the brand’s reputation, customer service and distinctive merchandise, and does not engage in price promotional advertising. Competition for engagement jewelry sales is also intense. If Tiffany’s competitive position deteriorates, it will affect the sales of its products, and the company’s operating results or financial condition could be adversely impacted.
Increasi ng l abo r wag e s i n t he U S L a b o r wa g e s have b een r i s i n g i n the US In recent times, tight labor markets, increased overtime, government mandated increases in minimum wages and a higher proportion of full-time employees are resulting in an increase in labor costs. The legal minimum wage rate in the US, which remained at $5.15 per hour since 1998, increased to $5.85 per hour in 2008. It further increased to $6.55 per hour in 2009 and to $7.25 per hour in 2010. Many states in the country have even higher minimum wage rates than the legal minimum wage rate due to the higher cost of living.
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Current Positioning in the Market 15
Perceptual Map
Justif ication The perceptual map of our luxury jewelry competitors and ourselves is based on accessibility and digital competency. Tiffany and Co. finds itself high on accessibility with 122 stores in North America, just behind Chopard with 134. The leaders of accessibility on the right quadrants have points of sale ranging between 134-28 and are neighboring each other, dominating the sector. The second comparative analysis focuses on digital competency based on information from L2.com in which Tiffany falls significantly behind its major competitors. The gap encourages the company to take action and fill the gap will technological advancements that provide better services to our customers demands and market expectations. The Link initiative will set Tiffany in the path of implementing more technology to its retail strategy and join the upper right quadrant to better compete with other brands like Cartier and Chopard.
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Current Positioning in the Market
Unique Point of Difference Tiffany’s uniqueness and differentiation from its competitors comes from its great customer service and ability to engage with the customer across many different marketing channels, including retail locations. Tiffany’s is also recognized as one of the most technologically driven high-end jewelers and dissimilar to other competitors is committed to obtaining precious metals and gemstones and crafting their jewelry in ways that are socially responsible.
Current Positioning in the Market
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Current Placement
C han n els of Di str i but io n Tiffany & Co.’s current operating segments include brick-and mortar stores, e-commerce, catalog, business-to-business, and wholesale operations. Retail sales in the Americas are transacted in 122 Company-operated TIFFANY & CO. stores in the United States. The Company distributes a selection of its products in the U.S. and Canada through the websites at www.tiffany.com and www.tiffany.ca. A smaller percentage of sales are also generated through catalogs that the Company distributes to its exclusive list of customers in the U.S. and Canada. Business-to-Business sales are made through sales executives for purposes such as trophies and products designed for the specific customer. Most of these sales in the America’s occur in the US.
VOLUME OF SALES
Sales Volu me Di stribut io n
$ 4,031.1 M
The United States is the largest market for Tiffany among the American countries.
BRICK & MORTAR
295 locations E-COMMERCE
13 countries 18
Current Placement
In Asia-Pacific, Tiffany’s retail sales are through their company-operated stores. There are currently 26 stores in China, 14 in Korea, 9 in Hong Kong, 8 in Taiwan, 6 in Australia, 5 in Singapore, and 2 in both Macau, and Malaysia. As well as retail stores, the company operates an e-commerce site in Australia. In Japan, Tiffany’s retail sales are transacted through 54 company-operated stores. A selection of the company’s merchandise is offered through their Japanese e-commerce site. The UK contributes to nearly half of Tiffany’s European regions sales. The company operates 10 stores in the UK, 7 in Germany, seven in Italy, 4 in France, 2 each in Spain and Switzerland, and one each in Austria, Belgium, Ireland, the Czech Republic and the Netherlands. Internet sales are conducted in the UK, Austria, Belgium, France, Germany, Ireland, Italy, the Netherlands and Spain, as well. Sales in the U.S. for 2014 were $1,682,965,548. Although Tiffany & Co. does not disclose all information regarding the sales broken down by distribution channel, select information was publicly available. Of their overall worldwide sales, 6% of the amount was transacted through e-commerce at $254,994,780 for 2014. Wholesale sales accounted for 3% of the overall worldwide sales at $127,497,390. Information for sales transacted through the catalog and B2B were not disclosed.
