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Submitted to: Prof. Rose Lacerona 8/19/2013
One of North America's largest specialty jewelry retailers. Zale also operates about 130 jewelry outlet stores. and gold jewelry (diamond fashion rings.gordonsjewelers. (http://www.zales.About Zale Corporation Zale is multifaceted. Zale sells diamond. run more than 200 stores in Canada under the Peoples Jewellers and Mappins Jewellers names. and Piercing Pagoda. Canada and Puerto Rico. The firm." As a leading specialty retailer in North America.125 stores and 655 kiosks. has a trio of large chains aimed at different jewelry markets: Gordon's Jewelers. and offers jewelry insurance. gold chains). semiprecious stones. which targets the value-oriented customer.zalecorp. our brands are famous for helping turn important milestones and celebrations into priceless.gordonsjewelers.930 locations throughout the United States.com and www. mostly in malls. .com/AboutZaleCorp. For nearly 90 years.com. and online at www. life-long memories. After decades of growth. the Zale family of brands provides our customers with fine jewelry. watches.900 stores throughout North America and online at www. and Puerto Rico. including diamonds and an exclusive wedding collection.com and www. earrings.zales. we are now more passionate than ever about being the jeweler people turn to for the perfect expression of love. Canada. and gift items at some 1.com. sells online. With an exceptional assortment of jewelry and gifts. Zale Corporation has provided extraordinary ways to say "I love you. watches and gift items that offer great value at more than 1. throughout the US.aspx) The Zale Corporation Story From a single Zales Jewelers store in 1924. to six retail brands with approximately 1. colored stone. flagship chain Zales Jewelers. Zale Corporation has stayed true to its original vision: Provide customers with quality merchandise at the lowest possible price.
which enables the company to buy in larger quantities at lower prices.Time Context 1920s Morris and William Zale have a vision: Provide customers with quality merchandise at the lowest possible price. The vision becomes reality with the opening of the first Zales Jewelers store in Wichita Falls. A cooperative buying system is established to centralize the purchase and distribution of merchandise for all stores. Texas. eventually leading to the launch of the Bailey Banks & Biddle brand. Inventory includes small appliances. its first "carriage trade" (fine jewelry) store in 1944. Zales acquires Corrigan's of Houston. 1925 The Zale brothers launch a revolutionary marketing strategy with a credit plan of "a penny down and a dollar a week. cameras and cookware." making jewelry and other merchandise affordable to the average working American. Centralized buying marks the beginning of the chain store concept for Zales. in addition to jewelry. coupled with friendly customer service. . 1924. on March 29. leads to a period of tremendous expansion. limiting expenses and looking for growth opportunities. 1938 The success of the credit policy. 1941-1944 Zales Jewelers responds to the limited production of consumer goods during World War II by maintaining its current prices on jewelry. with roughly one new store each year for a total of 12 stores in Oklahoma and Texas by 1942.
1970s M. The company's sales triple during the decade to $1. 1957 Zales Jewelers broadens its reach. a 469-store chain. 1950s The company installs one of the country's first computer systems and is among the first major jewelers to institute management training. Gordon's Jewelers. the company name becomes Zale Corporation. Zales announces the initial public offering of its stock (ZLC) and begins trading its public shares on the American Stock Exchange the following year. opening the first store in a shopping center ─ a major shift from operating only in downtown locations. branching out into shoes. Reflecting this diversity. Texas.B. 1960s Following the discovery of synthetic diamond technology. 1984-1985 Zale Corporation unveils acquisition of the 890-carat "Incomparable Diamond. drug stores.1946 Zales Jewelers moves its headquarters from Wichita Falls to Dallas. 1986-1989 The leveraged buyout of Zale Corporation by Peoples Jewellers of Canada and Swarovski International of Austria is completed. The same year. is acquired in 1989. furniture and catalog stores. the company diversifies. In 1985. . Zale moves its world headquarters to Irving. Zale retires as company chairman in 1970. sporting goods." the largest internally flawless diamond in the world.04 billion in 1980.
