Tom Shane's World

Happy 2012!  I am pleased that another year has gone by where I feel good about the work that we’ve been performing at Shane Co.  It has been a very busy year for us.  I have visited 17 of our 20 stores in the past 10 weeks, and feel like I have the strongest grip on our company that I’ve ever had.  As I’ve mentioned in the past, my job technically lands me a desk in our Home Office, but in the retail business, the only action that exists is at the stores.  Therefore, my travels as of late really gave me perspective on the course that we spent the first three quarters charting.

In last year’s blog around this time I mentioned the economy.  I cited that I believed that although newspaper and television headlines had continued to be grim and negative in nature with regards to economic data, I thought that consumer sentiment was on the uptick.  Speaking to our customers around the country these past few months, I finally stopped hearing negative comments with regards to everyday, real-life stories.  The past few years, we’d see, for example, customers coming into our store to return a product.  Although our return policy is a hassle-free 60 day money-back guarantee, we still always ask the reason for a returned product.  The main reason is to ensure that we didn’t fall short of consumer expectations with pricing, quality of the merchandise, or the like.  At any rate, the percentage of returns that were being brought back for economic reasons (recently lost a job, buyer’s remorse over purchasing jewelry, etc…) has almost completely been eliminated.  I am not naïve, and do know that economic times are less than easy, to put it lightly, but my anecdotal ‘research’ is being supported by world newspapers regarding the state of the US economy, which was not the case 12 months ago in my blog reflecting back on 2010.  Good news, and continued progress, in my opinion.

As for our focus at Shane Co. this past year, we have been focused more than anything on the caliber of our team members.  My father Tom and I have always felt like strong employees is the only true differentiation a company can have that someone else can’t copy.  Our free lifetime warranty can be copied by others (it hasn’t been yet), our merchandise trade-in policy, our return policy, and our low-pricing, high volume strategy are all things that can easily be copied should someone desire to someday do so.  In the end, our true advantage is our people, and customer service is our upper hand which can only be gained through hard work and a company culture that is constantly being molded, monitored, and I believe improved upon.  I view this never-ending charge as 80% of my job as company Executive Vice President.  After all, it is said that people may not remember what they paid for something, what occasion it was purchased for, or even what the product was exactly, but they’ll always remember how you made them feel during their experience.  This is true with a vacation, a restaurant, or when buying jewelry.

We are very excited for our prospects in the upcoming year ahead.  Our technical advances this past year have taken us from 2005 to 2013 in a 12 month span, and we look forward to continuing to advance ourselves to remain the best place to buy jewelry in the country.

Wishing everybody a happy, and most important healthy, New Year ahead in 2012.

As our company celebrated its 40^th anniversary, many of my friends ask me what functions I perform personally, along with my role of Executive Chairman.  They marvel at the idea that I buy all of the rubies and sapphires…mandating my going over to Bangkok 7 or 8 times a year for approximately 3 weeks each time.  They can neither understand how I can be away from the business that long, or away from my home.  They can’t imagine that I can justify spending so much time buying those stones, and why I haven’t hired a person to do that function for us.

The beautiful city of Bangkok, Thailand.

For the first twenty years of our company’s existence, I bought every diamond personally.  As the company grew in size, and I was forced to give up most of the ‘hands-on’ functions, I kept on doing the radio ads, and buying the stones.  During that period, buying diamonds changed materially.  Grading became both standardized and common.  Price lists came into being, and stones were priced and traded based upon those grades.  What had been an art was turned into a science.  That took the fun out of it for me, quite frankly.

This picture was taken in the mid 1970's. I'm inspecting diamonds with Abraham Lipschutz who was the founder of the diamond exchange in Israel, and an extremely important individual in the diamond trade. My uncle, Claude, and I learned a priceless amount of information from Abraham and his family.

By fun, I don’t mean that I didn’t take it very seriously.  But the way I learned the business, there were no grades.  Every stone I would buy would be examined by me, and I would offer based upon my knowledge of the wholesale market.  The better I knew the market, the market conditions, the situation of the sellers, and all of the intricacies of where there was a surplus of certain goods, a shortage of others, etc., the better I could buy.  My skills as a negotiator came into play as well; but the real key competitive advantage that we had was my intimate knowledge of a complicated but disorganized, segmented market.

Once the diamonds were commoditized, the relative advantage of understanding (or needing to know) the market’s intricacies was minimized. Our buyers today still examine each and every stone, and select the most beautiful within each grade, and negotiate hard to save a few percent…but the atmosphere is completely different.

Sorting through rubies and deciding which to purchase in my buying office in Bangkok

Buying rubies and sapphires, on the other hand, is even more demanding, in terms of a buyer knowing the product and knowing the market.  By comparison, diamonds are much easier to purchase.  There are so many more variables with a colored stone.

