Fashion Victim to Refurbish Its Image, Tiffany Risks Profits

January 10, 2007
Wall Street Journal
By Ellen Byron


In the late 1990s, Tiffany & Co.’s silver charm bracelet was a must-have fashion accessory. Teens jammed Tiffany’s hushed stores clamoring for the $110 silver bauble. Sales skyrocketed, investors cheered.
Tiffany’s managers worried. They knew the bracelet had become a fad, one that could alienate the jewelry firm’s older, wealthier, and more conservative clientele. Worse, it could forever damage Tiffany’s reputation for luxury.

“The large number of silver customers did represent a fundamental threat — not just to the business but to the core franchise of our brand,” says Tiffany CEO Michael Kowalski.
So in a dramatic gamble, Tiffany decided to kill its golden goose. In 2002, the firm began hiking prices on its fast-growing, highly profitable line of cheaper silver jewelry. It simultaneously introduced pricier jewelry collections, renovated stores and showed off its craftsmanship by highlighting spectacular gems like a $2.5 million pink diamond ring.

Here you go ladies and gentlemen, a lesson in over licensing your product. Tiffany's, known for their exquisite fine jewelry, has raised the price on most of their lower-end sterling silver. Why? Image of course! Many women who once adored Tiffany's accessories are now looking at the product as mere accessories for teenagers. Young ladies could be seen strutting the streets showing off their Tiffany charm bracelets. Also, to add to the demand, Elle Woods, in the popular "Legally Blonde," movies sported this same style accessory. Many companies must beware of their target market without trying to cater to every consumer. As a result, Tiffany's is now targeting back to their more affluent customers spending much more money on diamonds rather than sterling silver. As the article states, Burberry has reached out to many consumer groups as well by providing products from plaid handbags to umbrellas. I believe that Tiffany's move will potentially make them a stronger more profitable company. Trying to target a high end market as well as a lower one can cause the perceived value of a product to decrease. Wealthy women willing to dish out a couple thousand for a Tiffany's branded necklace want it to be original, not overdone. Many companies fall victim to over licensing their product and suffer in the long run when their wealthier consumers head elsewhere.

Jackie Webb

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