It’s been more than two years since the Jewellery Association of Australia (JAA) made the disastrous decision in April 2016 to launch and manage its own jewellery trade fair, ending its relationship with Expertise Events and losing the vital financial support that came with it.

History shows that the JAA’s decision divided the industry – directors resigned, members quit en masse and Australia’s largest retail group Nationwide Jewellers declined to renew its membership after 25 years.

The fallout proved financially disastrous, with the JAA reporting a $131,829 loss to members in its 2017 financial statements – a result that pushed the association into negative equity. Worse still, one can’t be sure if this loss is even accurate; the financial statements were riddled with errors, and are now under investigation by the compliance division of the Institute of Public Accountants.

Not only were the original financial accounts issued to members last October error-ridden, they also showed the JAA business model to be unsustainable, given its executive director Amanda Hunter was paid 52 cents in every membership dollar in that year.

Around the same time, information emerged that JAA president and board member Selwyn Brandt had decided against his company, Australian Jewellers Supplies (AJS), participating at the new JAA fair. This is despite he being one of the instigators of the decision to break away from Expertise Events and start a rival show. It meant Brandt’s own business wasn’t going to exhibit at the very fair he was promoting!

At the time some directors declared they were unaware of this, with one board member telling me that he/she would not have supported the breakaway move if they had known that the president’s own business would not be supporting the new fair.

It got worse when it was discovered that Australian Jewellers Supplies was not even a JAA member!

Ongoing fallout

The JAA’s many missteps continued, and so has the resulting fallout.

Just recently, I received a phone call from someone who expressed utter dissatisfaction after contacting the JAA head office. He said when his phone call was finally returned, “they seemed to be disinterested in anything I said.”

I still receive calls and emails about JAA membership, and the sad thing is they all carry the same message: we would like to support an industry association, but we also don’t want our money going down the drain.

It is perhaps expressed best by the following email, which has been slightly edited for clarity and anonymity: “I would like to know if you can offer a suggestion with regards to renewal of JAA membership. We have been members for years because we like to belong to the association or at least be a part of an association for jewellers. I am happy to pay membership fees as long as it’s not wasted because of their problems. We rarely make use of the association, however we prefer to be a part of one for different reasons.”

Sadly, this sentiment is rampant across the industry; while the noise may have stopped, the dissatisfaction hasn’t.

More recently others have pointed to the JAA’s website, which is almost inactive. The last ‘jnews’ – the JAA’s monthly enewsletter to members and the wider industry – was posted in February, six months ago. The most recent blog post dates back to June 2016!

The JAA’s popular ‘robbery alert’ page doesn’t appear to have been updated since January when it detailed a Toorak robbery. Unfortunately, there have been many jewellery store robberies since then, however, the so-called peak industry body has not seen fit to update its member website.

An industry association exists for its members, right?

So you would think the JAA’s ‘Current and recent projects’ page would be chock full of member news and activity.

Wrong! The page has a ‘coming soon’ headline.

When you consider the above points, as well as many others, you can well understand the sentiments of the former JAA member above being happy to pay membership fees as long as it’s not wasted.

Now that the 2018 financial year has ended, it’s likely that the JAA will record another loss, with as much as $60,000 in bad or doubtful debts being written-off, which perhaps should have been accounted for last year.

Membership fees 

With JAA membership at an all-time low, I have previously called on Selwyn Brandt to stand down in a bid to reconcile industry factions under a new leadership. Instead, Brandt stood for re-election, which is his right, and re-assumed the presidency again this year.

However, there’s a chance for a breath of fresh air in 2019 given that the JAA Constitution precludes Brandt standing again.

The constitution states “a director shall not hold office for more than six consecutive years” and depending on the outcome of the Institute of Public Accountants’ investigation into the last year’s financial accounts, it may well be prudent for other directors to consider their position, too.

Regardless of the shocking management decisions of the past, it is incumbent on the JAA board to not only rebuild its reputation – it is for others to judge if that can be done – it must deliver on its mandate to provide value and services to its paying members.

This leads me to my next point: JAA membership is not cheap.

The lowest annual fee for a jewellery store is $349, provided it has only one employee – including the owner. That’s a very small store, however I think it’s fair to say that the ‘average’ retail operation would have 4-5 staff, which means the membership fee jumps by a whopping 72 per cent!

