Tiffany and Company is one of the leading U.S. luxury jewelry brands, and their telltale “little blue box” has become a coveted item by women everywhere. Tiffany & Co. was founded in 1837 by Charles Tiffany and John Young and has grown to generate more then $2.6 billion in revenue through their 167 global retail outlets. The growth strategy that has seen them through their long reign is “growth without compromise”. In 2007, due to objections from their largest shareholder, Tiffany began looking at strategies to increase shareholder value. Two options were presented; opening new stores at a faster rate, and licensing Tiffany to an established Italian fashion-eyewear manufacturer/distributer.
The ownership of Tiffany & Co. has changed four times in the last 160 years; Walter Hoving bought the company from the Tiffany family in 1965, Avon purchased the company in 1979, and in 1984, Avon sold Tiffany for $135 million to investors who took the company public in 1987. Since going public, the value of Tiffany has grown from $135 million to $4.4 billion.
There are 3 channels of distribution that Tiffany & Co. uses to sell their products; U.S. retail stores, which account for 51% of sales, International retail stores, which account for 38% of sales, and Internet/catalogues, which account for 6% of sales. Of the international sales, about 50% were from Japan, 25% were from different Asia-Pacific countries, and 18% were from Europe. The amount of internet/catalogue sales is noticeably increasing each year, with a high of 744,000 orders in 2006.
The first international Tiffany & Co. was in Japan in 1972, followed by London in 1986, and stores were in over 10 different countries by 2007 (See Appendix A). Although Tiffany’s original strategy was to limit new-store openings to 4 to 5 per year, Tiffany revised this plan and began opening more stores at a faster rate as part of the strategy to improve shareholder value. This new approach succeeded in raising sales, but also caused a significant rise in expenses, adding up to a slight rise in gross profit. Interestingly, the new stores caused an increase in international sales, but a decrease in domestic sales.
One of the things that make Tiffany & Co. truly unique is their technique of complete vertical integration. In order to cut costs while keeping complete control of the quality level of their jewelry, Tiffany has taken many steps to vertically integrate themselves. They own their own diamond mines, have exclusive sole-source diamond supply contracts, and their own diamond-cutting, polishing, testing, grading, and measurement facilities.
In 2002, Tiffany obtained a new acquisition, the Little Switzerland chain of discount jewelry stores located in the Caribbean islands. This new asset was a new concept based around opening a pearl chain named IRIDESSE. Although Tiffany specifically kept the brands separate, IRIDESSE already has 13 stores in the U.S.
One of Tiffany & Co.’s strong assets is their employees. Tiffany & Co. has a less than 10% turnover rate, which is low for retail establishments. Employee satisfaction is high overall and over 50% of employees hold stock in the company. With such an involved bunch of employees, Tiffany focuses on rewarding brand-enhancing behavior, which helps keep and build the strong brand image.
In 2005, Tiffany pulled a surprising move and rose it’s own prices to slow down the growth of entry-level price points in silver jewelry. This is true to their motto, “growth without compromise”. They would rather cut their own sales than kill their own brand image.
Tiffany & Co.’s “Growth without compromise” strategy has been the base of Tiffany culture since the beginning, and has contributed to the long success of the company. In recent years however, the company has been suffering from a regression in sales and is facing a dilemma between upholding the Tiffany brand image and culture, which...
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