It set out to meet these criteria

Executives at Nancy B & Company wanted to see just where their firm fit in the jewelry industry and where they could expand. A review in 1993 led them to divide the industry into three distinct segments: independent jewelers; chain stores and mass retailers of better-quality merchandise; and other mass retailers, including discount stores.

“We didn’t fly at all in the discount world,” says Pat Patten, who joined the Culver City, Calif., company that year as chief operating officer after 15 years on the retail side with Finlay Fine Jewelry Corp. “We did a nice business in the other two segments, but we asked ourselves, ‘What is best for long-term survival strategy?’”

U.S. Commerce Department figures showed there were about 28,000 operating retail jewelry stores in the United States in 1992; nearly 19,500 were one- or two-store businesses. While the numbers were virtually unchanged from five years earlier, dollar volume for independent firms had increased 20.7%. “We’re seeing the re-emergence of the independent jeweler as a force in the business,” says Patten, now president and responsible for planning, marketing and operations.

Nancy B decided that to stay competitive, it needed to maintain its mass retail business while expanding further into the independent retail sector.

After a year in development, however, Patten discovered a key flaw in the company’s plan: it hadn’t spent enough time studying independent jewelers as a group. “We answered questions, but we never asked jewelers if they were the right questions,” Patten says.

Through a connection with nearby Loyola Marymount University’s Manufacturing Executives Strategic Forum, Nancy B hooked up with the marketing department at LMU. The department helped the company develop a focus group of independent retailers and designed a comprehensive survey to determine how independents perceived the relationship between themselves and their suppliers.

The questionnaire was divided into five parts:

• Product Selection asked respondents to rank the importance of such factors as uniqueness, craftsmanship, fashion and price/gold weight ratio.

• Supplier Selection asked about delivery, follow-through, terms and financing, training, ads, marketing support and recognition of a brand name.

• Future Supplier Expectations examined types of services and relationships retailers might expect from their suppliers in the future.

• Technological Expectations sought opinions about the impact of technological advances, such as CD-ROM catalogs and on-line services, on jewelers.

• A fifth section asked jewelers what they considered the primary reasons to try a new supplier or drop an existing one.

Questionnaires were sent to 1,000 retailers, both customers and non-customers. Approximately 30% responded. “That told us that they appreciated that someone cared [to ask them],” Patten says.

What independents want. After six months of analyzing the results, company executives reached some surprising conclusions, says Patten. First, “there were some ‘givens’ to playing on the same field with independents, there were certain criteria they expected.” In the product category, retailers wanted high quality and craftsmanship, an element of uniqueness and a price/quality relationship that made the product salable. In service, the supplier had to be reliable, have follow-through, be flexible and responsive and the retailer had to have confidence in timely delivery.

“It was totally backwards of how we did our first [marketing] plan,” Patten says. “We put the company image way at the top, and we had delivery, reliability and follow-through at the bottom…. Where we thought that fitting a product to the consumer demand in a store would be at the top of the list, it was really farther down.”

The focus group helped point out how important “respect” was to the independent jeweler, Patten says. “They said, ‘Treat us with respect. We’re still a business and we face all the problems that big businesses face.’ We [the Nancy B executive staff] talked about why people who do business with us like us. It was little things like answering the phone and getting hold of the person they want…. We felt that if we could master the givens, that would tell the independents that we respect them enough to be a supplier to them. It shows we care.”

Evaluating the survey one section at a time showed Nancy B those areas the independent retailer might see as its strengths and weaknesses. “We think we already did a pretty good job in defects [low rate of defective merchandise] and craftsmanship, and we knew we were OK in price/sell-through, because we always had re-orders. We think we’ve always been unique. We felt we had to put more emphasis on product development so we would not stagnate.

“We looked at the givens on the supplier side. We think we do better than anyone on reliability and follow-through, but we realized we have a challenge in delivery, the time it takes to deliver. We have not always been responsive enough and our order turn-around time has been weak.”

Armed with new insight, Nancy B began making changes to attract more independent jewelers. On the production side, it redefined its method of manufacturing, which in effect created two operating companies – the Mass Manufacturing Division and the Rapid Response Division.

Ten percent of Nancy B’s SKUs (stock keeping units) are sold to mass retailers. “For those, we can produce [products] in major runs, and we can pretty well project what we need and when.”

The Rapid Response Division handles small orders, the other 90% of the firm’s line. This was the business clogging up the system; small orders require more custom work, which increases turn-around time.

“The only difference between the two divisions is the quantity of product made, not the quality of how it is made,” says Patten, who points out that use of the word “mass” in Mass Manufacturing Division doesn’t change the method of manufacturing at all. “Mass doesn’t mean machine. Everything is hand-finished,” he says. “We’re a factory of people, not machines.”

Good timing meant several unrelated changes helped Nancy B implement its new business plan. In late 1996, the company embarked on an expansion program. It took over an adjacent area as well as the second floor of the building it occupied, increasing space 70%; two thirds of that is devoted to the factory.

Nancy B was also developing a new software operating system. “As we learned more about the [independent] jeweler,” says Patten, “we had to change the operating package to handle it.” The company decided to develop two distinct operating systems, one for mass retailers and one for independents.

Updating the line. Nancy B carries some 800 basic designs at any given time, with about 2,000 SKUs, including all variations on all products. “We have a 30% to 40% turnover in the line every year,” says Patten. “This is very important to independents. If you look at our line in the spring and again in the fall, a portion is significantly different.”

Nancy B has four staff designers, but also retains independent designers. “People who don’t want to run their own business can create designs for us,” Patten says. “We’re always open to talk with people who have a new angle or a new niche.” The firm also is expanding its color line, which Patten describes as “almost 100% for an independent store.”

Nancy B is fairly well-known in the industry. It was founded 19 years ago by Nancy Brewer (now chief executive officer, though less active in the business) and Raul Moreno (a vice president, who oversees manufacturing). But Patten says, “We frequently hear people say, ‘I didn’t know you sold to independents.’ We’re trying to dispel that. The minimum quantity order is one. In fact, we’d prefer to start slowly with a new independent and build up the business, rather than load them up and then have merchandise left. We tell customers that you get the same treatment for one [piece ordered] as for 150.”

How is the company telling independent jewelers about its new program? It is polishing its customer service skills, says Patten. “We’re improving our performance in the givens, and then in public we’re trying to reinforce them.” Sales representatives call on independents more often. “Even if you have a unique product and are selling quality, you still need to be out there and see the jeweler face-to-face.” And the firm has done a very selective direct marketing program to independent jewelers.

A Jewelers Hot Line (888-4-NANCY B) is for the exclusive use of independent jewelers. One representative is assigned to serve these callers. “He has the authority to make decisions and do whatever is necessary to make things right [for the customer],” says Patten. “He doesn’t have to tell them, ‘Let me find out and call you back.’ He can make the decision on the spot.”

A new advertising campaign also reflects the change in direction. Ads depict the entire process of getting the product to market, from design sketches, manufacturing tools and raw materials to findings and finished jewelry. The company once used famous models such as Kathy Ireland in its ads, which gave it good name recognition. “We were associated with beautiful women,” says Patten. “But now we’ve shifted our emphasis to uniqueness.”

Nancy B also wants to make its delivery process more efficient. Turnaround time for orders from independent jewelers now is two to four weeks during the off-season, but as much as 12-14 weeks in peak season for some pieces. Within two years, the company hopes to cut that to seven days and eventually to 48 hours, Patten says. “The key is in parts inventory and raw materials inventory, and each day we’re learning how to control both.”