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272ECONOMIC SCIENCES
THE MARKET VALUE OF BRANDS ON AN INTERNATIONAL SCALE: CONSIDERING THE
EXAMPLE OF JEWELRY INDUSTRY
Serdiuk A. V.,
Kuban State University, Krasnodar, master student Czech University of Life Science, Prague, master student
Votchenko E.S.,
Kuban State University, Krasnodar, PhD, assistant professor
Bogdashev I. V.
Kuban State University, Krasnodar, PhD, associate professor
ABSTRACT
Brand equity and brand value are measures that estimate how much a brand is worth. The difference between the two is that brand value refers to the financial asset that the company records on its balance sheet, while brand equity refers to the importance of the brand to a customer of the company. Therefore, in the research the authors imply that the market value of brands on an international scale, especially in the jewelry industry, performs high demanded competitiveness, however, it depends not only on brand image or exterior attractiveness of commodities rather than personal attitudes to the trademark, its history, perception and willingness to pay. To study that options thoroughly the authors present a brief performance of the jewelry industry, kinds of its activity in an international scale, pursue an economical and macro-economic analysis, as well as make a competitive analysis of the related market, analyze the efficiency of sales and conduct SWOT-analysis about the targeted markets of products or services the industry provides.
Keywords: market value, jewelry industry, Tiffany, luxury goods, return on assets, branding, SWOT-analysis.
It is natural to begin with describing the jewelry industry itself. What is it essentially about? What are the key characteristics? It goes without saying that jewelry is a part of luxury industries. In addition, the businesses that are in jewelry are often dealing with other luxury products or vice versa. Speaking about this fact, it could easily cause any confusion. First, in order to get a holistic view on luxury industry, we have decided to include the following list, which gathers all products in the category [11, p. 13]: luxury clothing & apparel; luxury fashion accessories; luxury beauty, cosmetics & fragrances; jewelry; watches; wine & spirits; automobiles (and other vehicles, such as yachts).
As we can see from the list above, luxury is a complex filed. Secondly, it is important to admit that often the confusion is related to watches: some refer them to jewelry while others do not. Therefore representing of numbers must remain critical.
Jewelry industry is highly cyclical in its nature and that is mostly driven by the increasing wealth [10]. This fact affects the industry in the world economy both in good and bad times. Recently, several factors have affected the performance of both Tiffany's and the luxury goods industry. Typically, spending in general and on luxury goods in particular depends greatly on consumer confidence in the economy as a whole. With the economic slowdown of 2008, Tiffany & Co as well as the luxury jewelry industry has experienced dramatic decline, captured in a particularly poor holiday season. Facing further anticipated economic softening, the firm has decided to open an alternative store model in the Los Angeles area that focuses exclusively on its lower-end sterling silver jewelry whose average price point is
$200. Tiffany & Co is also focusing on growth opportunities in non-Japanese Asian markets as well as opening its first store in the Middle East [3].
Despite this fact, there are positive long-term growth trends, as well as the different estimates of the size of international jewelry industry. Some experts have put this number in 25 billion USD, while industry specific research companies suggest considerably bigger size of 236 billion USD. For comparison, it should be noted that the diamond supply giant De Beers company with their 40% world market share, mark with their turnover solely the World diamond supply to 18,5 billion USD in 2015. Therefore, the 236 billion USD estimate for world jewelry market seems rather more convincing [8].
Tiffany & Co has been the world's premier jeweler and America's house of design since 1837. Throughout its history, Tiffany & Co has been a luxury jewelry brand associated with romance, quality, and style. Originally gaining fame as a silversmith and later for its association with engagement rings and diamonds, Tiffany & Co now reaches a wide market through its sale of high-end jewelry, watches and glassware. Tiffany's keeps step with the American economy and expands across the United States and into South America, Europe, Asia and Australia. The firm offers a wide array of price points in its pieces, from sterling silver items under $100 to quarter of a million dollar signature pieces covered in diamonds and other gems. The supplier power on DeBeers and others is critical to shaping the industry's dynamics and future [12].
Tiffany & Co. operates in many countries, with 313 company-operated stores. Its Americas segment, is the largest one, includes sales from company-operated retail stores in the United States, Canada, Mexico, and
Brazil. It also includes sales in these markets through business-to-business, Internet, catalog, and wholesale operations. At the end of fiscal 2017, ended January 31, 2017, Tiffany operated 122 retail stores in the Americas: 95 in the United States, 11 in Canada, 11 in Mexico, and 5 in Brazil. This included 12 company-operated stores within department stores in Canada and Mexico [1]. At the end of fiscal 2017, the Americas segment had a total gross retail square footage of 710,000. Tiffany's Americas segment accounted for 48% of the company's total revenue in fiscal 2017 and 2017, while sales in the United States accounted for 88% and 89% of revenue in the Americas in the respective periods. This revenue is further divided into the following categories:
- statement, fine, and solitaire jewelry - items containing diamonds and gemstones, contributing 23% of sales in the Americas;
- engagement jewelry and wedding bands - items containing diamonds, contributing 23% of sales in the Americas;
- fashion jewelry - non-gemstone, sterling silver, gold, and metal items, accounting for 44% of sales in the Americas, with sterling silver contributing more than 50% of total fashion jewelry sales [7, p. 254].
