Tiffany & Co. is a retailer, designer, manufacturer, and distributor of luxury fine jewelry. As of January 31st, 2003, they had 44 company-operated stores within US borders and 82 company-operated stores internationally. Fine jewelry makes up 79% of their net sales followed by other products such as timepieces, stationery, and sterling silverware. Michael J. Kowalski, Tiffany & Co.’s current CEO, has the same mission the company had when it first started in 1837: to be the world’s premier luxury brand of fine jewelry as well as America’s house of design.
Tiffany & Co. has done an outstanding job in developing a strong brand name, which represents nothing but the best, most durable, and most luxurious jewelry. Part of their strong reputation can be accredited to their company-operated stores, which quickly differentiate Tiffany & Co. from competitors who sell their products through other distributors. The company-operated stores strengthen the brand name even more by physically isolating Tiffany’s name and its products, giving them a prestigious image. Tiffany & Co.’s advertising campaigns have done a good job in targeting their ideal upper to middle class customer. Their ads have been strategically placed in newspapers such as The New York Times and The Chicago Tribune, and in magazines such as New Yorker, which tend to be read by a well educated, upper class group. Tiffany’s collections which range in both style and price, combined with their impressively efficient inventory, have kept customers happy for decades. Tiffany & Co.’s well trained employees have been able to form relationships with their customers are another reason why the company has many returning customers. Tiffany exhibits several weaknesses that are hurting net sales. Most importantly, their international stores have not been bringing in nearly as much revenue as company executives had once predicted. The number of international stores is almost double that of stores within US borders, yet only bring in about 41% of net sales. As for domestic problems, Tiffany & Co. seems to have placed all its stores in large cities, not tapping into suburban wealth that could increase the company’s net sales. Also, sales of men’s products have been low. Although international sales have been rather low, foreign countries provide Tiffany & Co. with great opportunities in relatively new and expanding markets. Markets with strong potential exist in countries such as China, Brazil, and Canada. Since China’s membership in the WTO in 2001, global trade has risen, increasing economies of scale. Tiffany must continue to utilize China for its custom designing and cheap labor, and continue to utilize the low design and operational costs in Brazil, in order to increase net profit. Tiffany & Co. also purchased a diamond mine in Canada to cater to Canada’s growing trend in diamonds. Tiffany & Co.’s main threats are posed by other luxury jewelers like Bulgari, Cartier, and Harry Winston. Zales and David Yurman also pose significant threats, although they are not considered to be in the same price bracket as Tiffany. Internationally, small, local boutiques pose significant threats in small towns outside of large cities, as they have an already established customer base.
The luxury goods industry took a hit after the attacks on the World Trade Center in 2001. However, the jewelry sales increased almost one percent from 2002 in just the first quarter of 2003 alone, and is on its way to a full recovery. Also in 2001, the SARS outbreak in China decreased sales of jewelry overseas, but those sales also began to rise shortly after the epidemic was controlled. The luxury industry will always be able to bounce back because luxury goods are always in demand by the wealthy. Economists estimate that by 2050, over 25 million households will have assets of over one million dollars, as...