When the dust settles
A post-recession look at the Canadian jewellery landscape
By Jan Brassem
I don’t know about you, but I’m tired of reading about layoffs, bankruptcies, and unemployment lines. Enough already. How about some positive news for a change?
Well, here’s some. Canada unexpectedly added 35,900 jobs in April, U.S. President Barack Obama noted a “glimmer” of (economic) hope, large American banks started to make some money, and retail sales were up a little. By all indications, we may have bottomed out. And not a minute too soon.
The race to economic stability and expansion is nearing the finish line and it’s no surprise Canada will—or should—be one of the first to cross. According to an article in The Financial Times, Canada’s fourth quarter 2008 gross domestic product (GDP) dropped ‘only’ (‘merely’ may be a better word) 0.7 per cent compared to a year earlier. Not too bad considering Japan’s GDP contracted 4.3 per cent and Turkey’s 6.2 per cent. The United States’ dropped 0.8 per cent. [Is this correct? That doesn’t sound as dismal as one would think.] Jacquie, it got much worse as 2009 progressed. The US numbers obtained from The Bureau of Labor Statistics in DC.
While many (most?) of the world’s economies are still in the fiscal storm cellar, Canada seems to have its financial act together. Thankfully, it has the strongest banking system in the world (so says the World Economic Forum), the best fiscal position of the seven leading industrial nations (in terms of the debt-to-GDP ratio), a record of low and stable inflation, and a highly educated and mobile workforce. There don’t seem to be any trade wars on the horizon, either.
The economic recoveryIn April, Prime Minister Stephen Harper warned Canada could fix only part of the problem. The rest has to be repaired by the financial institutions in the United States and other industrialized countries. Nevertheless, some Canadian forecasters still predict more job losses—totalling 600,000—before the recession ends later this year.
The Canadian economic expansion will probably look like a chicken trying to fly. It’ll bounce along until finally airborne. Other economists say this recession will most likely have a ‘double-dip’ recovery, based on the stimulus-driven inflation (i.e. a W-growth curve).
American economists and The Wall Street Journal see the recovery—at least in the United States—starting in the late summer to early fall of this year, a result of the billions in stimulus packages. While it might be premature to send the all-clear signal, it could be time for Canadian jewellers to start planning for the economic expansion.
This writer agrees with the Journal’s predictions, although it’s likely the Canadian jewellery industry will see sunlight a little later, most likely around November/December or in early 2010.
Predicting the Canadian economic recovery is, of course, like hitting a moving target – nothing ever the stays same. For example, in early June, Mark Carney, Bank of Canada’s Governor wrote, “If the...rapid rise in the Canadian dollar…proves persistant, it could fully offset ..positive (recovery) factors”. The Canadian economy, he writes, is under “considerable uncertainty”. Stay tuned.
Don’t forget, with all the Canadian corporate downsizing, layoffs, cutbacks, and the like, it will take companies six months to become fully operational when the recession does finally end. If they wait on The Wall Street Journal to proclaim the end of the recession, and not on their own ‘Economic Upturn Alert,’ competitors will have a six-month head start.
Whenever the Canadian recovery begins, the jeweller will—read should—have implemented his or her post-recession operational recovery strategy
To stay ahead of the pack, watch the following indicators to see when the recovery is near.
The Dow Jones Industrial Average: It’s difficult to trust the Wall Street crowd, considering the hardship they created in 2008. However, stock markets historically project the condition of the economy six months forward. [Are we seeing a stable enough upturn in the Dow to say the recession will be over in six months?] Yes, most people say the wall street crowd have learned their lesson.
The premier paper of perpetual pessimism: Believe it or not, that premier paper of perpetual pessimism—The New York Times—recently reported on its front page (above the fold, no less) that it projects the U.S. economy turning around in 2009. It could be just in time to capture the 2009 selling season.
Obama’s recovery program: To me, Obama’s $3-trillion recovery package seems to be enough money to ‘stimulate’ the economy of the entire world. Supposedly, the funds will be distributed through public projects (i.e. bridges, roads, and the like), along with tax breaks for the middle class. This, of course, assumes the U.S. government will not turn the distribution into a mess, which it usually does—and has. So far at press time, only about 18 per cent of the funds have been distributed.
Another official/unofficial survey: I just finished another informal U.S. national jewellery sales survey for the first four months of 2009. I interviewed 25 retail jewellers, two wholesalers, and five trade journalists located throughout the country. They, too, expect the U.S. jewellery industry to recover by mid-fall. However, only 34.3 per cent think 2009 will be a good year for jewellery.