Earnings from operations for the Americas segment represented 19.4% and 18.8% of the company's net Americas sales for fiscal 2016 and 2017, respectively. The Tiffany's major peer in the jewelry industry is the Signet Jewelers. This company has presence mainly in the United States, which represented 86.8% of its total revenue in fiscal 2017. However, Tiffany's peer Fossil has a presence in the United States, the Asia-Pacific region, Japan, Europe, and other countries [5].
It is clear that Tiffany has a presence in many international regions such as: the Americas, the Asia-Pacific region, Japan, Europe and the United Arab Emirates. Let us look some of them more particularly (Fig. 1).
Fig. 1: Tiffany & Co. 's International Segments
The company's other segment includes operations in emerging markets, which represent 75% of the segment's total sales. It also includes wholesale sales of diamonds, which involves the purchasing and conversion of rough diamonds to polished stones. Sales of rough diamonds have been reducing Tiffany's overall gross margin [3].
Tiffany's major peer in the jewelry industry, Signet Jewelers, has a presence mainly in the United States, which represented 86.8% of Signet's total revenue in fiscal 2017. Tiffany's peer Fossil has presences in the United States, the Asia-Pacific region, Japan, Europe, and other countries [9]. After Tiffany & Co.'s
market situation has become clear, it is necessary to analyze efficiency of the Company's sales and present it in the Table 1 [6, p. 160].
Speaking about Return on assets (ROA), it is an indicator of how profitable a company related to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's management is at using its assets to generate earnings [13]. When Profit
Analysis of the efficiency
Margins are expressed as a percentage and, in effect, measure how much out of every dollar of sales a company actually keeps in earnings. So, as we can see from the Table 1, in 2016 ROA was 3,87%, but in 2017 it increased by 5,88%. It means that Tiffany & Co.'s assets became more productive. Thus, it is obvious that the higher ROA number is, the better, because the company is earning more money on less investment [9].
Table 1
Year Sales, millions Profits, millions Assets, millions Asset Turnover Profit Margin, % ROA, %
1 2 3 4 5 6 7
2016 4,105 2,374 5,122 0,80 11,30 9,00
2017 4,002 2,233 5,098 0,78 11,13 8,72
In order to have a good understanding of Tiffany & Co. 's competitive advantages, a SWOT-analysis has been conducted and reflected in the Fig. 2 [13].
Fig. 2: SWOT-analysis of Tiffany & Co
As it is captured from the research, growth rate of all indicators has an increasing tendency. Despite this fact, positive dynamics of growth rate in case of Short-term borrowings and long-term debt defines that Company's debts became bigger almost twice. Speaking about Total assets, as one of the most important indicator of Tiffany & Co.'s prosperity, due to positive percentage rate, which is equal 23,3%, it is obvious that the Company is expanded on the market of jewelry. Furthermore, growth rate of Stockholders' equity per share and Cash dividends paid per share, 24,6% and 41,1% accordingly, shows that earnings of Tiffany & Co. have increased.
Now taking into consideration the fact that Tiffany & Co. mostly presented in the USA we are going to describe the state of the jewelry industry in 2015 there. So, According to the U.S. Department of Commerce, between 2010 and 2015, total jewelry and watch sales in the United States have grown at a CAGR (compounded annual growth rate) of 4.4%, reaching $74.7 billion in 2014 [6, p. 166].
The United States, the most mature jewelry market, reported a 7% rise in jewelry sales in 2014, followed by China and India with rises of 6% and 3%, respectively. Tiffany & Co. has a strong presence in all these mature and growing markets. In the Fig. 3 below, we can see division of all jewelry sales in the USA by category [2, p. 328].
Fig. 3: USA jewelry sales by category
In-house credit facility represents 35%-50% of total jewelry sales. However, Tiffany and its peer Fossil do not offer credit facility to their customers, unlike Signet Jewelers, where credit sales account for 41.9% of total sales. According to the Survey of America, 37.9% of jewelry sold is diamond jewelry, with loose
diamonds contributing another 16% of sales. Fashion and gold jewelry account for 7% and 6% of total sales, respectively. Therefore, now we are going to describe sate of consumption in the USA jewelry industry from 2013 to 2015 (Table 1) [4].
