Every upscale jeweler wants to be the “Tiffany of its town.” But when Montreal-based Henry Birks & Sons hired Thomas A. Andruskevich, the former executive vice president of Tiffany & Co., to be its CEO, he needed to ensure the firm didn’t become a carbon copy of the famous American jeweler. Founded in 1879, the Birks name is as revered by Canadians as Tiffany is by Americans, but some inconsistent merchandising decisions had dulled its luster.
“I didn’t want to assume that what had worked at Tiffany would work at Birks,” says Andruskevich, who spoke with JCK in an exclusive interview. Instead, he hired Boston Consulting Group to conduct research to see what was needed.
In Florida, Mayors faced even tougher challenges. The firm, founded in 1910 by Samuel Mayor Getz, was known for distinctive, design-driven merchandise, but its 1998 acquisition by Jan Bell Marketing made a poor fit. Mayors was a pillar in the luxury jewelry market; Jan Bell—which ran the jewelry department for the Sam’s Club division of Wal-Mart—was solidly mass market. The two firms had wildly disparate cultures, and, eventually, financial issues spooked suppliers who once had clamored to get into Mayors.
“The stores were very lean in product, some to the point where they looked like they were going out of business,” says Andrus-kevich. Many also desperately needed renovation.
But would Mayors fit with Birks? Canadians and Americans have some significant cultural differences, says Andruskevich: “Americans live to work; Canadians work to live.”
He also says Canadians are more reserved than Americans, more polite, and more sophisticated. And, with every purchase subject to a 7 percent national sales tax, in addition to the provincial sales tax, Canadian consumers weigh purchase decisions carefully.
Still, the two stores’ cultures were fundamentally compatible, and the brand positioning of each in their respective markets was similar. Birks acquired a controlling interest in Mayors in 2002, and both continued to run as separate operations until 2005, when the merger was completed and the new firm was renamed Birks & Mayors Inc. But Andruskevich exercised restraint.
“I didn’t want to assume what worked at Birks and force it on Mayors,” he says. Unlike many corporate mergers, where “best practices” is given lip service but the acquiring company calls the shots, both firms had equal input. “For every decision, we studied the Birks way and the Mayors way, and we really chose the best, right down to whose insurance company we would use,” says Andrus-kevich. For example, Mayors’ training program became the basis for the combined firm’s training, while Birks’s inventory management system became the new standard.
BLENDING IT
“When we first merged, lots of people worried about their jobs,” says Andruskevich. “They didn’t need to. We said, ‘We’ll take the best people, so just do your job really well [and you’ll still have it].’
“Mayors didn’t have the corporate discipline that Birks did. There was no strategic plan, no profit plan. Right away, we brought clients in, did research to see what they thought Mayors represented, and then we did a strategic plan.”
Between August and November 2005, Andruskevich met with every member of the management team, asking about Mayors’ strengths, opportunities, and priorities. Its strength was its reputation for excellence, but more communication was needed.
Andruskevich says Mayors’ inventory-replenishment funds were turned on and off at the discretion of the chief financial officer, whereas at Birks the financial people help plan but let the merchandising people run it. That’s now standard across the company.
Mayors’ renowned training program, called Mayors University, became the basis for the new firm’s training. In addition to its in-store buddy-training program and weeklong training sessions, the firm has one major conference every year.
Some adjustments were made to fit Birks’s needs. Andruskevich recalls the first time he tried to employ some U.S. sales techniques at Birks. “We asked our sales professionals to start calling customers to let them know of special events or products. They looked at me in absolute horror! They felt calling people at home was an invasion of privacy.”
Canadian consumers, he said, don’t expect the high levels of service that Americans do. Theirs is a more European approach—aloofness is part of the brand experience, whereas Americans are more proactive about selling. Still, he says it’s possible to strike a balance.
Canadian or American, every Birks & Mayors salesperson has to take the corporate training program—and pass proficiency examinations—before they’re allowed to work on their own. They also must take ongoing training, and outside courses are encouraged—employees are reimbursed for Gemological Institute of America classes once they become graduate gemologists.
“It’s our goal to have a G.G. in all stores. We’re not quite there, but our top stores do [have a G.G. on staff], says Andruskevich. “We also have highly trained watchmakers, Patek [Philippe] trained. They’re in Montreal, Coral Gables, and in some of our other stores.”
More essential than combining operational details, however, was cementing a unified brand message that would reflect both the Birks product brand and the retail store brand. The product brand needed to stand for international elegance; the retail brand was to be recognized as a celebration of emotion.
Working as a team, Birks and Mayors veterans engaged in the formal process of building a brand pyramid. The vision was “to be recognized internationally as a world-class luxury brand.” The goal for both retail operations was to deliver an unparalleled experience through distribution of desirable product, superior customer service, and a luxury environment.
“That’s what any brand strives to do, but we have our own style of service that’s different from Tiffany, Cartier, and so forth,” says Andruskevich. “To be honest, I think our environment is a bit more welcoming than some of the other great brands. It’s like a home.”
As for product selection, each firm was used to addressing different consumer tastes within its overall market. Toronto is different from Montreal, which is different from Vancouver, and Atlanta is different from Orlando, which is different from Tampa, says Aida Alvarez, senior vice president of merchandising. But within those markets, there were surprising similarities. “We can almost match [Mayors to Birks] city to city,” Alvarez explains. “For example, look at South Florida and it’s almost the same way we’d merchandise Toronto. You wouldn’t think it would be, but it is.”
“You have to listen to your store directors,” adds Andruskevich. “If we just ran the business out of corporate [headquarters], we’d make lots of mistakes. As an industry, we have so many spreadsheets and reports that sometimes we lose sight of instinct.”