Is there a resulting 72 per cent increase in membership value and services? I doubt it.

In fact one supplier told me last year that he would be happy to pay $300–$400 per year knowing he would gain little value for the membership fee. He explained that he’d see it like a charitable donation – a way to support the industry. However, his annual fee was closer to $2,000 and at that cost he decided to quit the association.

He saw little to no value in membership at that cost and was perplexed that another supplier could pay as little as $349 based solely on staff numbers. He would not receive fives times the value as the smaller business.

Further, the cause was not helped when the same supplier realised that 68 per cent of the JAA’s total revenue was paid to staff (add office costs and you’re up to 83 per cent) which begs the question: for whom does the JAA exist – members or association staff?

There is no doubt that the JAA membership fee structure is outdated. It dates back to a bygone era; it’s confusing and creates a disincentive to join, regardless of whether membership fees are “wasted” or not.

There are 33 different membership fees based on a business’ category!

Not only does the pricing penalise successful storeowners, it also penalises multi-store retailers and, in the digital age, that doesn’t makes sense.

For example, I know of one small multi-store retailer that quit the association last year because of the lack of membership value as well as the JAA’s disastrous industry politicking.

If the JAA has a desire to rebuild its membership numbers from the current lows, it might consider starting with a more equitable and logical fee structure – 33 categories is ludicrous.

Where to for the JAA

I have previously written that the retail buying groups offer far greater value at all levels, from fees through to education and training. Their annual conferences are often world-class and all offer regular activities throughout the year.

Given that JAA’s recent activity – or lack thereof – is it any wonder that the buying groups account for far more members than the JAA? 

Not for the first time have I suggested that the JAA needs a thorough review of its raison d’être. For example, what should an industry association look like in 2019 and how should it be modeled into the future?

Clearly the JAA cannot just go along its merry way without adapting? Changing and simplifying its membership fees would help and it also cannot continue to be divisive and hostile.

And on that point, I note that the JAA’s Vision and Mission Statement was dramatically altered after its executive director resigned 12 months ago.

So, where the website once listed a long and detailed raison d’être which included: 

• to be the peak industry body that represents greater than 75 per cent of industry participants
• to be recognised and respected as an organisation for excellence and trusted leadership
• to be the first point-of-contact for thought leadership
• to be the first point of contact for best practice advice for my business
• to be the first point of contact for career opportunities

it now has a simple two sentence mission statement: “Advancing the Australian jewellery industry through representation, unity and consumer confidence. To continue to be the united voice of the Australian jewellery industry.”

The changes might also have something to do with our survey in April 2017, which discovered – among many other things – that only 62 per cent of JAA members agreed that their own association could be recognised and respected for excellence and trusted leadership. That’s an appalling result. 

It’s up to readers to judge whether the JAA can make the claim of ‘continuing’ to be the united voice of the Australian jewellery industry given the turmoil and disunity its decisions created, but by anyone’s reckoning one measure of such success would be membership numbers and association income, including sponsor revenue.

On both counts, the JAA fails those tests and one wonders whether the soon-to-be-released 2018 financial statements will change anyone’s view about its financial predicament or the future of a once-proud industry association.  

Only time will tell, but one thing is for sure, a complete review of the JAA is now more important than ever before. Sadly, I doubt that it will happen.

More reading:

Jewellers association financial statements raise questions – October 2017
JAA accounting investigation continues – October 2017
New JAA Financial Statement raise more questions – November 2017
Unanswered questions at JAA AGM – November 2017

JAA fails own Vision and Mission Statement – March 2017

Jewellers Association needs a Brexit – October 2017

More industry division over two jewellery fairs – September 2016
Nationwide, Leading Edge make 2017 jewellery fair decision – September 2016
JAA’s perfect storm: Nationwide quits association – October 2016
Amanda Hunter resigns; 2017 JAA jewellery tradeshow cancelled – May 2017

Friis announced he will leave the company on 31 August after three-and-a-half years at the helm. The resignation came hot on the heels of Pandora announcing it would cut almost 400 jobs in a bid to achieve its 2022 strategy.

“We have made important progress on our 2022 strategy since we launched it last year, and are on the right long-term direction for Pandora,” Friis stated in the company release.

