Tiffany is the indisputable hallmark of American Luxury. Over the years the name of this iconic brand became synonymous with ultimate quality, taste and exclusivity. Hollywood played a big part in the company’s rise to fame – movies like “Breakfast at Tiffany” and “Gentlemen Prefer Blonds” quickly promoted the name of the brand to the masses. By the early 60s, Tiffany stores became a beloved destination for nearly every social layer of the population.
Tiffany’s notoriety was built upon an interesting pricing strategy of selective affordability. The brand offered every single customer the opportunity to acquire something aspirational, a small token with the brand’s logo on it. Ultimately this strategy turned an army of aspirational customers into evangelists that would continue solidifying the brand’s status for generations. In the meantime, the commercial success of this “affordable” luxury was being fueled by the 10 carat diamond rings displayed on the store window. For many decades that was a dangerous but impeccably executed strategy and, in my opinion, one of the key ingredients in the company’s success.
However, following the recession in 2007, much like other retailers, Tiffany suffered major loses. After a few difficult years of layoffs and store closings, in 2013 the company decided to make some changes and replaced nearly all its executives. One of the most intriguing moves was hiring Francesca Amfitheatrof as Chief Designer. With a degree from London’s Royal College of Art and years of work with Karl Lagerfeld and Alexander McQueen behind her shoulders, it was clear Francesca would bring change. It felt like something really, really good was about to happen at Tiffany’s… and it did!
Less than a year after Francesca was hired she launched the Tiffany T collection – a discreet, elegant selection of jewelry that plays around a simple concept, over and over again. It was impeccably executed. So well that design wise, I think it’s one of the most effortless, chic, and flexible collections the brand has offered since “Diamonds by the Yard” by Elsa Peretti. Tiffany T was supposed to woo the younger, fashion forward customer and for a brief period it felt like Francesca managed to hit her target… however as years went by and the revenues continued to shrink it became clear…. Tiffany, with all its history, craftsmanship, and excellence is rolling off the cliff. Fast.
Last week, after another quarter of declining revenues, the company announced that Francesca is stepping down and the new Chief Designer will be the former Creative Director of Coach, Reed Krakoff. Reed is no stranger to difficult situations. On his watch, Coach turned from a $500 Million brand with questionable identity into a four Billion-dollar fashion powerhouse. As exciting as this appointment might look, I think letting Francesca go was a huge mistake… I also believe this to be a good time to pause and take a good look at what has been going on with Tiffany in the past few years. Most importantly, how is the market of fine jewelry changing. First things first… and since everything evolves around the customer – let’s start with that.
Who is she?
The Tiffany woman. Who is she? How old is she? What does she do? What does she love? What does she dream about? What does she look forward to? These are the basic questions that lay the foundation of the brand identity. According to Francesca “The Tiffany woman has a spring in her step, she makes her own rules, she also doesn’t conform”. While that’s a relatively vague description it’s a good starting point… one I can easily match with Francesca’s work and personality. I see the confident woman she tried to appeal to, I also see the intention and the vibe coming from the effortless, structural pieces she designed… yet I also feel like Ms. Amfitheatrof is the only one at Tiffany’s purposefully asking that question. And I find it ironic that she is stepping down after fighting a “Brand Identity Battle” on her own. Looking from aside it seems like everybody else at Tiffany were betting on Francesca to turn the company around, while doing their “business as usual” in all other areas. In fact, to prove that point, I would like to analyze Tiffany’s performance in every area of the business.
Merchandising / Product
Whomever is in charge of merchandising at Tiffany is probably away on vacation. Let’s start with the cheap looking, tacky and outdated silver jewelry. Scrolling though the Tiffany website I often ask myself “How did this item end up here?” Heart shaped pendants and bracelets that would be a great present for a six year old are displayed next to elegant pieces from the T collection. I often feel confused and saddened to see that Tiffany is putting its stamp of approval on designs that dilute the identity and harm the core values both short and long term. I understand that the brand is staying true to its strategy of offering “something to everyone” but even affordable silver jewelry can be catered “in style.”
Another extreme is the extravagant, tasteless and inconceivably expensive jewelry that is designed for Russian oligarchs or perhaps Kardashian family members. These pieces might be even more harmful to the brand image Tiffany is trying to build. Ultimately, the clean, polished silhouette of the T collection simply gets lost is the noise of unrelated designs.
Offering “something” for everyone might have been a good strategy 20 or even 10 years ago, when brand loyalty was stronger… Millennials are no longer looking to purchase a fancy Brand, in fact brand loyalty has never been more volatile. They are willing to buy something that stands for a certain set of values, lifestyle, thoughts, aspirations. Looking at the products Tiffany has to offer – it’s really, really, really hard to see what is it that the brand stands for.
The bridal collection is another painful topic… The Tiffany settings had been around for many, many years, and generally speaking, they haven’t changed much. No doubt they are beautiful, classy and timeless, but they are available at nearly every single jewelry retailer – for a fraction of the price. In my opinion, Tiffany engagement rings are gradually becoming a mockery of the brand itself – outdated, overpriced and with a blurry customer profile to cater to. No wonder Millennials hesitate to spend their money there.
