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|By Nancy Pier Sindt||Posted: 02/01/09 07:04|
| RAPAPORT... Although its selling space and inventory have grown impressively over the years, Borsheim’s has retained its reputation for personalized customer service. |
With 248 employees and an inventory of more than 100,000 items, Borsheim’s Fine Jewelry in Omaha, Nebraska, has proved that bigger is better when it comes to satisfying its thousands of customers in the United States and abroad. As one of the largest single-unit jewelry companies in the country, Borsheim’s ranks second only to Tiffany’s flagship store in New York City in the volume of merchandise sold from a single location.
Nearly half of Borsheim’s present 62,500 square feet of real estate is devoted to selling space — the balance is used for offices, jewelry repair and production and support services. And while its present size dwarfs its initial 8,000-square-foot store, Borsheim’s has maintained its original commitment to friendly, personal customer service despite its expansive footprint.
Founded in downtown Omaha by Louis Borsheim in 1870, the jewelry store already had a well-established hometown reputation when it was sold to Louis Friedman and his wife Rebecca in 1947. Their son, Ike, who joined the company the next year, oversaw the growth of the store’s business with his philosophy of a large selection of merchandise and value pricing. In 1986, Borsheim’s moved into 27,000 square feet on the ground floor of the former Hovland-Swanson department store, an anchor of the upscale Regency Court Mall in suburban Omaha, and later expanded into the second floor as well.
In 1989, the controlling interest of Borsheim’s was purchased by financier Warren Buffett, a frequent customer at the hometown store, who considered Ike “a retailing genius.” The sale made Borsheim’s part of Buffett’s Berkshire Hathaway holding company. In 1994, Buffett appointed Susan Jacques, then a 34-year-old senior vice president who had worked at Borsheim’s for 12 years, as president and chief executive officer (CEO). Under her leadership, sales have more than doubled.
Diamonds Are Key
Befitting its supersized square footage, the store boasts an expansive inventory, of which 80 percent is jewelry. The rest of the stock consists of watches, 11 percent, and gift items, 9 percent. Trademarked Crisscut and Ashoka diamonds and big-name timepieces are just some of the featured items. Jacques characterizes the merchandise selection as “wide and shallow, but deep in core categories,” such as diamonds and diamond jewelry.
Diamonds, Jacques goes on to say, are a key element for Borsheim’s, representing an estimated 68 percent of the retailer’s jewelry business. In comparative sales, diamonds and diamond jewelry contribute 33 percent to annual volume. Loose diamonds and engagement rings are a pivotal category, as are wedding and anniversary rings.
Even though Borsheim’s sells a number of large, top- quality diamonds, the great majority of diamonds for the engagement ring business average 1 carat in size. In terms of diamond quality, the store, says Jacques, sells “anything and everything, except for the very low qualities.” Best-selling qualities generally range from G to J color, VS2 to SI2 clarity.
Borsheim’s does sell clarity-enhanced stones, but always with full disclosure. Certs are included with all loose goods, most typically from the Gemological Institute of America (GIA). Jacques says the third-party endorsement is important to her customers. She herself is a graduate gemologist (GG) of GIA and a fellow of the Gemmological Association of Great Britain (FGA), and she counts a dozen graduate gemologists on the store’s staff, in addition to three appraisers and 12 bench jewelers.
Unlike many retailers, Borsheim’s owns its own inventory and has cultivated close working relationships with its diamond suppliers, including a major sightholder from whom the store buys a large volume. “We own the majority of our inventory,” the president says, “so we are somewhat immune to the problems of many companies” in accessing credit and consignment goods. Borsheim’s does take some consignments at the high end, and partners with its diamond suppliers to supplement inventory, but makes immediate payment after sales of consigned goods.
Overall, Borsheim’s is frugal and runs a tight ship, says Jacques. Granted that in Omaha, operating costs are lower than in many major cities, but the store works on a low profit margin, averaging 21 percent operating expenses compared to sales.
Borsheim’s has established a reputation for its family-friendly culture, with many employees having worked there for more than 20 years. If an employee has a sick child at home or a soccer game to attend, he is encouraged to take the time for his family. “Don’t confuse your career with your life,” advises Jacques. The retailer also benefits from being a part of the extended family of Berkshire Hathaway. Once every year, at the beginning of May, Buffett invites all 30,000 of his stockholders to Omaha for a blowout weekend surrounding the annual stockholders meeting. Borsheim’s hosts a reception for the group and schedules exclusive stockholder shopping events, which include special Berkshire Hathaway “family discount” coupons.
As might be expected from a store with such a long hometown history, Borsheim’s is active in many civic and charitable events. These include tie-ins with the city’s annual College World Series, support of the Jewelers for Children (JFC) charity and special events benefiting the city’s botanical gardens and children’s hospital. Each December, Borsheim’s creates a special-purchase piece of jewelry and a gift item that each retail for $25, of which $5 is donated to a local charity.
The current tough economic times have encouraged the store to ask, “How can we help sales and customers?” As one solution, the retailer initiated a Scrap Gold Party —marketed as “Turn Your Gold into Green” — where people brought in unwanted or damaged gold jewelry to sell for the gold content. Customers received a higher value if they opted to trade for merchandise, lower if they chose cash. What began as a one-time event stretched into 14 weeks, and was repeated before the holidays.
In 1999, Borsheim’s established a website, which almost immediately became a working ecommerce site. It was important to start sales right away, to interact and sell, Jacques says. Approximately 80 percent of the initial buyers were new clients. Borsheims.com offers such services as designing your own engagement ring, where brides can choose the size and shape of the diamond and design the ring, and an interactive bridal registry.
Other company services include a generous diamond trade-in policy and a Shop at Home service, which originally involved physically selecting and shipping items to established clients for at-home viewing. Now, thanks to the advent of email, the process has become easier, with images, rather than actual merchandise, leaving the store for private viewing.
“We have always been known for exemplary customer service,” says Jacques. “We are privileged to be invited into our customers’ lives; we tie into the emotion and passion they feel on special events and occasions.”