In the Zone with MWEB Entrepreneur: NWJ Jewellery - Outshining the competition

Acquired by Taste Holdings in 2008, they reputed to be the only vertically integrated franchise jewellery chain in South Africa. Where does the story behind the success of NWJ start?

Story behind the story

Hylton Rabinowitz established Natal Wholesale Jewellers in Durban when he opened Hylton's Jewellers in 1983. He opened his second jewellery store in the same year, and the name subsequently changed to Natal Wholesale Jewellers. In 1988, in an astute business move, Rabinowitz had the foresight to buy shares in one of the oldest jewellery manufacturers in Durban, Durban Manufacturing Jewellers.

In-house manufacturing meant that NWJ could make quality jewellery affordable to a large customer base, with savings passed on to customers as there were no middlemen involved in the production process.

By doing this, it became possible to sell top quality jewellery to the public at wholesale prices, a concept that had surefire appeal. NWJ were also guaranteed a reliable source for the manufacturing of their jewellery, with the added benefit of it carrying the NWJ-SABS guarantee of gold content.

Motivated by their early success, and as a means to generate further expansion of the brand, NWJ moved to a franchise model, which enabled them to become the largest chain of jewellery outlets in South Africa. As South Africa's only jewellery retail franchise, NWJ had cornered a very lucrative local market.

Multiple retail franchisor

The success, popularity and growth of NWJ made them a desirable investment, and in 2008 Taste Holdings acquired NWJ for R101-million. Taste Holdings' acquisition of a jewellery retail franchise chain was initially seen as unusual, as they had their roots in the franchised food outlet market, and owned Maxi's restaurants and Scooters Pizza.

But for Taste CEO Carlo Gonzaga, the acquisition of NWJ was a logical move and he said, "NWJ fits our profile in terms of the franchise businesses. It is a healthy, brand-driven business with a strong value proposition in line with our existing brands. Being a broadly middle-market business, it sits in a segment which we understand extremely well - so it makes for a very good fit."

"The puzzlement of the market was probably due to Taste being more narrowly perceived as a food franchisor, rather than a diversified multiple retail brand franchisor," said Gonzaga. "The success of a retail franchise business is not only about specific product knowledge, there are many other factors that contribute to success - branding, location, strategic direction, and access to expertise and experience that a brand would not have access to by itself."

In the jewellery business, being able to offer a wide range of quality jewellery and watches at reasonable prices, goes a long way to ensuring customer loyalty. Staying up to date with international trends is a key competitive advantage too, and NWJ buyers and designers travel to overseas jewellery fairs regularly so that they can stay abreast of international trends.

Having their own manufacturing division makes it possible for NWJ to be quick to market with competitive prices while maintaining top quality items. They are able to offer repair services, as well as produce custom-made jewellery, which is crafted by an experienced team of designers, gemmologists, goldsmiths and jewellers.

Second largest jewellery group

NWJ operates a franchise system which appeals to people who want to work regular hours in a sophisticated and attractive environment, and franchisees are provided with support to ensure that they have the tools to make their store a success. NWJ has a large customer base, as well as an established management team with many years of experience in the jewellery field, and franchisees are offered operational and marketing support, project management, advice regarding new site growth and development, as well as access to national brand-building strategies.

As the second-largest jewellery group in South Africa they are able to source large volumes at lowest cost from both within and outside South Africa. Combined with in-house manufacturing this gives them merchandise flexibility and relatively short lead times. All ring designs are conceptualised in-house and the group has more than 10,000 ring moulds and designs.

The distribution division distributes the goods sold through the NWJ outlets. Of these goods around 40% are manufactured by the Durban-based manufacturing facility, 22% are imported and the balance sourced locally. This model provides in-house innovation capacity, fast routes to the market and reduces the input costs to franchisees through purchasing economies of scale. Another benefit of owning the manufacturing facility is that slow-moving or returned stock can be either reworked with negligible yield loss or transferred to a different location where there is known demand for that item.

The vertical integration strategy means that the franchise company has control over several or all of the production and/or distribution steps involved in the creation of its product or service. This method can help to reduce costs and improve efficiency by reducing turnaround time, among other advantages.

By using this strategy it is possible for NWJ to control the supply, quality and distribution logistics, pass on cost benefits to the consumer, and provide the flexibility to respond more rapidly to changing consumer tastes. Branding is a particularly strong point for NWJ and they ensure the sustainability of their brand by focusing on quality, value and choice - three elements that are fundamental to the success of any business.

Loyal customer base

Successful franchisees are encouraged to have a very hands-on approach and are fully involved in all aspects of running their store. They are invited to wholeheartedly buy into the brand and make it their own, which is critical to making a franchise store work. The other key to the success of a brand is having a wide-ranging and loyal customer base, and the potential to appeal to a variety of personal tastes.

NWJ has addressed this by offering a wide range of jewellery that includes everything from affordable fashion items to more exclusive pieces crafted in gold and precious stones. This makes their jewellery an appealing choice to many different customers, whether they are drawn to classic or more modern items. And in keeping up with innovative trends and the creation of new products in various types of metal, two unique ranges were introduced to the South African market with the Tsar stainless steel and titanium jewellery ranges.

In June 2012 NWJ launched an NWJ-branded credit card, to fill a gap in their market offering. As they had historically not had a robust credit offering, this strategic move has translated into new customer attraction and substantially higher spends per transaction than in its existing cash business.

And NWJ are definitely doing something right as they have won the Daily News Readers' Choice awards for several years in a row. Successful brands need to be sustainable, compelling and have important differentiating factors in themselves, while providing products that are high volume, relative to the sector in which they trade and offer good quality and value to customers in the broad middle market.

Incorporating these factors into their business model, as well as providing a wide range of quality jewellery at competitive prices, is a winning formula for this popular and successful South African brand.

Fast facts:

NWJ was recently featured on Wedding Info TV (From the annual NWJ Bridal and Events show, courtesy of Wedding Info TV)

The NWJ Bridal and Events Show in Durban is an annual exhibition showcasing jewellery, wedding dress designers, photographers and wedding planners, amongst others, giving visitors an ideal opportunity to plan all aspects of their dream wedding.