“Pandora has nearly doubled in size the past three years, and our ways of working have also grown rapidly and resulted in different organisational set-ups in different parts of the company.”

Evidently, these new organisational changes included a managerial restructuring, as Friis withdrew from his position within 48 hours of this announcement.

The company statement announcing the job cuts, released on 7 August, revealed that 397 of Pandora’s 27,000 employees would be sacked, 218 from its Thailand offices and stores. The statement claimed the cuts were to “align functions across the company, support strategic priorities and protect profitability.”

It also announced a more modest forecast in revenue, re-estimating an increase of 4-7 per cent, rather than its previously guided 7-10 per cent. The organisational changes are expected to reduce annual costs with around DKK 150 million (AU$314 m).

Jeremy Schwartz, former chief executive of The Body Shop, will step in as acting chief operating officer until the appointment of a new CEO. It appears to have been well received. Company shares rose as much as 9 per cent following Schwartz’s appointment after having plunged 24 per cent on Monday when the company’s initial outlook was revealed.

Further reading: For Pandora Jewellery, arrogance is a two edged sword

In a statement, Peder Tuborgh, chairman of the board of directors said: “The board recognises the important role Anders Colding Friis has played in leading the company and in particular in developing and articulating the right new strategy assuring the future success of Pandora. Pending the appointment of a new CEO, I am delighted that we have Anders Boyer (CFO) and Jeremy Schwartz on board to take the lead.”

It is unknown what changes, if any, will be made in Australia.

Given that Pandora Jewellery CEO Anders Colding Friis has just announced he’s quitting the business, the company could well be about to experience Wilson Mizner’s advice about meeting people on the way down.

Following a profit warning on Monday where the company announced its January sales forecast would be reduced to 4-7 per cent from its previous 7-10 per cent prediction and it would sack 400 staff, Friis decided it was time to go.

Pandora’s stock price immediately plummeted 20 per cent.

The business media and investment analysts have been keeping a close eye on Pandora’s stock price for some time, closely monitoring consumer sales. You would expect that, but what they have a little difficulty doing is monitoring Pandora’s relationships in the retail channel – with the stores that act as the conduit for product to consumers – and, as I have previously indicated, that is in an appalling state.

It was a little more than a month ago that I detailed how Pandora Australia had announced its latest round of retail account closures as it sought to reduce its retail distribution. The company sent emails to the affected independent stockists in June and then immediately attempted to allay the fears of its remaining stockists.

A company email attempted to explain the reasoning, and advised stores which were not affected by the latest round of closures that, “It is important to note that this announcement does not change the nature of our relation and will have no impact on your account.

On 6 July I wrote: The problem for Pandora is that no one believes a word of it!

And while I had some inkling about the anger of the retail stockists who had helped develop and build the brand over the past 5–10 years, I was caught by surprise to the extent that the anger had fermented – even the retail stockists who hadn’t had their accounts closed have had enough.

Many are making moves for life after the Danish brand, which is why I commented, Pandora: the beginning of the end.

While Pandora might have problems at the consumer end, its problems at the retail end are just as bad. And they are only going to get worse unless the company changes its management style, which is all to often described as “arrogant” and “conceited”.

Those are two words that don’t sit well when you could be meeting the same people on your way up as you might be doing on your way down.

Perhaps Friis’ resignation has something to do with a change of management style. Who knows? But if it doesn’t, then Pandora’s problems have only just begun!

What also caught me by surprise is the extent that international market analysts and investment strategists closely monitor the jewellery business-to-business media. Following my last commentary, I have been contacted by a number of European strategists enquiring about the independent wholesale channel.

The late night conversations have been intriguing, not just because of the topics, but mostly because it only seems like yesterday that Karin Adcock stood on a 3X3 stand displaying a new range of jewellery charms, presented in ugly polystyrene boxes at the Sydney jewellery fair. In the early days the Australian arm of the business was run from her home garage.

Maybe the new Pandora Jewellery boss could learn a thing or two about modesty towards customers by visiting that Sydney garage. After all, it was the Australian retailers who, in the early days, were vital in propelling the brand into the international behemoth it eventually became.

Arrogance can be a two edged sword: it breeds success and it can also breed failure.
 

More reading
Pandora: the beginning of the end
Pandora Australia closes more accounts

Background reading
The Pandora Phenomenon
Birth of brand Pandora