Di str i b u ti on M odel s Tiffany has its own manufacturing facilities which produce approximately 60% of the merchandise sold by the company, and the rest including almost all non-jewelry items is purchased from third parties. Tiffany produces jewelry in Rhode Island, New York and Kentucky, and silver hollowware in Rhode Island. The company processes, cuts and polishes diamonds at facilities outside the US. Tiffany acquires gems and precious metals from several vendors. The company has diamond-processing operations that purchase, sort, cut and polish rough diamonds for use by Tiffany in Belgium, South Africa, Botswana, Namibia, Mauritius and Vietnam. Current Placement 19
Communication & Promotional Activities Ad ve r t i s i ng Acti vi ti e s a n d A n n u al Ad ve r tisin g E x pe n d itu re s Tiffany & Co. utilizes several advertising methods, as the company believes these activities are very significant to their business. The company regularly advertises in magazines, newspapers, and through digital media, as well as public and media related activities and events. Tiffany & Co. has acquired a strong following though social media platforms and uses these to maintain consumer awareness of the brand and to introduce new products. The Company also continues to publish its signature Blue Book, which showcases its high-end jewelry. Tiffany & Co. has invested in TV advertisement for several years, however, the Company has been most successful in getting publicity and promotion from movies and actresses such as Audrey Hepburn on Breakfast at Tiffany’s (1961) and also from the Truman Capote novel (1950). Tiffany & Co.’s first catalog, also called “The Blue Book” was first published in 1845. The catalog was one of the first of its kind to be printed in full color. By 1994 the Company was reaching 15 million customers through their mail-order catalogs. Additionally, Tiffany & Co. also produces a corporate catalog every year intended to be used for business gift-giving and employee service/recognition awards. The Company’s Out-of-Home advertising includes advertisements in bus stops, on billboards and in malls. Besides providing the digital version of their “Blue Book” on the Tiffany & Co. website, the Company places digital advertisements in mobile versions of prestigious newspapers such as the New York Times mobile app, in which they can also download the Tiffany app for free. Tiffany & Co. also has two apps as part of their digital strategy, one being the “Ring Finder” where women can browse through their settings and styles of Wedding and Engagement rings. True Love, is Tiffany’s second app where the Company shares actual love and proposal stories featuring the customer’s Tiffany & Co. ring.
Tiffany & Co. places advertisements in high circulation newspapers and magazines that fit the aesthetic and contributes to the reputation and brand positioning of the company. Some of these magazines include: Vanity Fair, T Magazine, Conde Nast Traveler, Harpers Bazaar, and W Magazine. In 2015, Tiffany made headlines by launching its first same sex marriage proposal ad as part of their “Will You?” campaign running in print magazines. (www.tiffany.com) In 2014 the Company spent $283,648,000, representing 6.7% of worldwide net sales that year on advertising, marketing and public and media relations. This total includes costs for media, production, catalogs, Internet, visual merchandising (both indoor and store displays), marketing events, and other related activities.
Direct M arket ing Tiffany & Co. has developed a few CRM initiatives to engage with their customers. Their catalogs, are mailed once a year and are also available online. Howevevr, the company does not have a loyalty program in place. The company also has an email list, in which they provide subscribers news about exciting new designs, special events, store openings and more. As part of their commitment to excellent service, Tiffany & Co. engraves some of its jewelry with a serial number which they provide the customer with. If the product is lost and someone takes it to a Tiffany store, they are able to contact the original owner and return it to them
Tiffany has a long record of events that serve to introduce new product lines such as the “Blue Book Dinner”, “Blue Book Ball” and the “Art of Storytelling” panels, and most recently the Company added Google + Hangouts. Tiffany and & Co. has differentiated themselves from their competitors through their strong presence on social media. They utilize these channels to promote current and exclusive sneak peeks of upcoming products, events, and share videos. 20 Communication & Promotional Activites
Communication & Promotional Activites
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CRM Activities Tiffany & Co. has developed CRM initiatives to engage with their customers not only in store, but outside of the store as well. The Company catalog is mailed to existing customers, as well as being available for request through the Company website. Tiffany & Co. does not have a specific loyalty program, however, as a complementary service, the Company offers Personal Shopper services through the Company’s knowledgable associates. These shoppers provide gift suggestions, or personalized suggestions for any of the customer’s shopping needs. Online orders are available for in-store pickup at the Tiffany & Co. flagship location. Customers can also be reached through the Company’s email list in which they provide subscribers news about exciting new designs, special events, store openings, and new collaborations. As part of their committment to excellent customer service, Tiffany & Co. engraves some of its jewelry with a serial number which they provide the customer with. If the product is lost and someone brings it to a Tiffany & Co. location, the original customer can be contacted and have their jewelry returned to them.
