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How Signet Differentiates Kay and Zales To Expand the Mid-Priced Jewelry Market

Following a challenging pandemic year when Signet Jewelers’ sales declined 14.8%, the company’s turnaround began in earnest during the second half of the fiscal year. Fourth quarter sales rose 1.5% – and 5.1% in North America where the company generates over 90% of revenue.

The company’s recovery continues apace, with revenues reaching $1.7 billion in first quarter 2022, up 18% over fiscal 2020 pre-Covid. Crediting strong Valentine’s Day and Mother’s Day sales and expanded digital capabilities introduced through its Connected Commerce initiative, part of its Inspiring Brilliance transformation plan, CEO Virginia Drosos announced it was raising guidance with year-end sales to reach $6.5 to $6.65 billion, up from $6 to $6.14 billion previously.

“We delivered strong performance across our portfolio. While the jewelry category is experiencing meaningful growth, we are outpacing market growth and gaining share consistent with our Inspiring Brilliance strategy,” she announced in a statement.

Critical to the success of the Inspiring Brilliance plan is to expand Signet’s penetration in the mid-range in the jewelry market. Signet’s flagship banners, Kay and Zales, sit smack dab in the middle of the middle jewelry market and together generate some 60% of Signet revenues. Given the challenges many mid-market retail brands have found navigating the middle, it’s a big ask.

One part of the mid-market expansion plan is to push the boundaries at the upper and lower ranges that define the mid-market. Jared gets the call at the upper-end and Piercing Pagoda at the lower.  

Accounting for 18% of sales in 2021 and about 200 stores, Jared is positioned for the “accessible luxury” consumer and offers premium Le Vian, Royal Asscher and Pnina Tornai brands. In the first quarter, higher priced items at $3,000 and above were its fastest-growing category.

And consistent with its luxury positioning, Jared has been developing its customization offerings, installing a Foundry studio in 50 locations to custom design a piece on the spot by year’s end.

Shoring up the lower-end of the mid-range is Piercing Pagoda, operating through mall-based kiosks as well as online, and generating 6% of corporate revenues last year. Besides piercing services, it also specializes in fashion gold, silver and diamond jewelry.

Drosos foresees significant opportunities for the Piercing Pagoda brand with its first-quarter revenues bettering any quarter ever in its history, including even fourth quarters.

With locations designed for efficiency, it has more than 135 stores now on track to deliver $1 million in sales this year. Recognizing that the Piercing Pagoda name doesn’t accurately reflect the modernity of its product or service offering, it is testing new store formats and launching a brand refresh which will include opening up to 100 more locations in fiscal 2022.

Sharing space in the middle of the mid-market are Kay and Zales. Fierce competitors before Signet acquired Zales in 2014, these two brands have largely operated at cross-purposes until recently.

With Kay accounting for 38% of revenue and Zales 22%, making the most of these two brands is critical for Signet to reach its goal of capturing 10% of jewelry retail market share, or $9 billion, up from 6% currently.

Uniquely differentiating these two brands is the key. “Historically, we didn’t do a great job differentiating those banners,” Drosos acknowledges. “Even when Zales became part of our portfolio, we still let them compete against each other too much, running a big promotion at Kay one week and the next at Zales.”

With Drosos’ previous experience managing competing shampoo brands for Proctor and Gamble, she applied the brand portfolio strategy she learned to the Kay and Zales challenge.

“We started with a white sheet of paper and gathered data about attitudinal, demographic and price point differences to develop our banner value proposition. It’s work we completed about a year ago,” she shares.

The analysis hit upon the two primary reasons consumers buy jewelry. One is gifting, particularly romantic gifting including bridal, and the other is self-purchase. The research revealed that these two purchase motivations are about equally weighted within the jewelry category.

And that became the lever to differentiate the Kay and Zales brands. Kay primarily targets the “generous sentimentalist,” a romantically-motivated gifting buyer and Zales aims for the “bold statement maker,” the self-purchaser who expresses herself and her style through jewelry.

The differentiation is now reflected throughout all touchpoints of the brands.

“More and more we are carrying distinct merchandise, different pieces and different brands,” Drosos explains, pointing to how both Kay and Zales feature Disney collections but with two very different expressions of Disney. Kay features a Disney Treasures collection of Disney characters, like Mickey, Minnie and Winnie the Pooh, with a sentimental appeal and Zales showcases the Enchanted Disney fashion-forward collection inspired by Disney princesses.

And while both brands are prominent mall-based retailers, Signet is following different real estate strategies to ensure each is located in the optimum location. Today only about 40% of Kay stores are located in malls that also feature a Zales store.

In addition, about half of Kay stores are outside of traditional malls, including locations in strip and outlet malls and lifestyle centers. Zales is also moving beyond malls, with about 25% of stores in off-mall locations. Malls for each brand are also being selected based upon the target shopper they attract, so for Zales it is more fashion-oriented malls and Kay that attracts more male shoppers.

The differentiation strategy carries over into each brand’s online presentation as well. Zales website features more influencer content and style quizzes to guide the self-purchasers. Kay leans into gifting occasions with Father’s Day now getting the sentimentalist’s treatment.

“This is how we are driving bigger businesses in both of these banners with a well-defined target customer,” Drosos explains. And she is proud to report that the differentiation strategy is showing results. Both Kay and Zales garnered double-digit growth in the first quarter versus two years ago, prior to Covid.

This is a marked difference from before the strategy was put into place. Previously if one brand was up, the other was down and vice versa. Now both are enjoying strong sales growth with higher-average transaction value and an influx of younger new customers.

“When we combine our knowledge of product as a jeweler and our knowledge of customers as a retailer, along with the scale of our data-driven operations, we win, especially in our biggest businesses,” Drosos concludes, noting that roughly 60% of sales growth in Q1 across Kay and Zales came from new customers.

She credits having the right products targeting the right customers in the right locations, a time-proven formula for retail success.