Andruskevich continues, “Our customer appreciates great design, follows fashion but isn’t cutting edge, is educated, and appreciates the finer things in life.” The typical customer is affluent (household income $75,000 and above), skews largely female, and, at least at Mayors, had been a bit older. Now there’s a new effort to bring younger consumers into the stores.
“Mayors used to be only about diamonds one carat and above. Now we have one-third carat [pieces] to get younger customers,” says Alvarez. “Both stores have a very loyal following among customers age 35 to 55, but we’re working to have very enticing offerings for teens and 20s. It’s very important to connect with customers at a young age.”
Alvarez has introduced some entry-level price points with jewelry inspired by “biker chic” fashion. The firm—a believer in event marketing—also uses that to target younger customers. Mayors, famous for its annual Swiss Watch Fairs, also puts on events like one based around a new mobile phone launch by LG, or youth-oriented fashion shows. In Canada, the Toronto Film Festival skews to a younger audience, so Birks is there in force.
The composition of the sales team also is important, say Andrus-kevich and Alvarez. Attrition has resulted in more age diversity, while training has given some longtime staffers renewed enthusiasm.
As for Internet strategy, the firm’s online sales are stronger in Canada than in the United States, which Andruskevich attributes to Birks being a national brand, whereas Mayors is a strong regional brand. A combined corporate site for Birks & Mayors (www.birksandmayors.com) has links to individual retail sites Birks.com and Mayors.com. The Birks site is e-commerce enabled, while at press time the Mayors site wasn’t, but online purchasing will be reviewed during a Web site redesign.
GOING SHOPPING
Executive vice president and chief marketing officer Daisy Chin-Lor uses familiar brands to describe the different Birks & Mayors customers: A contemporary customer drives BMW and Audi and wears Gucci. A classic customer might drive a Mercedes-Benz or Volvo and wear Ferragamo or Polo. A fashion-forward customer might wear Dolce & Gabbana, Gucci, or Prada. The sweet spot for both divisions is the classic customer. Targeting women is a key part of the firm’s strategy, says Alvarez, and much of its advertising is geared to women buying jewelry for themselves and those who would influence male gift purchases.
Central to the firm’s strategy is vertical integration—a trend many retail categories have embraced, but that’s only starting to catch on in jewelry. Its line of Birks-branded products includes jewelry, watches, and a new line of small leather goods ranging from key chains to handbags. Chin-Lor and Alvarez say the leather goods help extend the store’s giftware sales and position it to benefit from the hot trend for designer handbags. “The development of the Birks Boutique Collection is a natural extension and one that through successful branding in Canada would naturally expand into the U.S.,” says Chin-Lor.
Approximately 40 percent of the firm’s jewelry sales in 2006 were from product manufactured internally, says Andruskevich. The remaining 60 percent is split between contract manufacturing and other sourcing, and third-party brands, which include Di Modolo, H.Stern, Kwiat, Ladyheart, Roberto Coin, and Van Cleef & Arpels.
Most of its jewelry manufacturing is done in Canada and the United States. In other product categories, some pieces and components are brought in from other countries, such as watch movements from Switzerland. Birks-brand watches account for a small but growing percentage of its signature-brand business. Originally classic or sports-oriented, the watches have gone upmarket. Today, they’re focused on three segments: classic, sports, and fashion, says Alvarez.
In Canada, the Birks stores had great success with Canadian designers. Now both retail brands feature the company’s international in-house design team, which includes Jose Hess, considered one of the two founding fathers (Henry Dunay is the other) of American jewelry design. Other Birks & Mayors signature designers are Swiss-born Toni Cavelti, and Canadian-born Esty, who lives in the south of France.
Alvarez says the firm isn’t interested in building third-party brands; it will add them selectively if it enhances the business, but it’s focused on building its own brand. To that end, it’s building Birks-branded boutiques inside Mayors stores, and the Birks signature products come with aqua and brown Birks packaging—which is placed in maroon and celadon Mayors bags. The firm also plans to begin wholesale distribution of Birks brand products within the trade—possibly as early as this year.
All that manufacturing raises a question: Does Birks & Mayors want to be—or partner with—a Diamond Trading Company sightholder? “We’ve considered it in the past, and it would be interesting in the future. It would certainly strengthen our vertical integration strategy,” says Andruskevich, whose former employer, Tiffany, owns part of a mining company, Tehera, and has acquired a majority share in sightholder Rand Precision Cut Diamonds (Pty.) Ltd.
Discussing diamonds and Canada in the same breath raises another question: Does Birks & Mayors sell Canadian diamonds? “Absolutely!” says Andruskevich. “It is—and we want it to be—a growing part of the business.” He says they sell more of them in Canada than in the United States as national pride plays a strong role. The firm sources diamonds from dealers, not directly from the mines, but they ask for certificates to know which mine the diamonds came from.
For the future, there will be at least three more Mayors stores in Florida, and a few more will be renovated. “We’re always looking for new store opportunities that make sense, and we’re always looking for acquisition opportunities that make sense,” says Andruskevich. That might be retail acquisitions in the United States or Canada, or global-scale brand acquisitions. He’s also looking at international shop-in-shop opportunities for the Birks brand in existing retailers.
Whatever the future, it won’t be static. “I don’t live my life to be mediocre, and I don’t tolerate mediocrity,” says Andruskevich. “In 2002, we had a lot of skeptical, scared people. Today, we have lots of happy campers—not only because they have windows in their offices again (Mayors’ corporate headquarters recently moved) but because we’ve regained Mayors’ position in the market.”