Social Media
“Instagram was made for Tiffany’s. The company doesn’t even need to use filters on their flawless photos! The key to this strategy is amazing photography and around three posts a week.” - Business Insider
2.2 million followers 7.4 million followers 93,733 followers 1.29 Million followers 18,480 subscribers
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247,511 Followers Communication & Promotional Activites
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Business Issues & Objectives O b jecti ves To enhance the customer experience with superior customer service and through engaging store environments To ensure a superior shopping experience, the Company employs highly-qualified sales and customer service professionals, focuses on enhancing sales and product training programs, and is investing in enhancing its information systems for customer relationship management. The Company also focuses on enhancing the design of its stores, as well as the creative visual presentation of its merchandise, to provide an engaging luxury experience in both its new and existing stores.
Issues In Tiffany & Co.’s 2014 Annual Report, the company outlined their main challenges within the company, as well as defined objectives to overcome these challenges. As Tiffany & Co. continues to expand their product range, it has become apparent that the classic positioning of much of Tiffany’s product line supports the Brand, but limits the display space that can be allocated to new product introductions. Being a company who focuses on sustainable efforts, Tiffany’s realizes their packaging supports consumer expectations with respect to the Brand but is slightly more costly to make due to the use of FSC Certified recycled materials. A significant amount of advertising is required to both reinforce the Brand’s association with luxury, sophistication, style and romance, as well as to market specific products.
Provide out-of-store resources The Link initiative allows for Tiffany’s to transition into a technology driven retailer, focused on facilitating the shopping experience for its customers. Tiffany’s potential engagement jewelry customer can access reliable information and personalized content from any home or mobile device at their convenience. The initiative provides necessary information and exceptional service to help the customer make the best possible purchase. Allow a higher level of customization A bigger focus on product customization will allow a more personalized service to individual customers and their specific needs. The Link offers a detailed progression of communications and process of design to clarify original ideas and expectations. The Link promotes design collaboration between fiances or couples, and the jewelers in order assure satisfaction of the investment and increase customer’s loyalty. Raise the level of digital competency By implementing The Link to the engagement jewelry retailing process we are offering our customers the ultimate technology to create a better and more efficient shopping experience. The commodity will rise our position in digital competency higher to the right quadrant to race with our competitors. It is a step into revolutionizing the jewelry consumer journey through innovation and to continue to be a leader in the market. Provide another channel of communication Tiffany’s is known for our prioritization of customer service and multichannel retailing. By adding another form of communication directly between a jeweler and his customer that includes personal notes, customized designs, and a transition of continuous collaboration throughout, we are guaranteeing to continue leading in service and methods in which to better retail our products.
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Business Issues & Objectives
Business Issues & Objectives
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Key Obje ct ive s
Strategic Initiative
Through the Tiffany Link pen we plan to optimize and facilitate the shopping experience of future fiancées. The technology motivates the shopper to be further engaged in the process of choosing and customizing the engagement ring with the personal help of a professional. It is a direct initiative to increase customer services, personalization, and customer experience at Tiffany’s, as well as putting the customer at ease while making such a monetary and lifetime investment. The initiative will increase the communication between our jewelers and the customer through constant collaboration both in store and at home with access to the personalized URL provided at the end of the visit. We plan the best practice to create awareness of the company’s multichannel offerings. Through the implementation of the Link, we plan to further ingage with fiances in the design process and purchasing of thier engagement and wedding rings, promote the Company’s technological approach to retailing, and be highly accessible and efficient to cater to the couple’s needs. The Tiffany Pen will provide detailed information through NFC tags regarding the product, which will enhance the research portion of the consumer buying journey, while also allowing for customization and design collaboration between the customer and jeweler, guiding them to make the best possible purchase. It takes the groom an average of 3 months to locate and decide on an engagement ring, and through our initiative, we hope to simplify the process. Whether the design is created on their own, with the help of jewelers, or make custom changes to an existing ring, around 59% of fiances choose to add personal elements to the engagement ring in the luxury segment. Men and women are getting married at the approximate age of 29 and we have concluded that most in this age group are technology driven (Digital Research Inc.). Our target customer also has a limited amount of free time and will appreciate the time and effort efficiency behind the best practice. Three quarters of millennial’s are known to go through a heavy research stage that usually is the major factor in their purchase consideration, so we will provide them with the information in-store and the ability to access it from any mobile device for further scrutiny. The act of being involved in the process of designing the bridal jewelry gives the product more sentimental value and therefore more financial investment is foreseen. The outlook is that customers will return to buy the wedding bands, having the ability to design them accordingly with the previous work, assuring returning customers. The implementation of the best practice will position Tiffany higher in the technology and digital competency, as a leader in the luxury jewelry market.
