The heart of Pandora's woes stem from common problems in physical shops

Pandora is known for its “affordable luxury” jewellery and charm bracelets. Photo: Sonia Recchia/WireImage
Pandora is known for its “affordable luxury” jewellery and charm bracelets. Photo: Sonia Recchia/WireImage

Pandora’s management admit they’re facing an uphill battle after announcing a new CEO and massive global turnaround plan this month.

But typical retail pressures like online competition or a drop in Chinese demand aren’t being blamed for the global jeweller’s sluggish sales. Instead, the problem has emerged from within.

Pandora’s (PNDORA.CO) chief financial officer Anders Boyer told Yahoo Finance UK in an exclusive interview this week that they are working on an internal overhaul to address poor marketing strategy, excessive discounting, and “clutter” in stores.

“We see that many of the issues that we have been facing in 2017 and 2018 are due to issues that are within our control. It’s not the case that some new competitor has come by or some new revolutionary technology has [hurt] us … It takes time, but it’s issues that we can fix ourselves,” Boyer said.

The global jewellery market has grown by roughly 7% in the past year to become a $356bn (£276bn) industry, according to research firm Euromonitor. The Copenhagen-headquartered firm has a 1% share of the market and a presence in more than 100 countries, but has been left behind this year as sales stalled.

Global revenue at Pandora was essentially flat in 2018 once it was converted back into the local Danish currency. Online revenue and sales at stores open for more than a year declined by 4% in 2018, a key sign of trouble in the retail industry.

It may take a few months for incoming CEO Alexander Lacik to join. His start date could come as late as September. But the company is starting the turnaround process now.

Shares in Pandora shot up by 18% in a single day after the turnaround plan was unveiled this month. But the stock is still down about 70% since hitting a peak in mid-2016.

No ‘silver bullet’ solution

Boyer said there’s no single “silver bullet” solution. Instead, Pandora’s two-year turnaround plan involves a sweeping overhaul of strategy and marketing, among other areas, to inspire customers to come back and buy Pandora’s “affordable luxury” charms, bracelets, rings, and pendants.

The company, which has 2,700 stores globally, is planning to revamp its shops and buy back old jewellery to cut down on clutter, thus making room for new products.

Retail experts have noted that clutter is a common problem in traditional brick-and-mortar shops, which can detract from the customer experience.

“Store clutter is a huge issue broadly. And we’re seeing now the emergence of much simpler merchandising. Less is more,” said James Bidwell, a retail expert and co-founder of the consulting firm, Re_Set.

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Pandora is also consolidating control under a new head of merchandising — Jason Morgan — who is joining the company this month. Morgan will have power to dictate which jewellery is featured in stores, removing some autonomy for local staff.

“There’s been some new product introductions and product launches, but in some stores you wouldn’t be able to find them because it was decided on a local level, ‘We don’t like that product.’ We think we need to take a much more coordinated and global approach to that,” Boyer said, noting that Morgan’s centralised team will have control of 80% of products featured in its stores.

“That’s a pretty big change” to the status quo, he said.

Another industry expert who is familiar with Pandora’s strategy, but declined to be named, told Yahoo Finance UK that the company needs to streamline its offerings and consider retiring old jewellery lines to make the items feel more limited and precious. Online personalisation options would also go a long way to attracting customers, this expert said.

“It’s almost as if Pandora is too available and too mainstream. Too mass market,” they said, noting that competitor Swarovski had a better strategy because it limited its product availability.

Not so charming?

Boyer denies the possibility that customers may be falling out of love with charms and charm bracelets, even as sales in this area have been slipping.

“Charm bracelets have been here for decades, if not hundreds of years. It is a category that’s here to stay, just like rings or necklaces,” he said.

The ultimate goal is to stabilise the charm sales slide and eventually return to growth.

But prices aren’t going to change. Boyer said that the “middle market” area is a sweet spot for Pandora, with his company selling tiny charms for as little as £10 each in the UK and $14 in the US, while larger pieces retail for hundreds.

“If we moved further up in the price point, we would be in a much smaller market … We’re, on average, pretty well positioned where we are,” he said.

Pandora CFO Anders Boyer: “It takes time, but it’s issues that we can fix ourselves.” Photo: Pandora
Pandora CFO Anders Boyer: “It takes time, but it’s issues that we can fix ourselves.” Photo: Pandora

Growth opportunities

There are also still big growth opportunities in China and Latin America, Boyer said.

“We have a pretty decent footprint already in China, but there are many cities where we are not even present yet, some of the cities with 1 million-plus inhabitants where we don’t even have a footprint yet,” he said.

India — the third largest jewellery market in the world behind China and the US — is a missing part of the Pandora puzzle.

“India is probably the last country where we haven’t really cracked the code,” Boyer said. “[It’s] a very different type of jewellery market compared to the rest of the world given that it’s much more based on gold and [Pandora] remains a silver company.”

The firm has a handful of Indian stores, but Boyer acknowledges that the company’s products don’t really resonate with jewellery buyers in the country.

“We have to rethink our approach to India during 2019,” he said.

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