Hallstead Jewelers Case Solution

The gross profit margin has been diminishing from approximately 50% in 2003 to 49% in 2004 and 48% in 2006. Similarly, the net profit margin has been declining from 7% in 2003 to 3% in 2004 and in 2006, the company had a negative net profit margin of -4%. The net income declined by almost 63% in the fiscal year of 2004 as compared to 2003, while the net income deteriorated further in 2006 as it declined by 292% as compared to 2004.

The Cost of goods sold decreased by approximately 4% in 2004 as compared to 2003 but increased significantly by approximately 35% in 2006 as compared to the cost of goods sold in 2004. Correspondingly, the expenses like salaries and commission, rent and depreciation increased by approximately 54%, 32%, 100%, and 69% respectively in 2006 as compared to the fiscal year of 2004. Other miscellaneous expenses also increased by roughly 75% in the year 2004 as compared to 2003 and by almost 31% in 2006 as compared to 2004. 

All of this indicates that the expansion and relocating to a new location has been fruitful for the business as sales have increased. However, the costs have been increasing more than the sales which are affecting the profitability of the business and business suffers from a net loss in 2006.

2. What are the business’s competitive strengths and weaknesses?  

The competitive strengths for Hallstead Jewelers include the prestige, reputation, and its heritage. It is one of the oldest and largest jewelry and gift stores that was found in one of the prime cities of the USA. Additionally, the store offers a wide variety of products including jewelry, precious stones, crockery items like flatware and chinaware, and other gift items. In other words, it was a one-stop-shop. Moreover, the quality of Hallstead jewelers was considered as finest. It was located at a prime location of Lake Avenue when it was the retail hub. This considerably added to the brand image. Additionally, the business was highly reputable for customers so much so that they would visit and shop from the Lake Avenue retail shop of Hallstead Jewelers when most of the retail stores had shifted to Washington Street.

While the business has competitive strengths that benefitted it throughout the years, there are some unavoidable weaknesses too. Firstly, the Hallstead Jewelers business is slow to adapt to the changes in the market as when the major shopping and retail areas shifted to Washington Street, the business did not make any changes to its location. This made the store look out of place in the locality that it was in. While the old customers kept coming and buying from Hallstead, eventually, the sales dropped as younger generation/new customers did not visit the old store at Lakeview Avenue or perhaps they preferred shopping from Washington Street. 

Furthermore, the expenses and cost as compared to revenues for Hallstead jewelers account for a major chunk of their revenues and consequently profits. Salaries and commission account for the biggest expenditure of the business.

3. What’s happening in the industry? How are customer behaviors changing? What are the competitors and how are they advantaged or disadvantaged with respect to Hallstead?  

The industry dynamics have been changing significantly in various ways. Firstly, the retail shopping center shifted from the once prime location of Lake Avenue to Washington Street. Moreover, the kind of retail experience demanded and preferred by customers has also evolved with consumers preferring bigger retail stores experience. Likewise, the consumers seek premium experience through value-adding features of products like packaging such as the “blue boxes” of Tiffany made the diamond jewelry appear more sophisticated, exquisite, and luxurious. 

Secondly, new competitors have sprung up. These included both brick and mortar stores like Tiffany and Company as well as online businesses like Blue Nile. Both businesses are leading sellers of diamonds. This shows that consumers’ demand for diamonds has been increasing. The former jewelry business has managed to create a global presence through its diamond jewelry product line which signifies that demand for diamonds is increasing not only locally but internationally as well.