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New Strategic Initiative 27
Porter’s 5 Forces Analysis
Market Analysis The engagement ring market has been the largest segment in diamond purchasing in the US for the last three decades. Sales of luxury jewelry and timepieces reached $15.2 billion in 2014 from $11.2 billion in 2009 which is approximately a 5% increase. In particular, the women’s luxury jewelry sector has increased 3% from 2009 to 2014. According to the research, store-based retailing is still the main distribution channel of selling in the US. However, Tiffany & Co is still the largest player in the jewelry and timepieces market in the US since its aspiration and brand heritage. The Company holds the highest market share of 10.9% in the US in 2013.
Overall, Tiffany & Co.’s primary target market is upperupper class woman. The marketing is always geared towards women even though men contribute to a decent percentage of the profits. In this case, women act as influencers on the men. Millennials are the currently the largest wedding jewelry shoppers hitting the average age of marriage of 35-28 but we include shoppers ages 36-45.
In the Americas region, total sales rose 6% to $408 million. On a constant-exchange-rate basis, total sales increased 6%; comparable store sales rose 3% with relatively stronger growth in the New York flagship store. Sales in New York benefitted from purchases by customers who attended the Blue Book event.
For the Tiffany Pen men will be our priority target because according to our research, “surprise factor” is still what makes the engagement ring market flourish in the U.S. Engagement rings are considered an essential investment in any marriage proposal in the U.S. “Future Grooms” is composed of men between ages 28-45, with annual incomes above $40,000 living in metro area. Most men in this age group are in their prime career and about to start a family of their own. Many of them are already living with their couple. We concluded that most of these men are computer literate, of course connected to the Internet, probably engaging in high profile sports.
After completing the Porter analysis based on the technology behind The Link, we have found it is the appropriate time to invest in the best practice grounded on the conditions of the market. The threat of new entry in the future is high so the moment to invest is now. All other opposition forces that could affect the industry are low for The Link retail strategy. 28
Market Analysis
Threat of New Entry
HIGH The bargaining power of suppliers is high since our suppliers are unique; we source the Tiffany Link from specific company’s that can demand from Tiffany’s. The Link’s software was developed by Local Projects privately and owns the program. The screens are manufactured singlehandedly by Ideum.
HIGH The threat of new entry is high because the initiative is a new technology that can be easily integrated to retail and guarantees better quality of customer service. Many jewelry company’s that are higher than Tiffany’s in their digital competency are constantly looking for initiatives.
Threat of Substitution LOW There is not one other entity that has implemented the same initiative or something similar to its retail structure. Individuals can only experience the exact technology at the Cooper Hewitt Museum. Digital competency-high competitors have technology applications focused on visual merchandising.
Competitive Rivalr y LOW-MEDIUM Our competitors are high in digital competency compared to Tiffany’ but the leaders are very few according to our perceptual map. Customers can experience technology in retailing in very limited brands. Aside from Van Cleef & Arpels has a new initiative of visual window-shopping in its flagship store. Cartier also integrated digital experience into their stores window, and manipulated jewelry boxed by kinetic movement.
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Po r te r ’ s 5 Forces C on clu s i on
B a r g a i n i n g Powe r o f S u p p l i e r s
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Ta rg et C ustomer Iden ti f i cati on
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Market S iz e
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B a r g a i n i n g Powe r o f C u s t o m e r LOW/NON-EXISTENT The buyer has no bargaining power regarding the accessibility of the technology behind The Link and is uniquely exposed to its abilities and creative integration at Tiffany’s.
Market Analysis 29
Technology & Implementation Technolog y D riv ing Ou r I ni ti ative
Key S up p l i e r s of Techn ology & C o mp o n en ts
The Pen, which we have named ‘The Link’, combines two main technologies. Its interface along with the interactive tables engages the services of a common touchscreen stylus. Its interface with the object labels (NFC tags) employs near-field communication technology. A sensor built into the end of the Pen reads the information on small NFC tags embedded in the object labels. This information is stored in the Pen’s onboard memory and can be read at the interactive tables.
Ideum has been a pioneer in the development of multitouch and multiuser exhibits, developing both the software and hardware for these unique visitor experiences. Ideum is a creative company focused on emerging technology and on designing public installations and products that can create meaningful and compelling user experiences. Their unique perspective as a design, software development, content-creation, engineering and hardware integration firm, allows them to create holistic installations and unique products. Ideum will provide and install the multitouch screens for our initiative in the three proposed Tiffany & Co. locations.