With a diamond, “color” is a negative attribute.  In other words, the best color is no color at all, what we call colorless.  Compare this to the color of drinking water.  The more color, the less the diamond is worth.  But with colored stones, there is no ‘ideal’ blue, or red, or pink, or yellow, or lavender, or green, etc.  And sapphires come in every color of the rainbow.  Like buying a pair of jeans, who is to say which shade of blue those pants should be?  So it comes down to the personal taste of the buyer…and I love being able to select those shades of color that are what I know our customers will like.  Plus, many colors are those that our customers won’t find at any other jewelry store in America.

Then there is the fact that with diamonds, there is a very consistent, standard cut.  Deviations in cut are not nearly as great as with colored stones.  I recut most of the sapphires that I buy.  We employ several cutters, in our own buying office, that I keep busy all year long.  I order the stones I buy to be recut, and work with those cutters to detail my desired results, stone by stone.  I see, firsthand, the results of the improvements that I make with the stones.  I am, therefore, able to add value for our customers, without increasing the cost of the stones.  This is a huge advantage to our company, and it makes me feel good, to know that I am capable of selecting stones that I can enhance by re-cutting or re-polishing.  While I would never turn around and sell those stones back on the wholesale market, I know that I could, and at a nice profit.  So again, my ego is fed!

There is a difference between being an employee in a company and being an owner.  It is an unfair burden for a company to hire someone to make buying decisions based solely upon their own personal opinion.  The employee can never defend his/her action, should the boss wish to criticize it.  And buying colored stones is totally an art.  We hear occasionally of someone trying to standardize the rubies and sapphires, like they did with diamonds.  In fact, I know that will never happen, because there are just too many different independent variables that come into play.  Sure, you can find a date on the web, and people have even more variables!  But this is not about matchmaking…it is about buying tens of thousands of stones many times per year, to meet the needs of thousands of customers.  And, in most cases, the customers don’t even realize, much less appreciate, the number of choices that are out there.

Even when professional jewelers come into one of our stores, they are struck in the face by the quality of our rubies and sapphires…which most of them admit they have never seen anywhere in their lives.  And of course, that makes the ruby and sapphire buyer feel that it is worth spending half his life in Asia!  The fact that I love being in Bangkok makes it even better for me, as I can rationalize my time there easier, when challenged.  And today, with the world’s connectivity, most people I work with via phone or email don’t even realize that we are communicating from somewhere outside of America.  They don’t need to know either.  And that too, is part of the fun for me.

My apologies for such a delay between blog entries; retail in December is nothing short of crazy.

I am currently writing from an airport Starbucks in Kentucky. I have finished my Christmas week of selling in our Louisville store.

A lot of the people at the Shane Co. home office  travel to our stores quite extensively throughout the year (as I mentioned in my previous blog post) but Christmas week is a whole different animal.  There is no time for the normal dinners with the team after the store closes for the night.  No long management meetings evaluating the store’s performance.  There’s really not much time for anything but selling…and I absolutely love it!

Having spent the past seven days in our store in Louisville, and having visited five stores in five cities in the past three weeks, I was able to speak to several dozen customers across the country.  Besides helping them with their jewelry purchase, we always end up speaking about more general topics, such as the economy.

In general, most of the people that I spoke to are all tending to feel like things are trending for the better, economically speaking.  The feeling seems to be that while unemployment remains high, those with jobs are comfortable that they will be able to keep their jobs.  There was mention that Ford, a large employer here in Louisville, just announced that they were adding a new model to be built here locally, instead of the alternative which was to be (I believe) in Mexico.  This is a small sample size, and a single example of course, but the overall sentiment appears to be positive with our consumer group.

I’ve noticed more positive newspaper headlines lately as well, whereas over the past several years, media reports have been primarily negative.

Of course, most economic fundamentals are factual, and scientific in nature…but I believe that whether people are feeling uncertain or optimistic about the economy, those feelings influence their spending;  when optimism generally takes hold, as it appears to be, it leads to an overall rebuilding of a strong economy.  This “soft analysis” (newspaper headlines, speaking to our customers, etc…) regarding people’s sentiments, is where I’m seeing the most improvements.

This is a very strong country, filled with very strong people, and I’m excited to see, hear, and feel better about the way the economy is headed.

My favorite news headline of the week, but on this one I’m of course biased, has to be that Shane Co. formally emerged from bankruptcy, strong and intact. This story is of course another good story across publication headlines.

Happy Holidays, and a very happy, healthy New Year.  Enjoy the time with loved ones, and we’ll chat next year.