With deep-pocketed fashion houses moving in and luxury labels becoming their own conglomerates, independent jewelers must choose their destinies carefully.

In last month’s JCK, Market Intelligence columnists Tony and Leanne Argyle cautioned retailers about a growing superpower within many of their own stores: the brand. “Beware the double-edged sword of carrying high-profile brands,” they wrote.

Their discussion of “the dominance of brands” couldn’t have been timelier. Consider the recent onslaught of fresh competition from fashion houses alone: Louis Vuitton just announced plans to open jewelry-only stores worldwide; Versace (long a licensee of its name to fashion watches) launched a fine jewelry line this summer; Ferra­gamo did the same in February; Ralph Lauren, Dolce & Gabbana, and Badgley Mischka ventured into fine jewelry in 2011 (plus, Mischka created a bridal collection with Zalemark in 2008). That’s not counting ­Hermès and Bottega Veneta, which debuted fine ­jewelry in 2010 and 2006, respectively. In this burgeoning branded jewelry arena, mom-and-pop stores are facing mounting pressure from both sides of the retail equation. Luxury consumers are being drawn to well-advertised big brands and new mono-brand boutiques, and brands are capitalizing on that surge in demand to do business with their remaining wholesale partners on their own, often challenging, terms.

“The unbranded family jewelry business is not a good place to be,” Thomas Tochtermann of international consulting firm McKinsey & Co. told the Financial Times in July. That article touted some revealing stats: Branded jewelry makes up about 19 percent of the global jewelry market, while branded leather goods account for 50 percent of that market, and branded eyewear 38 percent.

You don’t have to be a math whiz to see where jewelry is headed. It’s clear that independent retailers need to define their long-term strategies: Do they make their stores—and their names and reputations—into brands, with all the requisite publicity and marketing work, or do they fill their stores with branded goods made and promoted by others?

Considering that, historically, consumers have seen brands as goods they can purchase with confidence about quality, value, and price, independent jewelers have similar opportunities for growth as bigger players—albeit ones with less cash and clout.

35th anniversary MUSE sterling silver Caviar bracelets in blue sapphire, $895, and pink sapphire, $995; LAGOS, Philadelphia; 877-925-4305; lagos.com	Couture Collection sterling silver earrings with 12 cts. t.w. green agate, 0.16 ct. t.w. smoky quartz, and 0.28 ct. t.w. brown diamonds; $1,395; Badgley Mischka Fine Jewelry, New York City; 212-849-1333; badgleymischka.com

Take Mednikow in Memphis, Tenn. The flagship store sells private-label and Patek Philippe watches, plus a handful of ­jewelry brands including Pomellato, interspersed with Mednikow diamond and gemstone jewels; a Mednikow boutique, in a nearby high-end clothier, offers jewels from trendy designers such as Emily Armenta. The goal is to offer merchandise “that projects the image of the store,” says president Jay Mednikow. “The store itself is a brand.”

Alfredo Molina

How to achieve that goal, however, is a matter of some debate. Alfredo J. Molina, chairman of 25-year-old Molina Fine Jewelers in Phoenix, was one of Bulgari’s first wholesale watch accounts in the early 1990s. He also had access to its high-end ­jewelry. Then Bulgari grew larger, stronger, and more prestigious—and started taking longer to fulfill his special orders; meanwhile, Molina struggled to get the best-selling timepieces—to the point where he started losing customers. He dropped Bulgari in 2002.

When the branding phenomenon began in the 1980s, says Molina, brands “were your allies.” Relationships were mutually beneficial. Now, he says, “brands are becoming your competitor.”

And stocking them is sort of like eating a potato chip. You can’t have just one; you need more for comparison. So when a few of Molina’s other tony watch brands—he carried Cartier, Breitling, and more—began dictating his gross margins and discounting policies, stocking the goods became a losing proposition. With some watch lines, recalls Molina, “you lost money every time you sold one at list price.”

In 2006, the year he bought the now 202-year-old Newport Beach, Calif.–based Black, Starr & Frost—a jeweler that predates Tiffany & Co. by 27 years—Molina implemented a drastic new strategy. He dropped all brands from his showcases—both jewelry and watches. By 2007, both Molina and Black, Starr & Frost were selling only private-label goods. Molina hasn’t advertised a brand in 10 years. “It took me some time to understand that they were a losing proposition,” he says. He’s also developing a proprietary watch line—custom movements created by an American watchmaker—that he hopes to have in stores by summer 2013.

Todd Mutzig

Of course, there are still plenty of jewelers excited about the brand business. At Meigs Jewelry in Tahlequah and Tulsa, Okla., owner Todd Mutzig, who bought the 53-year-old operation from his parents in 1986, stocks brands that are “value-driven,” including Alwand Vahan, Bellarri, Natalie K, and Scott Kay, and that allow his store’s name and reputation—not the designer’s—to shine. “A brand doesn’t need to be a Yurman,” he explains.

Social media and public relations experts agree there’s a lot to be gained by pairing with ­lower-profile labels. “Curate and carry smaller brands. Cobrand with them. Be aggressive with marketing and PR,” says Carrie Soucy, president of Miamore Communications in Providence, R.I. “Be the launchpad for the next great thing.” Cobranding is an amorphous concept: It can mean retailers and designers jointly promoting in-store appearances; coproducing collections (as Olivia Cornell, president of Cornell’s Jewelers in Rochester, N.Y., does with some lower-ticket basics); even collaborating on Facebook photo albums—click through one Westlake, Ohio–based Yeager Jewelers created with Thistle & Bee.

Cosmos Collection cuff in sterling silver; $595; Thistle & Bee, New York City; 888-288-2801; thistleandbee.net	14k yellow gold and sterling silver pendant with amethyst and diamonds; $4,675; Vahan, Mamaroneck, N.Y.; 914-381-4464; vahanjewelry.com

Co-owner Debbie Yeager carries several high-profile names, including Alexis Bittar and LAGOS. But she isn’t looking to add more just yet. “My concern is that when I advertise, I could end up advertising for bigger stores like a Neiman Marcus,” she says. “The competition with goliaths is growing.”

She makes a good point. How should an independent retailer promote goods that are carried by local luxury department stores? Jim Feldman, CEO of Jim Feldman Creative Direction in New York City, who has worked with retailers to raise their community profiles, advises emphasizing your single-most outstanding trait: personalities within the business, for example, or a niche, such as artisan-made jewelry. “You have to be known for something,” he says. “The big mistake is trying to be all things to all people.”

Most important is determining what will be most profitable. From store brands with private-label lines to boutiques filled with big-name designers (or mixes of both), retailers need clear road maps for success—and they must be the ones in the driver’s seat. As local jewelers with, presumably, a history of service in the community, independents should recognize they have at least one thing the big brands don’t: personal connections with clients.

“Consumers are tired of no-name trays of jewelry in mall and chain stores,” says Feldman. “They’re looking for engagement—someone they can trust.”