Using the large, ultra-high-definition screens on the interactive tables designed by Ideum, customers are able to explore and manipulate the objects they have collected, retrieve contextual information, learn more about designers, design processes and materials, watch and share videos and even sketch their own designs. At the end of a visit the Pen is returned to a jeweler and all the information collected or sketches designed by the visitor and designer are accessible online through a unique web address which will be printed on a Tiffany’s URL card. The information can be shared online and stored for later use in following visits.
O per ati on al C on s i der at io ns In terms of operational considerations for the technology to work there are three main factors to take into account. First, is space for the Ideum screens, the electric wiring that it is required on the floor and lastly a strong wi-fi internet connection. The pens, manufactured by MakeSimply take less than two months to produce and these will be ready for testing as soon as they get delivered to Tiffany’s. The screens will take 10 to 12 weeks to manufacture and deliver from Ideum’s headquarters in the United State. To properly place and determine the location of the screens throughout the stores, store planning and design will be executed in January (9 months) before launch to allow for any changes and modifications. The customized NFC tags from Sistelnetworks will take an approximate of a month to be manufactured and delivered. Moreover, the software (provided by Local Projects) that facilitates the user interface and url that the customer takes home takes a two step process to be completed. Step one is the “discovery” phase, it usually takes about 2 weeks depending on the complexity of the software. Step two is the implementation phase, which according to Local Projects takes five weeks to three months.
Additionally, there needs to be a testing period in which all components of the technology will be put to work and fix any possible bugs., this testing will be performed over a period of 2 months before the launch. Moreover, Tiffany & Co.’s staff needs to be trained in regards to registering the pen (for each customer) and transferin of all the information that the customer may have gathered in the store to the take home urls. This training which will be done during the month of September, and it will also include teaching them how to sketch and save their designs to the software. Lastly, in order to gather and quantify information about post-visit and post-purchase behaviors of the customers who used the Tiffany “Link”, we will perform a series a consumer data analysis to gather information in regards to number of URL after visits or purchases, number of purchases due to use of in-store technology and after visits to the URL, number of requested appointments while visiting the URL at home, number of instore users of the initiative per day, number of purchases from customers using the technology, Social Media Imprints (Shares/imrints).
Sistelnetworks is an RFID – NFC manufacturer that provides proximity products and solutions. From concept and analysis through the deployment, manufacturing and support stages, they provide the answers to your needs. Sistelnetworks has identified Near Field Communications (NFC) as one key proximity technology which covers specific scenarios where security, battery life and information capacity are critical requirements. Our initiative requires NFC tags to hold the information about each product which is tagged and saved by the Link. MakeSimply, a New York-based sourcing and manufacturing management company, converted GE’s designs into prototypes, then took the final designs to their global partners for manufacturing.
30 New Strategic Initiative
Single visit ‘lifecycle’ of The Pen. Illustration by Katie Shelly, 2015
New Strategic Initiative 31
Operational Plan
Tiffany & Co. Operational Plan Activity Order Pens from Manufacturers Order NFC Tags Tablets for registration/transfer Order Screens Electric Wiring Set up Planification /Design of store "Discovery" period for API/Software Implementation of API/Software Testing of the software/Screens Staff Training Implementation of Technology Data analysis/Post purchase behavior
January
February
March
April
Pre Launch May
June
July
August
September
Launch October
Post Launch November December
Pre-Launch
Launch
Post Launch
January 2016 - September 2016
October 2016
November 2016 - December 2016
Order pens from manufactureres
Implementation of technology
Data analysis/Post-purchse behavior
Order NFC tags Tablets for registration/transfers Order screens Electric wiring set-up Planification/Design of stores Discovery period for API/software Implementation of API/software Testing of the software screens Staff training
32 Operational Considerations
Operational Considerations 33
+
NFC Tags
+
+
The customized NFC tags from Sistelnetworks employs near-field communication technology. A sensor built into the end of the Pen reads the information on these small NFC tags embedded in the object labels seen under the description plaques next to the products. The information printed on these plaques, along with further, more specific product information can be “tagged” with the flat end of The Link. This information is stored in the Pen’s onboard memory and can be read at the interactive tables, or later on the personal URL provided at the end of the visit.