2007 Zale expands its e-commerce business with the launch of www. and Edna Zale Foundation. giving the corporation 13 locations in premier outlet centers nationwide. Zales Outlet unveils its e-Commerce site with the launch of zalesoutlet.com. presented to Donald Zale. To better focus on the core business and increase returns on capital.B. 2008 Zale Corporation creates a new management team under the leadership of CEO Neal Goldberg that includes veteran Zale executives and new talent with significant retail experience.3 billion. annual sales top $1. Zale divests the Bailey Banks & Biddle brand. Zale.B. Zale Corporation files for Chapter 11 bankruptcy. 1998 Zales Outlet is launched.gordonsjewelers.1990s In 1992. The JCK-Harrison Group Consumer Jewelry Study also ranks Zales #1 in unaided brand awareness.com. . son of company founder M. 1999-2000 Zale expands with two major acquisitions: Peoples Jewellers of Canada and Piercing Pagoda. but emerges the following year as a financially stronger company after restructuring its debt.com. Five years later. 2009 Zale Corporation marks the 85th anniversary of the opening of the first Zales Jewelers store with a donation to the M.zales. showing profit in all four quarters for the first time since the reorganization. Online shopping is launched at www.
Although Zale’s is the largest specialty retail corporation. they have suffered to maintain their dominance in the industry. Summary of the Case Zale’s is an organization that has shown significant increase and decreases over its lifetime. and is growing international competition.900 employees in 2. In this case. They should take a chance in the growing market to earn more revenue. jewelry is usually the first to be hit. Puerto Rico. This can become a problem because most jewelry are created or come from international waters. Zale’s operates stores in the U. One reason is because of their organizational structure. They also lack on their focus strategy. A lot of Zale’s ups and downs have to do with the economic situation. They are going in a new direction when Neil Goldberg became CEO in 2007. when the economy is struggling. There are several reasons why Zale’s is not leading their competition. Along with the leadership problems Zale’s also have external and competitors to deal with. and peoplesjewellers. They employ approximately 16. only because of the bad economy and to reach consumers that are not able to spend an arm and a leg for jewelry. and Canada.2010 Zale continues to expand its e-Commerce business with two significant launches: pagoda. Zale’s is a specialty retail jewelry corporation that only focuses on the best of jewelry. Also when the economic situation is horrible jewelry takes a hit.394 of their stores.. Externally the jewelry industry is gaining and sustaining market share. A study has shown that more people would take synthetic diamonds or natural diamonds. bringing multi-channel shopping to consumers across Canada. This should encourage Zale’s to expand their company more across the globe. When the economy is booming the jewelry is on the rise but. They lack with consistent leadership because of the often changes of CEO’s.S. Zale should try to reach out to some of the less fortunate folks. providing an online presence for Piercing Pagoda. Before they become the most dominating jewelry corporation they must first figure out which way they are going to lead their company and who is going to lead them.com. .com.
Vision Statement Provide customers with quality merchandise at the lowest possible price. While Tiffany’s leads in profit margins with 15. After decades of growth.Zale’s have 3 major competitors.000.439. Zale’s will have to expand their product line and service to continue to compete and have a chance to lead their competitors. .120 and 3rd in revenue at 2. Our goal is to develop and maximize the develop and maximize the finest collection of jewelry finest collection of jewelry brands in order to build lasting brands in order to build lasting customer relationships that customer relationships that will generate solid returns for will generate solid returns for our shareholders.500.000 they come second with its profit margins in at 11. With Signet leading in revenue at $3. Mission Statement The Mission of Zale Corporation is to be the best Corporation is to be the best specialty retailer in North specialty retailer in North America.20% with only 8.20%. offering products throughout all segments from basic to fine jewelry.000. which are Signets. we are now more passionate than ever about being the jeweler people turn to for the perfect expression of love.395. With Zale’s being in a tight competition.000.000 right behind Zale’s at 2. Our goal is to America.403. Tiffany. and the Surging Blue Nile. they are doing some good things such as supporting organizations that oppose the mining of dirty gold. Zale’s are primarily pursing a direct sale strategy. While all the top competitors in specialty jewelry.
