Avon professes
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Still, Avon professes to be pleased with its acquisition and is banking on the hope that a bigger Tiffany will be a more profitable Tiffany. ''We feel Tiffany has the potential to be on a strong growth track,'' said Mr. Chaney. ''And we're committed to developing Tiffany at this time.''
To that end, nearly $50 million has been invested in Tiffany since 1979 to support the planned expansion. Two new branches have been added to its five-branch operation - one opened in Dallas last year and Kansas City will open this month - and Avon plans to open even more, at the rate of one or two a year. A 135,000-square-foot distribution terminal was purchased in Parsippany, N.J., to support Tiffany's rapidly expanding direct mail business. This replaces a system in which much of the merchandise was shipped to customers from the Fifth Avenue store, causing headaches as delivery trucks clogged the crowded midtown Manhattan streets.
What's more, Tiffany's billing, merchandise control and other back office operations - many of which were handled manually - were brought into the computer age. Tiffany also lopped off its wholesale gemstone business and backed away from its trade account business, in which Tiffany products were distributed through some 300 other retail stores.
And Tiffany has begun to reach out to more - and newer - customers, those who are affluent, but who, perhaps, are not Tiffany shoppers or who do not live near a Tiffany store. ''We're not trying to change our market at all,'' said Mr. Ostrom, in an interview in his wood paneled office that looks out on Avon's corporate headquarters on 57th Street. ''We've just not reached out to all the people who would be available to us. There are potential buyers outside our store and we're taking our product offerings around the country.'' It is still directing its marketing at the same price point - the customer who spends, on average, $200.
Tiffany began to vastly expand its direct mail operation in 1980, issuing new catalogues containing everything from $195,000 sapphire and diamond rings to $50 ball-point pens and sending them to potential customers gleaned from mail order lists. It began issuing its own credit card last July and has expanded its corporate business, including opening new offices in Philadelphia and Boston to handle corporate accounts. While declining to give numbers on customers, Mr. Ostrom said the direct mail business has increased by 40 percent a year and corporate accounts by 25 percent.
THIS expansion, however, is not without its costs. Its high price tag, in part, accounts for Tiffany's poor showing under Avon - ''It takes money to make money,'' said Mr. Ostrom. More importantly, Mr. Ostrom feels that Tiffany, of late, has been a victim of the recession and of the volatile silver, gem and gold market. As commodity prices for silver and gold dropped after 1980, Tiffany was left holding older, more expensive silver and gold in inventory. Yet, because of the recession, it was limited in the amount it could raise prices, causing its margins to be squeezed. To provide for more stable raw material prices in the future, Tiffany has begun to purchase forward contracts in the futures market for its raw materials rather than to rely on the more fluctating spot market.
But the expansion is a byword at Tiffany, and Mr. Ostrom believes it can be accomplished without any cheapening of the Tiffany name. Indeed, he feels Tiffany's current path was already forged by Mr. Hoving, who believed the store should emphasize quality, whether it was in diamonds for a millionaire or a simple wine glass costing less than $10.
''We don't want to change anything,'' said Mr. Ostrom. ''Avon was acquiring something special in terms of quality of the product, the image of the company and the quality of manufacturing and service. Avon wasn't expected to change Tiffany's strategic direction and it hasn't. We feel if we adhere to the principles that made this company grow for many years, and if we don't change that formula, we can accomplish that.''
Mr. Hoving took control of a somewhat stodgy Tiffany's in 1955 and, with his fine eye for quality, gave the store its special stamp. Good design meant good business and Tiffany's sales grew to $100 million from $6 million under Mr. Hoving. ''Hoving initiated the idea of good quality,'' said Labarr Hoagland, who retired from Tiffany last March as executive vice president. ''Before, you felt you had to have a million dollars to come into the store. But Hoving introduced mass merchandising, not in the ordinary sense, but in the sense of affordable and good quality.''
Under Mr. Hoving, who left in 1980 at the age of 83 after Avon executives told him it was time to give up his day- to-day activities, Tiffany set trends in American design and put together Tiffany's powerful design team of Jean Schlumberger, Elsa Peretti, and Angela Cummings. Paloma Picasso, daughter of the artist, was added later after Mr. Hoving retired. ''Avon has been very good in not attempting to impose a different point of view on the merchandise,'' added Mr. Hoagland. Mr. Hoving declined to comment on the evolution at Tiffany: ''I left Tiffany's on January 1, 1980, and I haven't gone back since then. I've been busy. I haven't kept up. Why should I bother?''
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