“The Link” Stylus
& Co. TIFFANY
The Link
Tagging Component
Writing/Drawing tip 34 Technology
Technology 35
TIFFANY & Co. Flagship Location with implemented jeweler design screens
TIFFANY & Co. Lounge at Flagship Location with implemented design screen accent table
Collaboration with FASM 311 New Media Methods - Ana Acevedo & Chelsea Nabergall 36 Technology
Technology 37
The Link URL Mockups
URL “Homepage”
38
URL Mockups
“Saved Links” Page
The designs for the URL are in keeping with the aesthetic of the Tiffany & Co. website. The design of the Company website is very clean, uses high quality images, and truly captures the spirit of the brand. The URL will feature a Homepage when the initially opened, and will have three tabs; Saved Links, Our Catalog and Request an Appointment. From these, customer’s are able to view their saved information from the store visit, view the engagement catalog, and request an appointment in store. “Our Catalog” Page
“Request An Appointment” Page
39
40
URL Mockups
URL Mockups 41
Communication & Promotional Plan
A n aly s i s
Tiffany & Co. Promotional Plan Digital Media Tiffany Website Facebook Instagram Twitter True Love App TV Advertisement Youtube Video
June
July
PRE-‐LAUNCH August
September October
LAUNCH November December
January
February
POST-‐LAUNCH March April
May
The Link initiative is being promoted in New York, Chicago, and Los Angeles, which are the cities where it will be test-launched. We divided our 12-month promotional plan beginning on June and going through September for pre-launch, October to January for actual launch and finalizing with February toward May to conduct post launch activities. The Company decided to launch during the holidays because it’s the time of the year with most marriage proposals in the US, and holiday shopping brings more foot traffic into the store. The pre-launch will focus on creating the necessary buzz and anticipation for the new in-store technology and maintaining the attention of future fiancées throughout the launch. The post launch will concentrate on using digital medias to communicate with newly engaged couples from Tiffany’s and congratulating them on their union as well as inviting them to include Tiffany’s on their journey through wedding bands, and wedding registries, etc. (See appendix Figure 12) Many of the promotional mediums have international exposure and do not have to be divided by location segmentation but rather target market for engagement jewelry. The primary targets for our promotional plan are upper and upper-middle class woman. The marketing is always geared towards women because they act as the influencers on men. We will also use neutral communication mediums that address both genders. Our public relations company hired for a full year will handle detailed scheduling, contracts with medias, and customer relations through social medias. *Importance of advertisement in sports in LA and Boston
Printed Advertisement Magazines Newspaper Catalog
Digital Media: The Link initiative will be presented on Tiffany’s website and social medias, covering the stores new interactive features and advancements in technology and promoting the brands new digital media approach.
Events Launch Party Launch to Public
Facebook: Facebook posts regarding The Link will increase the consistency of posts on the Facebook page to at least 2 per day/everyday for more exposure and customer attention. For post-launch we will repost pictures of our customers proposals/wedding experiences, if they tag us on their posts using #TiffanysTheLink.
Out-‐of-‐Home Ad. Billboards (LA) Spotify
Tiffany Website: Free exposure to already potential customers, therefore will be available yearlong. October 8th October 10th
Instagram: The Company mainly posts pictures of products on the Instagram account twice a day but not daily, so to maintain uniformity we will include information about The Link along with engagement jewelry products. Twitter: Posts on twitter will mimic visual advertisements on other social medias but embrace informative details about The Link technology, the process of its integration into the store and possible applications in and out of store. Retweets will be employed when using the hashtag #TiffanysTheLink True Love App: As a post-purchase strategy we will sustain communication with the buyers and suggest them to share their engagement/wedding experience on our True Love App that has a Love Story section. The Link technology will allow them to share initial ring designs up to final proposal pictures. We want this promotional activity to keep the customer engaged with the Company and consider us for future wedding purchases, and to promote good relations. Printed Advertisement: Magazines and Newspapers to advertise in were chosen according to location and target market. These encompass the usual Tiffany advertisement partners plus a few more male oriented printed medias. Most magazines have national exposure but are read most in certain demographics.
