Professional Jeweler Archive: Reinventing Service Merchandise

September 2000


Reinventing Service Merchandise

From its dime-store origins to its rise and fall as the catalog showroom king, Service Merchandise has had more lives than a cat. With new positioning, the company hopes to land on its feet once more

In March 1999, Service Merchandise filed a petition for Chapter 11 bankruptcy protection. It quickly shuttered 134 stores and a distribution center. The action signaled the final demise of the catalog showroom model. “We started it and we ended it,” was the succinct observation of COO Charles Septer. But what was next?

The company needed a new image. Retail analysts at the time of its bankruptcy filing said consumers couldn’t see past the old catalog retailer image, which the company tried to shed, and no longer knew what Service Merchandise represented.

Jewelry, Housewares, Price & Selection

“We knew intuitively that jewelry was our core,” says Rose Septer, senior vice president for jewelry merchandising. The jewelry division did well while hardlines such as electronics and toys got trampled by Big Box stores. The company’s average annual jewelry sales per store: $3.2 million, with many stores bringing in $5 million to $6 million.

A strategic review found “jewelry is the cornerstone of Service Merchandise,” as the company’s 2000 business plan says. In fact, core customers viewed the company as a jewelry store that carried other items. Analyses of purchases showed buyers came to buy jewelry or watches, then most often bought housewares and gifts.

Clicks-and-Mortar and Phone Too

With this information in hand, the company hired Yankelovich Partners to help formulate a marketing plan. Yankelovich shared the findings of its famous consumer attitude survey, which affirmed much of what Service Merchandise’s customer analysis said: The shopper of the new millennium wants a store with great service and a focus on certain categories, unique products and exclusive services such as special events. Shoppers also want flexibility on where and when to buy: in-store, by phone or online.

After reviewing the results, the management team set about creating its new image, making key changes in product mix, store design, employee education, public relations and how it uses the Web.

Overall Product Mix

The company dropped electronics, toys and fitness equipment and expanded jewelry and jewelry-related products to 50% of the business. Housewares, gifts and related products make up the rest.

Jewelry Specifics

Diamond jewelry was expanded the most in the new stores, along with watches, gold, platinum and sterling silver. Prices range from $10-$4,000. Clearance and “special purchase” jewelry space has been increased also. The company created a higher-end area called “The Gallery” in 41 stores this year. Jewelry ranging from $500-$20,000 is featured, with average prices of $2,000-$4,000.

Physical Plant

Seventy newly redesigned stores boast bigger areas devoted to jewelry, which is front and center at each location. An additional 70-80 stores will be reconfigured next year. Surrounding the jewelry are housewares, tabletop items and gifts.

Interior Design

Signs, fixtures and merchandising aids are updated with an emphasis on clear communication and an overall “look.” Aisles are wider and fewer walls and enclosed spaces remain. The remodeled jewelry departments feature cherry veneers on showcases, ecru trim and halogen lighting. The Gallerys are distinguished by slightly different, richer wood and lighter trim with special lighting.

Sales and Service

To improve its reputation for service, the company is focusing on improved selling. Sales managers exclusively help associates sell more through training, coaching and motivation. (Sales support supervisors concentrate on infrastructure issues such as stocking, tagging and shrinkage.)

Associates also go through a special Service Merchandise University training. Even non-jewelry sales associates now learn the basics of how to sell jewelry. Top diamond sellers receive particular attention and extra care.

Jewelry repair has been brought inside stores as another customer-friendly strategy.)


The message of Service Merchandise’s fall 2000 advertising campaign reflects all it learned about its core customers’ needs and demands.

The campaign is marked by more jewelry advertising overall; TV, radio and newspaper ads and inserts are used more and direct mail less than in the past, though fliers remain the biggest part of the media budget at 31%. A new logo emphasizes the word “service” in a new typeface but keeps the signature red-and-white color branding.

– by Peggy Jo Donahue

Changing Channels

Service Merchandise adds a real Web strategy

Service Merchandise COO Charlie Septer likes to call the reimagined company a “multichannel specialty retailer.” This means the company uses every channel to reach customers: in-store, by phone and on the Web. Though experienced with the first two, the company sought to take Web sales to higher levels and integrate its site into the mix of ways it reaches customers.

The redesigned site works well, with easy-to-navigate features, crisp art and quick load times, even with a 28.8bps modem. Online features mention the latest fashion trends, such as hoop earrings and pink and blue as hot colors, then lead shoppers into a selection of jewelry typifying those trends. The addition of ever-changing content has doubled the length of time customers stay on the site, says the company.

Service Merchandise is leading users to its site also with in-store Web kiosks, a twice-monthly e-mail sale notification to 260,000 online customers and promotion on all printed materials.

Customers may pick up their orders at a local store or have them mailed. Wrapping paper and handwritten cards can accompany any gift purchase. Service Merchandise also pays for returns and arranges UPS pick-ups. A real-time gift registry complements the in-store registry and had 23,000 visitors in June 2000. Visit


Service Merchandise’s new store design places the expanded jewelry area front and center and incorporates redesigned lighting and showcases.
Left: Diamond and platinum jewelry from the Service Merchandise upscale store area called “The Gallery.”
A typical direct-mail postcard highlights all of Service Merchandise’s fresh branding messages, including an emphasis on service, selection and jewelry. The model typifies yet glamorizes the company’s core customer, a middle-class 40-ish woman.

Copyright © 2001 by Bond Communications