Marketing of Tiffany
EXECUTIVE SUMMARY The luxury goods industry quickly rebounded following the United States economic downturn in 2001, partly due to the increasing trend of middle-income American consumers demanding luxury at every level. Within the luxury industry, the jewelry sector is largest with global retail sales amounting to $150 billion. Tiffany & Co. (“Tiffany”) currently holds the leading position within the jewelry industry with a 19 percent share of the $50,000-plus jewelry industry.
Tiffany recognized the growing number of consumers demanding luxury at mid-level prices and decided to use this trend to its advantage by appealing to these middle-income Americans. Tiffany did this by adding less expensive items to its collection, including more sterling silver, which appeals to younger women as some items retail for as low as $100. With 2002 revenues of almost $190 million, analysts believe Tiffany’s earnings will continue to increase through future store expansion, which management hopes to increase by 5 percent annually. This would total 173 worldwide stores by the end of 2007.
Upon realizing the strength of its brand and the image its blue box portrays, Tiffany also plans to continue launching new product lines, taking advantage of the growing popularity of branding among jewelry consumers today. However, with all of Tiffany’s current success, some analysts worry that the company may dilute its luxury brand image with its attempts to make the blue box accessible to the lower end. Tiffany, therefore, must focus on assuring its affluent customers that the quality of its products and service has not lessened even though its brand has become more affordable.
This research proposal discusses the fine jewelry sector within the luxury goods industry, focusing on Tiffany & Co. ’s (“Tiffany”) position among its high-class competitors and fine jewelry consumers. The paper begins with an overview of the luxury goods industry and current trends within the specific sector of fine jewelry. The document progresses by describing the corporate structure of Tiffany, specifically the company’s products, financial situation, store operations and plans for expansion, key publics, brand image, and marketing strategies.
The proposal includes an in-depth analysis of Tiffany & Co. ’s position among luxury goods consumers, with the primary question of how Tiffany will maintain its elite image and leading position within the jewelry market while attempting to expand its consumer base. INDUSTRY INFORMATION The luxury goods industry, along with the rest of America’s economy, suffered in 2001 following the September 11 attacks. However, according to J. P. Morgan analysts Melanie Flouquet and David Wedick (2004), the luxury goods industry is recovering very well from the weaker sales growth experienced that year (p. 4).
In the first quarter of 2002, jewelry store sales increased 0. 7 percent from 2001 (Kato, 2002, ¶11). Consumers’ quick return to luxury purchases illustrates the somewhat addictive nature of luxury goods (Flouquet & Wedick, 2004, p. 15). However, according to Louis Cona, publisher of Vanity Fair, “There will always be a luxury consumer, and they’ll continue to spend whether there are wars or diseases or whatever” (Case & Anderson, 2003, ¶7). Tax cuts, equity wealth, and job market conditions also favor upper-income individuals, who are the primary luxury goods consumers (Flouquet & Wedick, 2004, p. ). At the same time, the exclusivity of luxury goods in America is declining. In an age of mass affluence with easy access to credit (Brown, 2002, ¶5), luxury goods are becoming more affordable (Horovitz, 2003, ¶13). Also, with a 50 percent rise in household income in the last 30 years, Americans have more money to spend on premium goods (Fiske & Silverstein, 2003, ¶16). According to Arnold Brown who writes for Across the Board (2002), recent surveys show that more than 350,000 U. S. households have a net worth of a least $10 million.
More than five million households have a net worth of more than $1 million, which is double the amount of households 20 years ago. Economists predict that by 2050, more than 25 million U. S. households may have assets of more than $1 million (Brown, 2002, ¶4). Figure 1 illustrates the above data, showing the increase in the number of households with assets amounting to more than $1 million. Note the increase of just over 40 percent during the 20-year span between 1982 and 2002 compared to the 400 percent increase predicted for the next 50 years. Figure 1 Numbers of Households with Assets Over $1 Million
Source: Brown, A. Luxury redefined. There is also a growing trend of middle-income Americans demanding luxury at every level (Horovitz, 2003, ¶3) and stretching their checkbooks and credit cards to support their luxury impulses (“A Beemer in Every Garage? ,” 2002, ¶4). According to futurist Watts Wacker, luxury is no longer an aspiration because even middle-income Americans are living luxurious lives (Horovitz, 2003, ¶12). Luxury travel has increased 130 percent since 1990, and luxury cars account for 12 percent of vehicles sold, a 6 percent rise since 1986 (Nucifora, 2001, ¶2).