When consumers began curtailing discretionary spending in 2008, few industries suffered more than luxury goods, such as jewelry and watches.
“The consequence was a cleansing of the competitive environment, with stronger companies surviving and weaker companies being edited,” says Mike Rabinovitch, executive vice president and CFO of Birks & Mayors Inc., a North American luxury jewelry business. The company operates in two markets: Canada, where under Birks it sells both Birks-branded and select third-party brands; and the southeastern United States, where under Mayors it sells high-end Swiss timepieces and high-brand jewelry.
All told, Rabinovitch says that between 2,500 and 3,500 US and Canadian jewelers closed their doors in 2009 and 2010—but fortunately Birks & Mayors wasn’t one of them.
Expanding Your Business
Stay focused on what you’re trying to achieve rather than
how you want to achieve it.
Stay true to the fundamental business proposition you offer the market rather than trying to be all things to all people.
Overinvest in areas of your business that don’t deliver sufficient value.
Underestimate the trust and loyalty and confidence of your customers and key suppliers.
Be complacent; always challenge the status quo.
“We survived the recession due to the strength of our brands, the dedication and perseverance of our employees, the loyalty and patience of our controlling shareholder and our financing sources, and the flexibility and creativity of our landlords and key suppliers,” says Rabinovitch. “Key employees didn’t leave when the going got tough, the company’s lenders renewed the company’s credit facility in the midst of the financial crisis—providing additional liquidity—and key brands did what they could to help us drive the business during that period.”
In addition, the company’s controlling shareholder provided short-term financing, and landlords provided temporary rent relief and allowed early exit of a few underperforming stores. Meanwhile, key suppliers offered merchandise on special terms, favourable distribution, and additional marketing. “They knew what made us successful would make them successful,” says Rabinovitch.
Rabinovitch himself also had something to do with the company’s success during difficult times. Although many of his responsibilities are those traditionally associated with the CFO role—including all aspects of financial management (such as budgeting, forecasting, accounting and reporting, and normal control functions)—others are more strategic. “I work in close partnership with our CEO and our key business leaders as they determine how more effectively run their businesses,” says Rabinovitch. “Retail is a capital intensive business: you have leases, inventory, and people, so you can’t just turn on a dime. It’s my responsibility to constantly identify and point out the areas for improvement within the business, ensure we allocate capital from those areas that are pressured to those areas that will provide us the greatest opportunity for long-term growth, and do what I can to help execute those initiatives that will drive growth.”
Rabinovitch attributes much of his success to experience gained as vice president of finance at Claire’s, which grew from doing business in three countries and $600 million in annual revenue when he started, in 1999, to doing business in 11 countries and $1.3 billion in annual revenue when he left, in 2005. “Claire’s had a fantastic business model that focused on managing cost and understanding the customer, and I learned quite a bit about managing growth,” says Rabinovitch, who has brought that discipline to Birks & Mayors.
Today, the industry in which Birks & Mayors operates is one of recovery and growth rather than consolidation and cost management. “Whoever survived through 2010 is seeing a different playing field,” Rabinovitch says. “In the last 12 months, we have been more concentrated on how we will grow rather than how we will survive.”
One way the company is growing is by addressing competition head-on. Three years ago, says Rabinovitch, retailers such as Birks & Mayors were the only place to go to buy luxury third-party jewelry and watches; now, many brands are opening their own stores. However, Rabinovitch sees that as an opportunity for a best-in-class brand manager like Birks & Mayors. For instance, in 2011 the company opened several stores for third-party brands, including Rolex. The initiative was so successful that the company is now opening several more Rolex shop-in-shops, which are stores within Birks & Mayors stores, and is pursuing opportunities to do the same with other international luxury brands.
Another strategic change is that Birks & Mayors is designing and developing more of its own branded product in Birks stores across Canada. Management believes the company is well positioned to provide a compelling assortment of fine jewelry to a younger generation than it has historically marketed to. “The Canadian retail space is experiencing a renaissance, and brands are all looking to tap into the consumer luxury market,” Rabinovitch says. “That gives us the opportunity to raise the level of awareness and desirability of the Birks product itself, which is one of our goals: make the assortment of our own products more relevant to today’s consumer.”
Looking ahead, Birks & Mayors is focusing on two key initiatives. First, at Mayors the company is reformatting many retail stores to highlight its best brands and building shop-in-shops. So instead of walking into a store and seeing a lot of glass counters, the customer will see a stronger physical representation of key brands. Meanwhile, at Birks the company is redesigning the look and feel of retail stores to target the younger, more energetic generation-X and generation-Y customer. Rabinovitch sees both efforts as something quite valuable within the industry. “We’re aiming to elevate the customer’s shopping experience such that shopping in a Birks store will be very different than what we see today,” he says. “We want our customers to be excited, refreshed, and at home.”