retail

Zales Ditches Its Value Pitch, Focuses On Joy

Zale Corp. says it is throwing in the towel on the mall price wars and wants to help America say "I love you," just in time for the holidays.

"We've made our message be about price," CEO Neal Goldberg told investors, in remarks that were web cast on Wednesday. "But marketing leads with emotions, and what business talks more about emotions than this one? I don't care if it's a birthday or christening or an engagement gift--there are very few products that should be so emotional, and let the product be the hero," he says. As a result, the chain's new ad campaign-just in time for the critical holiday sales period--will represent a "major, major change" in its brand message.

Ads, from the Richards Group, will follow up on the high-on-the-hankie scale of its Mother's Day ads, which were themed "Mom Rocks." The new campaign is called "Love Rocks," and will include three TV commercials, as well as major print and online initiatives.

Key to its strategy, executives told investors, is a better understanding of mall dynamics. "Our competitors aren't just other jewelry stores in the mall, but flowers, dinner, even a cashmere sweater," says Steve Larkin, the chain's EVP/CMO. "It's the broader market in which we live, and we want a bigger share of it." Focusing on price "hasn't worked for us, and it hasn't worked for our competitors. It's just imperative that we take a different tack."

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Last month, the Dallas-based company reported a quarterly loss, but said it had exceeded its expectations in sales, earnings and inventory reduction, and that it had posted a comparable-store sales gain of 6.1%.

A key part of the initiative will be the rollout of its proprietary Celebration Diamond, already available in its Gordon's Jewelers stores, which Zale says is an important weapon in fighting the "commoditization" of the diamond business.

But, interestingly, industry experts say that in the jewelry business, such efforts have typically failed. When the JCK-Harrison Group Consumer Jewelry Study recently polled consumers, using an unaided recall method, no brand of jewelry had much name recognition--consumers could only recall stores. (Zales was the No. 1 jewelry name mentioned by consumers, with rival Kay Jewelers coming in second.)

"The findings indicate that even after a decade of stepped-up consumer advertising, the majority of jewelry consumers still think of the retailer--not the product brand--first," the trade publication reports.

Zale is also keenly aware that it has plenty of new competition, both from the Internet and from discounters. The JCK survey reports that 49% of respondents with an annual income over $125,000 have purchased jewelry online in the past two years, and across all segments, 35%--more than double the number in its previous surveys--have purchased jewelry at discounters, including Wal-Mart, Target or Costco.

In addition to its Zales and Zales Outlet stores, Zale Corp. also operates stores under the Gordon's Jewelers, Peoples Jewelers, Mappins Jewelers and Piercing Pagoda brand name, with more than 2,100 stores.

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