2024 State of the Industry Report

Satellite showroom showoffs
A new term has gained prominence in the industry: ‘showroom’. It is
increasingly used by what Jeweller previously defined as ‘retailer-no
storefront’. These showroom operations are where customers must make an
appointment to visit the business.
A showroom has traditionally been used to describe a transaction where a
customer views products and orders the items to be delivered or collected at
another time.
It is also typically used in business-to-business transactions rather than
consumer retailing. That is, a showroom does not normally entail a business
carrying stock that a consumer purchases off the shelf.
Since 2010, Jeweller has witnessed a shift towards this model used by various
jewellery businesses, which probably gained momentum because of COVID.
However, this causes a problem for an industry study.
These ‘showrooms’ aim to grab a slice of the rapidly increasing demand for
custom-made designs without enduring the costs associated with a retail
lease, the expense of displaying jewellery, or the need to hire staff. This
showroom concept also added to the reasons for reclassifying the definition
of a ‘jewellery store’. It should be noted that showrooms generally do not
carry stock readily available to be purchased by the public and are not the sole
reason for the reclassification.
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There is another, more important reason behind the decision. The research
uncovered a new trend by some of these ‘showroom stores’ to advertise and
promote the business in a misleading or deceptive manner.
In the past few years, Jeweller has observed many examples of a new business
being established - or moving to - a no-storefront operation and promoting
itself as having showrooms in all, or many other, Australian capital cities.
The problem is that in many cases, these showrooms don’t ‘exist’; they
are either virtual offices with no staff, operating from a serviced office
arrangement, or, in some cases, images of a physical showroom that appear
on the company’s website and, again, have no staff.
For example, a jeweller specialising in engagement rings will promote itself
as being based in Sydney or Melbourne and claim to have showrooms in other
capital cities, such as Adelaide. The business often lists the phone number
of its head office or may have a local phone number, which is redirected,
unbeknownst to the customer, who thinks they are dealing with Adelaide staff.
These businesses will offer a virtual appointment with their ‘highly specialised
jewellers’ in the head office. In other words, the ‘interstate showroom’ is
nothing but a facade.
The trend is more evident post-COVID because technology has dramatically
improved in the past few years, and consumers have become accustomed to not
visiting stores. Indeed, many are more willing to ‘go shopping’ via Zoom meetings.
These two trends were not evident in 2010, so the notion that small jewellers
could have a ‘store’ in every capital city was unheard of. And it would have been
unprofitable!
Indeed, the advent of unstaffed ‘satellite’ jewellery showrooms was hastened by
COVID. With CBD rents crashing during COVID – and some have suggested they
will not recover to pre-COVID levels - the cost of establishing the ‘appearance’ of a
jewellery showroom in other capital cities has become less expensive.
This facade is ideal for jewellery as it is a high-margin product, at least when
compared to other retail categories. That is, the additional monthly cost for
renting a small interstate office, either as a physical location or a serviced
office - and in some cases deceptively presented on a website - could be far
outweighed by selling one diamond ring.
This causes a dilemma for such a study as this State of the Industry Report,
which attempts to measure the number of jewellery stores in Australia.
Yes, a consumer might contact a jewellery business operating from a
‘showroom’ in Adelaide; however, the sale occurs at a ‘no storefront’ office in
Sydney. Should the Adelaide ‘showroom’ be considered a jewellery store? We
think not. Worse, as mentioned, in some cases, the showroom doesn’t even
exist; it can be a phone call being redirected from a serviced office to another
city location.
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