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Communication & Promotional Plan
Communication & Promotional Plan 43
Budget for Tiffany & Co "Link Implementation"
Continu e d New York Magazines: Vanity Fair, Harpers Bazaar, W Magazine, GQ, Esquire, Readers Digest New York Newspapers: The New York Times, WSJ Los Angeles Magazines: Lifestyle, Forbes, Sports Illustrated, The Hollywood Reporter. LA Newspapers: The Los Angeles Times Chicago: (previous magazines) Chicago Newspapers: Chicago Tribune, Daily Herald Catalog: The Link will be featured on the Christmas catalog that prints and distributes in November to subscribed customers. Video Advertisement: As part of its campaign Tiffany’s will release a video advertisement to introduce The Link from the month it starts to operate continuously until the Holiday campaigns begin. TV Advertisement: It will be advertised on the top 4 gender varied and highest ratings channels FOX, CBS, NBC, ABC, and on sports channel ESPN. The ads will play during primetime TV during chosen shows only and football games. Hulu: Hulu advertisement uses class targeting to deliver the right ad at the right time. With choice-based ad formats it informs the proprietary serving technology to deliver ads to the right people. Youtube: The ad campaign will be featured on our Youtube channel and shared through other Tiffany social media profiles. Launch Party: The black-tie Launch Party will take place at the New York City flagship store on 727 5th Ave. We are using NYC Catering Company for fine alcohol, food, and waiter service. Entertainment will be DJ Petra Silander and Tiffany’s visual merchandisers will overlook the decorations. The party will host 1,500 invitees with a red carpet entrance including top company executives, major shareholders, celebrity promoters and the media on October the 8th. Launch to Public: The Launch to the public will take place simultaneously in New York, Chicago and Los Angeles on October 10th. We expect a well-prepared staff to handle the expectant customers and increased foot traffic. Out-of-Home Advertising Billboards: Digital billboards will be utilized only in Los Angeles and reflect our printed ad campaign. They will be active for 4 months and activate at times of most traffic congestion 7:30am-9am and 4:30pm- 6:30pm in the most trafficked areas. Spotify: By using Spotify’s content targeting and demographic targeting we can reach users with particular habits, mindsets, and registered data that match our target market. The algorithm would activate the advertisement when the desired audience has been identified. 44
Communication & Promotional Plan
EXPENSES
Quantity
Price per unit Total Cost Operational Pens 60 $30.00 $1,800.00 Custom NFC Tags 200 $3.40 $680.00 Registration/transfer tablets 10 $400.00 $4,000.00 Multitouch Screens 12 $10,950.00 $131,400.00 Convertible tables (Expand) 9 $1,695.00 $15,255.00 Electrical Wiring Set up 3 $2,503.00 $7,509.00 Discovery Fee (Software/API) 1 $10,000.00 $10,000.00 Implementation Fee (Software/API) 1 $50,000.00 $50,000.00 Total Operational $220,644.00 Human Resources $6,000.00 Staff Training General 60 $100.00 $9,000.00 Staff Training Specialized 30 $300.00 Total Human Resources $15,000.00 Marketing $328,000.00 Print Ads (GQ) 4 $82,000.00 Print Ads (WSJ) 4 $73,000.00 $292,000.00 Print Ads (New York Times) 4 $107,000.00 $428,000.00 $344,000.00 Print Ads (Readers Digest) 4 $86,000.00 $376,000.00 Print Ads (W Mag) 4 $94,000.00 Print Ads (Esquire) 4 $75,000.00 $300,000.00 Print Ads (Harpers Bazaar) 4 $155,000.00 $620,000.00 $340,000.00 Print Ads (Vanity Fair) 4 $85,000.00 Print Ads (Lifestyle) 4 $56,000.00 $224,000.00 $392,000.00 Print Ads (Forbes) 4 $98,000.00 $168,000.00 Print Ads (Sports Illustrated) 4 $42,000.00 $228,000.00 Print Ads (Hollywood Reporter) 4 $57,000.00 $428,000.00 Print Ads (LA Times) 4 $107,000.00 $368,000.00 Print Ads (Chicago Tribune) 4 $92,000.00 $280,000.00 Print Ads (Daily Herald) 4 $70,000.00 $152,000.00 Billboard (LA) 8 $19,000.00 $64,000.00 Spotify 8 $8,000.00 $300,000.00 Fee for PR Campaign (All Encompassing) 1 $300,000.00 $450,000.00 Launch Party (per person) 1500 $300.00 $450,000.00 Video advertisement Production (per second) 90 $5,000.00 $788,775.00 TV Broadcasting Fee (ESPN)-‐ Football Feeds 25 $31,551.00 TV Broadcasting Fee (ABC) 24 $97,837.00 $2,348,088.00 $1,488,620.00 TV Broadcasting Fee (NBC) 20 $74,431.00 $3,129,648.00 TV Broadcasting Fee (FOX) 24 $130,402.00 $2,276,840.00 TV Broadcasting Fee (CBS) 20 $113,842.00 $900,000.00 Online TV Broadcasting Fee (Hulu) 10,000 $90.00 $17,463,971.00 Total $17,699,615.00 Total Cost of Implementation
Notes Based on Phone conversation with Sistelnetworks Retail Price of an iPad Ideum's pricing sheet (See apendix) Based on expand.com estimate princing, see appendix Estimated by National cost of wiring Salesfore's estimate given phone conversation Salesfore's estimate given phone conversation
4h per person at rate based off NCSL Chart See Appendix 12h per person at rate based off NCSL Chart See Appendix
See Promotional Plan for Justification
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Conclusion Through the research and analysis of Tiffany’s current positioning in the market in comparison to its competitors in regards to digital competency it was easy to identify the opportunities for growth for the company. The implementation of the “Tiffany Link” strategy proves to be feasible and it represents an opportunity for Tiffany & Co. to revamp their positioning in the luxury jewelry retailing industry. The implementation of the “Link” will allow Tiffany & Co. to have more channels of communication with its customers while also allowing for a more customized and personalized experience for the couples looking to design one of the most important pieces of jewelry in their lives. The initiative is expected to be more of an expense effort rather than a profitable one given that it requires a considerable amount of advertising and operational expenses (software/equipment) to support it. Accounting for all the expenses (operational, store planning, human resources and promotion) we estimate them to be 5% of Tiffany & Co.’s overall spending in advertising and promotion. These expenses will allow us to maximize the exposure and promotion of the technology hence allowing more potential customers to learn about the initiative.