The Linz Award was created in 1924 by Simon Linz.Improved Mission Statement The mission of Zale Corporation is to be the Corporation is to be the best specialty retailer in the World.one of Dallas County's oldest and most prestigious civic honors. Each year we reaffirm this commitment through our sponsorship of the Linz Award . one of the founders of Linz Jewelers. Linz Award Part of the Zale corporate culture is to recognize exemplary leadership and volunteerism that enhance the life of fellow citizens. . The award has recognized Dallas County citizens whose civic or humanitarian efforts have created the greatest benefit to the community. Honors / Awards / Recognition 1. Now in partnership with The Dallas Morning News. Zale Corporation is proud to continue the legacy of this award. acquired by Zale Corporation in 1989. Our goal is to enhance our merchandise assortment to ensure that we offer styles that inspire and reflect the lifestyles of our customers.
Central Problem The main problem of Zale Corporation in this case study is how they will recover from its below average performance of the past six years. Objectives To be a world class jewelry provider to all classes To provide customers with quality merchandise at the lowest possible price To regain its once stellar performance in the jewelry retailing industry To improve from its below average performance for the past six years III.930 locations throughout the United States. 4. and online at www. Zale’s is competing but must find ways to advance their corporation either by expanding globally or product line. .com and www. They have great knowledge regarding diamonds. which gives it a competitive edge over its competitors. Canada and Puerto Rico. They have over more than 1. lack of consistent leadership. This happened due to having of unfocused strategy. 3. They have decades of experience and expertise in the diamond industry.gordonsjewelers. Areas of Consideration SWOT Analysis STRENGTHS 1. women’s and children’s jewelry.com. 2. II.zales. Another competitive advantage comes from a large variety of men’s. and uncertain economy. bridal.I. The company has comprehensive wedding. engagement and anniversary collections.
Large retail network of Zale Corporation in North America. By focusing mainly on regions in North America. which makes it easier to reach a broader specter of customers. Competitors. it has mostly expanded its business in North America. The revolutionary marketing strategy with a credit plan of "a penny down and a dollar a week. Has a strong workforce of nearly 13000 employees 7. 2009. Weaknesses 1. now operate in countries in Europe and Asia through a web portal. Zale’s ability to generate internal funds and its borrowing capacity has weakened the last couple of years. Diverse brand portfolio is also one of the strength of the company." was introduced in 1925 for making jewelry and other merchandise affordable to the average working American. 9. 6. On line purchase has been a great experience for the people and thus increases in sales. This is a disadvantage because most of Zale’s competitors are more geographically diversified. and 2010 shows the company has suffered from the financial crisis more than any of its competitors. The company has a very high debt-to-equity ratio compared to industry average.5. 3. which means Zale uses a lot of leverage and does not have a very strong equity position. It’s the first company to use Institute management training in 19506. Financing options through Zale’s credit card. 8. The locations of the company’s stores are limited to North America. 2. 4. . such as Blue Nile and Tiffany. Poor financial performance in 2008. Although the company has expanded its business online. the company increases its risk and limits growth at the same time. Zale has a very concentrated customer base. The company’s trademarks and trade names help to sustaining its competitive position in the jewelry industry.
2. The website also allows consumers to design their own jewelry. Cost-reduction initiatives would help to reduce SG&A expenses and thus help the company to become profitable again. such as downturn and consumer spending slows. Strongly performing e-commerce business. Threats 1. The concentration of a substantial portion of Holidays. Through its website. Zale is more vulnerable to discretionary purchases. the segment of the population that typically has the highest income. Sudden decrease in cash flow and earnings makes the company more “vulnerable” in the sense that the company is not generating enough money 6. The number of Americans aged 45 to 64. Increased competition can affect the sales of the company in future 3. Changing demographics. 7. Internet sales accounted for 3 percent of Zale’s revenue in 2009. The Diamond Trading Company. maintenance advice. discretionary spending on goods that are. and help on product purchases. 3. Since a majority of the store brands under Jewelry segment targets . can affect prices and supply of diamonds. 5. such as rings and wedding bands. is forecast to increase by about 4 percent between 2010 and 2020 compared to a 10 percent increase in the population overall. Valentine Day and Mother’s Day) means that disruptions.Opportunities 1. 2. “luxuries” may not grow and may decrease. Many jewelry stores rely on higher-income customers for much of their business. Increased minimum wages also put a threat in front of the company 4. or are perceived to be. If the general economy performs poorly. which is the number one supplier of diamonds. customers can get information about various stones.