The changesThe Canadian jeweller has to deal with his or her losses and move into what author William Bridges (Managing Transitions: Making the Most of Change, Da Capo Press, 2003) calls the ‘neutral zone.’ Jewellers have to pass through an in-between time when the bad times are gone, but the good aren’t there yet.
This is when jewellers and staff develop a new energy and enthusiasm, and discover the worst is behind them. By this time they should—with proper management—have a new sense of purpose and outlook. It’s a time for leadership and innovation.
Here are some anticipated changes to the Canadian industry—good and bad. Of course, there will likely be more when the dust settles.
Decreased competition: It is a wonderful opportunity for small independent jewellery retailers to ‘capture’ customers left unattended by insolvent competitors. Developing a strategy to ‘acquire’ these new consumers will take marketing skill, especially in an expanding economy. Retailers with an effective strategy could end up with a surprisingly strong holiday season. These kinds of opportunities—namely a decline in competition — don’t come along often. They are rare indeed.
The completed shakeout: The recession will have caused many weaker and/or poorly managed industry players to disappear, including suppliers and jewellery manufacturers. Here is another opportunity for jewellers to consolidate vertically via merger, acquisitions, or start-up. Manufacturers could own retailers and visa versa. As a matter of fact, Canadian jewellers could even expand globally.
The emergence of social networking: Everyone is familiar—or should be—with social media networking sites like Twitter, Facebook, MySpace, and the hundreds of others that have exploded onto the business scene. Everyone seems to be—excuse the pun, atwitter—with these innovative and cost-efficient marketing and networking tools. They have—or should in this writer’s opinion—become a key part of the modern jeweller’s marketing mix.
These social systems can be used to build brand awareness, promote training, expand services, and connect with customers. What’s nice about these sites is they require little to no technical knowledge, are definitely engaging, and even a little—dare say it—addictive.
Just one warning. When an industry grows this fast, there is bound to be a shakeout. Already, Facebook was looking for – and recently received-- US$200 million in fresh working capital (hard to believe since they have over 200 million users), Twitter is experiencing a management shakeup and there are rumours of copyright infringement lawsuits. Stay tuned.
Now is the time: Wouldn’t now be a good time to promote the entire Canadian jewellery industry? Canada has all the necessary natural and man-made resources to be a significant global jewellery player, if not leader. Here’s a brief list.
- Canada is the third-largest global producer of gem-quality diamond by value with mines owned by global players like De Beers, Rio Tinto, and BHP Billiton.
- Canada is a leading silver mining producer, ranking ninth in the world. In 2007 (the latest number available), Canada produced 25.8 million oz.
- Canada is a leading world gold producer, with more than 160,000 kg mined annually.
- Canada has, don’t forget, one of the best managed banking system in the world, a strong fiscal position, low and stable inflation and an efficient workforce.
- A strong and stable central government
- Creative and dynamic jewelry artesian.
Oh, and did I mention Canada is also a world-class oil producer. Add to that the relatively weak Canadian dollar, (at press time, hovering around the 91-cent mark against the U.S. greenback). At the current exchange rate, jewellery componets – all except manufacturing labor -- are relatively inexpensive, at least compared to those from other industrialized nations. [Is this still true at 91 cents? 91 cents seems strong. Please see the article I emailed you today.]Jacquie, this will change when the US economy soon turns the corner. Nothing stays the same and don’t forget it just transitional.
There doesn’t seem to be any nation on earth with all these jewellery-specific resources. Canada could—and should—become an extremely cost-effective supplier for global jewellery manufacturers. Who will take the lead?
A new beginningNo matter when or how the Canadian jeweller recovers from the economic doldrums, the industry will never be the same. As Bridges writes in his book, “It isn’t the changes that do you in. It’s not letting go of the old ways and not getting on with the new.”
Emerging from a recession usually leads to innovation and years of prosperity. It can be an exciting time. Even the Toronto Blue Jays are looking better.
Jan Brassem is managing director of Brassem Global Consulting, LLC. He is a regular contributor to numerous jewellery publications, commenting on current trends in mergers & acquisitions, fine jewellery/watch strategic marketing and sourcing. Brassem is a creative strategist, with successes spanning jewellery start-ups to manufacturing companies. He earned his International Business MBA (with Award) from New York University’s Stern Graduate School of Business Administration and is a frequent lecturer at U.S. colleges and universities. Brassem can be contacted via e-mail at jan@brassemglobalconsulting.com.