46
Conclusion
47
Appendix
Figure 1
48
Figure 2
49
Figure 3
Figure 5
Figure 7
Figure 6
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Figure 4
51
Competitor Digital Competency Ranking Brand # of Stores Tiffany & Co. 123 Boucheron 19 De Beers 7 David Yurman 33 Harry Winston 34 Chaumet 3 Van Cleef & Arpels 23 Cartier 44 Bulgari 16 Chopard 153
1 3 2.25 2 2.5 2 2.3 3.5 3.1 3 3
2 2 2.5 2.8 2.3 2 1.9 3 1.6 1.5 3.1
COLOR KEY Site Digital Mktg Social Media
3 3.7 0 4 4.2 2 1.4 3.3 3.8 3 4.5
4 3.2 1.75 2.3 4 1.1 0.5 3 4 2.4 2.8
5 2.7 1 2.5 2.1 1.5 1.4 2.7 2.5 1.8 2.5
6 3.3 1.9 0 3.4 0.2 1.5 2.6 2.8 0.75 2.2
7 3.2 1.5 2 3 2 1.6 2.4 2.9 2.5 3.7
8 2.3 1.9 2 2.7 2.5 3 3.3 4 2.5 3.1
9 2.9 2.5 1.5 2.9 2.5 0 2.4 3.5 1.5 2.4
10 3.2 1 3 3 0.1 2.1 3.2 0 3 3
11 3.5 2.2 3.9 3.5 2 2 3 3.5 3.1 3.1
12 2.2 1.4 0 1 1.6 1.3 2 2.5 2 1.5
Avg. Digital Comp. 1.7 1.7 2.2 2.9 1.6 1.6 2.9 2.9 2.3 2.9
Mobile
Figure 9
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Figure 8
53
Figure 10
Figure 13
54
Figure 11
Figure 12
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SOURCES
“Tiffany & Co. - Company Profile.” Tiffany & Co. - Company Profile. TIFFANY & CO., n.d. Web. 04 May 2015. <http://investor.tiffany.com/overview.cfm>. “About Tiffany & Co.” Tiffany & Co. For The Press | . TIFFANY & CO., n.d. Web. 04 May 2015. <http://press.tiffany.com/ViewBackgrounder.aspx?backgrounderId=30>. 2011 Engagement & Jewelry Statistics Released By TheKnot.com & WeddingChannel.com.” XOGroupInc.com. Digital Research Inc., Feb. 2011. Web. 6 May 2015. “The Median Age of Marriage in Every State in the U.S., in Two Maps.” Mic. N.p., 27 June 2014. Web. 04 May 2015. <http://mic.com/articles/92361/the- median-age-of-marriage-in-every-state-in-the-u-s-in-two-maps>. Tiffany & Co Annual Report On Form 10-K For The Year Ended January 31, 2015. New York: Tiffany & C), 1 Apr. 2015. Pdf. L2. “Digital IQ Score by Dimension.” Watches & Jewelry 2014. L2 Digital Intelligence for Digital, Dec. 2014. Web. 04 May 2015. Felix, Samantha. “Meet The 10 Most Followed Companies On Instagram - Ever.” Business Insider. Business Insider, Inc, 18 Oct. 2012. Web. 15 May 2015.
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