Table 1
The main consumption indicators of the jewelry industry in the USA
# Indicator Years Growth from 2015 to 2013, %
2013 2014 2015
1 Personal Consumption Expenditures 75,3 77,0 77,2 2,52
2 Real Personal Consumption Expenditures, index 111,266 117,819 121,068 8,81
3 Real Personal Consumption Expenditures, Chained Dollars 67,0 71,0 73,0 8,95
4 Price Indexes for Personal Consumption Expenditures 112,352 108,509 105,778 -5,85
All the indicators presented in the Table 1 (except Price Indexes which are naturally inversely proportional to all mentioned) demonstrate growth during the period from 2013 to 2015. Several of the top U.S. retail jewelry brands, including Tiffany & Co, reported increased sales and revenues in 2015, have proved such tendency.
To sum up, talking about main trends shaping the jewelry industry as a whole, we can deduce the following [14]:
1. Increasing demand for branded jewelry due to distinctive designs, credibility, and quality.
2. Increase in jewelry shops in developing countries of Asia.
3. Increased focus on e-commerce sales in both developed and developing markets.
Furthermore, when a jewelry brand reaches a level of excellence in style and quality of workmanship it attains a level of status. Brands like Tiffany & Co., Rolex,
Cartier, and the like grant status to the wearer. The benefits from status symbols are hard to put a price on. That is why these brands command a high premium for their jewelry, and their customers are happy to pay the price. These designers foster a loyalty that goes beyond image. It becomes the identity of the person. Individuality is formed by what we wear, and top jewelry brands provide value that goes beyond jewelry for many people.
According to the figures, the firm's return on capital (ROC) is an excellent indicator of the size and strength of its moat. If a company is able to generate returns of 15-20% year after year, it has a great system for transforming investor capital into profits. However, as we could see this indicator has not risen above 13.7% recently. That is why the Company's management should direct efforts to improve its ROC [1].
A similar situation is observed with respect to Return on equity. For Tiffany & Co. the ROE indicator showed decline in 12%. Return on assets (ROA), which
indicates how profitable a company is relative to its total assets, unfortunately shows decreasing tendency either. We could see the same tendency with operating profit margin ratio, also expressing as a percentage of sales and then showing the efficiency of a company controlling the costs and expenses associated with business operations. Thus, it can be concluded that the company's management should make the most effort to improve the above-mentioned indicators.
Despite the negative indicators, the Company continues to grow. In order to promote further development the first area Tiffany needs to focus on is its established markets. Tiffany's is currently experiencing dramatic growth in Europe and non-Japanese Asian markets, but struggles in US and Japanese markets where it has been established since 1837 and 1972 respectively.
Therefore, while the Company enjoys a strong reputation and large customer base, it encounters significant competition in all product categories and geographies. By focusing on enhanced marketing communications, product development and optimization of its store base and digital capabilities, the Company's objective is to be an industry leader in key markets.
References
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12. Tiffany & Co. Demand analysis. URL: https://brandtiffanyandco.wordpress.com/demand-analysis. Accessed: 22/05/2019.
13. Verbeek M. A guide to modern econometrics. Chichester, 2015.
14. Wilcox J., Damassa S., Hyder Z. Strategic Report for Tiffany & Company. New York, 2007. URL: http://economics-files.pomona.edu/jlikens/Sen-iorSeminars/harknessconsulting2008/pdfs/Tif-fany_and_Co.pdf. Accessed: 31/05/2019.
ОСОБЕННОСТИ СОВРЕМЕННОГО РОССИЙСКОГО ЗЕРНОВОГО ПРОИЗВОДСТВА В КОНТЕКСТЕ ОБЕСПЕЧЕНИЯ ПРОДОВОЛЬСТВЕННОЙ БЕЗОПАСНОСТИ РОССИИ
Демидов А.В.
кандидат политических наук, независимый эксперт, Москва
FEATURES OF MODERN RUSSIAN GRAIN PRODUCTION IN THE CONTEXT OF FOOD
SECURITY OF RUSSIA
Demidov A. V.
PhD in Political Science, independent expert, Moscow
АННОТАЦИЯ
В статье рассматриваются проблемы, связанные с переходом производства зерна в России на рыночные условия. Проводится сравнительный анализ зернового производства в современной России и в СССР.
ABSTRACT
The article deals with the issues related to the transition of grain production in Russia to the market rules and regulations. The author analizes the grain production in present-day Russia and in the USSR , its features and problems.
Ключевые слова: зерно, зерновое производство, зерновые культуры, сельхозкультуры, севооборот, дефицит зерна, машинно-тракторные станции, агрохолдинги, статистические данные, инновационность.
Keywords: grain, grain production, grain-crops, agricultural crops, crop rotation, grain deficit, machine and tractor stations, agroholdings, statistical data, innovation.
