Jeweller tests waters of retail to build brand

ABBEYCREST is opening jewellery shops for the first time to accelerate its move upmarket.

The Leeds-based group has revealed plans to open up to a dozen shops in independent shopping areas such as Leeds's Queens Arcade and Harrogate, in a bid to establish its branded jewellery arm.

Abbeycrest, which currently sells to retailers, hopes targeting consumers directly will speed up its transition from mass market to the higher-margin upmarket sector.

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Simon Ashton, executive chairman of the AIM-listed group, insisted Abbeycrest does not intend to become a retailer, but said the flagship shops will build its brands' reputation and presence.

"I don't want to be in retail," he said. "I want to use it as part of my building a brand.

"We are trying to get close to the market and understand the reaction."

Abbeycrest typically sells direct to high street jewellers such as Ernest Jones and Goldsmiths, as well as retailers including Argos and Asda.

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The new stores, which are likely to be called Osare, will target affluent consumers in upmarket areas more resilient to the downturn, with the first prototype opening in February or March.

"I want to invest in retail and have 10 to 12 concept retail flagship stores to push the brand," said Mr Ashton.

"It's the presence on the high street. We're committing to building the brand."

He envisages taking short leases to test the concept, and also plans to launch a new website which where consumers can buy jewellery online.

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Since launching its branded arm from scratch in 2008 – a strategy it dubbed "Straight Edge" – Abbeycrest has grown branded turnover to more than 750,000. The nearest thing Abbeycrest had to a brand before it launched the strategy was Brown & Newirth, a bridal jewellery business. Its brands now include Gorgeous Gold, Fluid, and Osare.

Osare, its male jewellery range, draws on architecture, Italian heritage, sport and the car industry.

"Everything is going branded," said Mr Ashton. "They (jewellers) are trying to make collections much more lifestyle-oriented."

But building brands from scratch has proved a slower process than Abbeycrest anticipated.

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"You don't go from the mass market into the higher end design-led area of the market overnight," he said. "There needs to be a change in attitude to our brand and product.

"We have now got to make what we sell rather than sell what we make."

The brand strategy has had some success so far – the average price of a piece of Abbeycrest jewellery was 14 when Mr Ashton arrived; now it is 22.

Mr Ashton plans to accelerate the strategy by buying brands from up-and-coming designers which have "a name and traction".

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"There are a lot of designers out there who have built up a brand and got a name for themselves and are selling to people like J-Lo but have got turnover of 200,000.

"We've got that footprint that they want – we've got sales people around the world, manufacturing in Thailand, design and sourcing in Hong Kong."

Mr Ashton, who was appointed in 2008 to rescue to group, has overhauled its board and shifted its strategy away from pure volume to target higher-margin business.

Under a programme called "Straight Edge", Mr Ashton has streamlined the group's operations, including shifting manufacturing and much of its distribution to Thailand. That included shrinking the group's Leeds facility from 160 people to about 18, switching to hold the bulk of its stock in Asia. It now supplies Argos direct from the Thai factory.

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He will have to convince shareholders such as activist investor Peter Gyllenhammar, who owns almost 30 per cent of the group's shares, of the strategy's merits. Mr Gyllenhammar is openly sceptical about Abbeycrest's "less successful new ventures into... branded".

The group's latest results saw revenues increase by five per cent to 18.8m in the six months to August 31, but it made a pre-tax loss of 500,000 after its mass market Essentials arm was hit by faltering consumer confidence and rising commodity prices.

Putting names to target market

ABBEYCREST has created profiles of model customers.

Emma, a 25-year-old graphic designer, lives in a city centre apartment with her partner Ben. A fan of TV shows EastEnders, Coronation Street and Ugly Betty, she regularly uses social networking sites and shops online.

Emma shops in Next, Zara and Topshop and reads magazines including Hello, OK and Grazia.

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She buys jewellery for herself and friends, particularly modern items.

Mark, in his 30s, is comfortably-off and climbing the executive ladder. He drives BMW 3 series and shops in Ikea, Hugo Boss and Topman.

He is most likely to buy jewellery as a gift for his partner.

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