the jewelry industry is gaining and sustaining market share. This should encourage Zale’s to expand their company more across the globe. Disadvantage: Risks of failing since they have problems when it comes to brand awareness. Advantage: Externally. SIGNET is doing business in London. Disadvantage: Large amount of money are needed for investments in this kind of plan. Alternative Courses of Actions Alternative course #1: They should start business in Europe to capture a market opportunity. Advantage: When they do this it will lessen the problems of having late delivery goods. Alternative Course # 2: Zale should do backward integration because it is not manufacturing jewelry by itself. The acceptance of people in North America may not be the same in Europe since they have a lot of competitors. . due to problem in external factor of Italy Zale also suffers in shape of late delivery of Goods.the middle economic downturns and consumer spending slows. They should take a chance in the growing market to earn more revenue. the company is also more vulnerable to economic downturns than the higher-end jewelry sellers. because competitors of Zale are doing business globally. Tiffany in Japan and earning profit their market share more than Zale. This can become a problem because most jewelry are created or come from international waters. Since a majority of the store brands under the Zale’s Fine Jewelry Segment targets the middle-income consumer base. IV. and is growing international competition. they purchase finished good from Italy.
V. Advantage: Through this. Alternative Course # 4 Zale should do diversification in Bridal dresses. Externally the jewelry industry is gaining and sustaining market share. as they are specially known for Bridal jewelry so they have an opportunity to diversify that business. Disadvantage: Even though Zale already has this established brand name. they are expanding their target markets and it will help in increasing sales and income. and is growing international competition. still people belonging to high-income group will not risk to buy with Zale Corporation due to its below average performance for the past years. This should encourage Zale’s to expand their company more across the globe. Advantage: This will attract more customers since they are not only involved in jewelries but also with gowns and dresses that could be compliment products. they are currently targeting mainly middle.Alternative Course # 3: Zale should target high-income group. This can become a problem because most jewelry are created or come from international waters. Strategy Formulation / Recommendation I therefore conclude that the best solution to the problem is alternative course of action #1. They should take a chance in the growing market to earn more revenue. Since they are already known with Bridal Jewelry. Disadvantage: When they add this Bridal dress. but they can earn a lot from high-income group because Zale have more innovative styles in jewelry. it will need a lot of requirements since Zale Corporation will have a different kind of business. it could be a stepping stone of expansion. .class. Zale should consider the recommendation to start a business in European market.
For . it must expand its business not only in America but also in other place in the world.VI. Potential Problems 1. 3. What if people in other countries will not patronize products of Zale Corporation because of its perceptions in the past? 3. Increase direct marketing efforts dramatically to create brand awareness while investing in store updates and new product lines. What if the expansions may lead to failure? 2. While they sale fine jewelry. Like Zale’s competitors. Zale should consider closing down its underperforming stores. Marketing-Led Strategy and Special Programs. 4. Expand more international and explore the growing market overseas. 2. 5. What if the economy in relation to diamonds becomes uncertain frequently? VIII. Clearing out old inventory. Plan of Action 1. Contingency Plans 1. repositioning Zale brand. they should add low-moderate priced jewelry as well. Also. the company will fall again. VII. Specifically. Zale’s should reach out to more to customers in this time of economic struggles. Close Down Unprofitable Stores. Zale should continue to build a strong organizational structure because without a strong organization. Through this. they could gain more market share and in effect will strengthen their profitability. at least 20% of its current stores are operating at significant losses without reasonable hope of improvement.
2. Designer jewelry will help the company to drive sales up. but would remain higher than the industry average. owner of Kay Jewelers and Jared. SG&A expenses as a percent of sales to be 35% for the next five years and then 30% in the terminal year. Implementing recommended cost-reduction plan. Signet Jewelers Ltd. BCG Analysis shows the company should concentrate only on profitable brands and divest unprofitable brands. Due to the demographic changes and increase in the proportion of the wealthy population. Focus on Few Brands. This will also help the company to increase its brand value. . For example. Divest Others and Increase Designer Jewelry. Zale could pursue range from selling off its Canadian stores or its Piercing Pagoda chain to merging with its rival. Zale’s SG&A expenses as a percent of sales would decrease. It could also sell its Gordon Jewelers division. Zale should consider introducing high-end designer jewelry similar to what Helzberg Diamonds sells at a few locations.. 3.example: Stores with declining sales and a soon-expiring lease term should be closed first. 4. The Galleria of Jewelry.
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