Pricing
And speaking of money…. Tiffany’s fine jewelry has always been at least 40-50% more expensive than similar pieces from lesser known brands. For the most part customers are ready to pay a premium for the quality, status, and brand. But will it always be that way? Times and attitudes are changing rapidly. Millennials are getting smarter about luxury purchases, they place a stronger emphasis on experiences, memories, travel… and it’s not surprising that the jewelry market is gradually re-shaping to accommodate for this shift in priorities. For instance, a young NY startup, AuRate is offering carefully crafted, flexible, and modern fine jewelry at a fraction of the Tiffany’s price point. It’s true that some of the AuRate pieces are essentially gold plated silver. Personally, I see this as yet another opportunity Tiffany is currently missing – Millennials are a relatively young customer category who have many things on the agenda. Student loans, mortgages, young children…. a $2K bracelet is not necessarily amongst their high priority items…Offering a larger selection of fashionable, fine jewelry that is somewhere around $150-$800 price point, is crucial to catch their 5 second attention span!
It’s very interesting to watch the interview Francesca gave at the launch of the T Collection. As she is describing the collection, she mentions “you have these delicate pieces, mixed together with these sculptural pieces. It’s nice to wear different scale, different length, and therefore you should layer it.” It is important to keep in mind that the price of a Jewelry piece in the Tiffany T collections start around $1000 and goes up to $20K… buying one of these pieces is a huge deal for most people. Buying a few and layering them is very very very unlikely, especially when considering that the collection is designed to lure Millennials. Once again, this leads me to the suspicion that Francesca received zero strategic support and was left to wander the dangerous waters of customer segmentation – ALONE.
Marketing
Marketing is a powerful tool. It can make wonders for any brand, particularly one with a strong product. It’s the magic glue that binds everything together and makes a storyline out of mere facts. Unfortunately, Tiffany has not been able to play that card well. The social presence is curated in a very formal way with no “life” and no context. It contains absolutely no customer content… all the images seem to come out of a boring perfect world that is hardly relatable. To top it all off the brand has no “face” or evangelist that could speak towards the Millennial customers Tiffany so desperately needs. As a result, the marketing campaigns come across rusty with no catch, no purpose, no emotional element.
To fix the problem Tiffany has to establish the sort of emotional connection that Under Armour managed to build with its Misty Copeland campaign (this one speaks for itself). Tiffany should find a purpose, something important that it stands for, something that resonates with the customers. Once the message is defined the brand has to find the human “voice” that personifies that message and sends it into the world. At this point the brand will be ready to build a purposeful marketing campaign and start bonding with the customers on a deeper level.
Mission
That takes us to the interesting subject of Mission. Here we basically talk about the change a brand wants to bring into in the world. For example, Millennial customers are increasingly concerned with issues such a sustainability, responsible sourcing and women empowerment. They are becoming more self-aware of the shopping footprint they leave and the impact it has on the world. Many luxury retailers (predominantly startups) have built their identity around important subjects that go way beyond the product they are offering (e.g. Everlane, Cuyana, Monique Pean). In this context understanding the motives, concerns and aspiration of shoppers becomes crucial. To become emotionally appealing, Tiffany has to build a mission around a cause that is worth defending… something that goes beyond diamonds and shiny objects…. Something that allows their shopper to feel proud of a purchase and makes them feel like they are contributing to an important cause.
Store Design
Last, but not least, I’d like to speak about the in-store experience. Every time I walk into the Tiffany Flagship store on 5th Avenue, I struggle to see the customer described by Francesca, and the setting probably has something to do with that. I am often surprised and overwhelmed by the majestic setup of store, the large dark counters (like the ones I see at Metropolitan Museum in the Egyptian section), the old fashion elevators… I almost feel like I got there by mistake, or maybe I traveled 50 years back in time… Sometimes I just feel like walking out to get some air… Some might argue that in the age of e-commerce the brick and mortar experience might not be “that” important… and I will readily disagree. For a product with a price point this high, customers will take the time to visit the store and investigate the purchase. And when they do, they’ll also get the “vibe” of the setting. To that point, I personally fail to see how a woman who makes her own rules, and who doesn’t conform would enjoy shopping in place that is by and large the impersonation of conformity.
Titanic or Phoenix?
Francesca’s brilliant vision did not save the brand from its fate because Tiffany is a very big ship. It’s hard to change direction… it’s slow and bulky and people take a long time to make a decision. Today Tiffany is in a tough spot, not because it cannot recover but mostly because it’s afraid of taking a risk. It has a hard time accepting imminent loss in revenue when rethinking the brand identity and re-aligning the merchandising strategy. Tiffany is a publicly traded company, and any major change has to be communicated to and accepted by lots and lots of people. Quite a few of them are “old school” retail soldiers. It’s much easier to “play it safe” and move from one creative director to another while the company gradually fades into oblivion.
Francesca’s departure is a very sad moment for the brand and I believe it will accelerate its
downfall. Tiffany is collapsing under the weight of its own heritage which simply does not fit into the modern mindset. I think the only thing that might save Tiffany today is going the path of M&A – much like Estee Lauder did back in the 90s when is started acquiring small brands and turning them into skin care powerhouses. Going after a younger customer requires a younger identity, and it is high time for Tiffany to pass on its wisdom to a new generation. That being said, acquiring and nurturing young brands into adulthood is probably the best use of Tiffany’s time, knowledge and resources. A few interesting companies come to mind: Monique Pean, Irene Neuwirth, AuRate, Ippolita.
Bottom Line
One thing is clear. Tiffany cannot continue its journey in denial. Reed Krakoff will have to make some really tough bets on his end, but most importantly he will have to work closely with everyone on board. The leadership of the company has to share one vision, no matter what that vision is, and make sure it gets fully translated in every aspect of the brand’s activity. If not, Krakoff creations – no matter how good – will do little to help Tiffany regain its former glory.
Retail Therapy 