Helzberg Diamonds

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Helzberg Diamonds

1825 Swift
Kansas City, Missouri 64116
U.S.A.
Telephone: (816) 842-7780
Fax: (816) 480-0294
Web site: http://www.helzberg.com

Wholly Owned Subsidiary of Berkshire Hathaway
Incorporated: 1915
Employees: 3,000
Sales: $400 million (2000 est.)
NAIC: 44831 Jewelry Stores

Helzberg Diamonds is one of the country’s largest jewelry retailers, with a chain of some 200 stores nationwide. The firm began in Kansas City, and gradually expanded to become the largest jewelry chain in the Midwest. Helzberg now has a presence in most of the 50 states, with locations primarily in enclosed shopping malls and strip malls. Its stores are Helzberg Diamond Shops and a sister chain of larger format stores called Jewelry3. The retail chain was operated by the descendants of founder Morris Helzberg until 1995, when it was sold to Berkshire Hathaway, the holding company of investor Warren Buffett.

From Father to Son: 1910s–20s

The nationwide chain that became Helzberg Diamond Shops Inc. began as a small jewelry store in Kansas City, opened in 1915 by a Russian immigrant, Morris Helzberg. Helzberg had five children, two girls and three boys. The children helped out in the shop, and the whole family was involved in making decisions regarding the business. Within a few years of starting the store, Morris Helzberg suffered a disabling stroke. His oldest son, Morton, was away at college studying dentistry, and the next oldest son, Gilbert, was soon to be shipped out to fight in World War I. The responsibility for running the family business fell to the youngest of the five children, Barnett, who was all of 14 years old. An uncle ran the store during the day, and Barnett took over when he got out of school at three o’clock. This seemed like it should have been a temporary arrangement until Gilbert returned from overseas. But when the older brother came back to Kansas City, he found that Barnett relished working in the store, and was full of plans for expansion. The rent on the original store was something around $30 a month. Barnett wanted to lease a bigger place, for $150 a month. This was a quite a jump in rent, but the teenage Barnett eventually prevailed. In 1920 he opened his own shop, called Shaw Diamond Shop, in the more expensive space, while Gilbert ran the original store. Within only a few months, Shaw Diamond was doing as much business as the old shop. Brother Gilbert decided to shut the old store and join Barnett in the new place, renamed Helzberg Diamonds.

Barnett was ambitious, and a big fan of advertising. He spent thousands of dollars on newspaper ads, some of which featured the two brothers’ serious faces, with the slogan “Meet the Helzberg Boys, Wear Diamonds.” Gilbert was seemingly content to keep the business as it was, but Barnett was full of bold advertising campaigns and such gimmicks as free car and airplane rides for customers who made significant purchases. Barnett began offering customers payment plans by the mid-1920s, so they could buy on credit. This allowed the store to sell to people who might not otherwise be able to afford Helzberg jewelry. By the mid-1920s, the Helzberg brothers had grown into a small chain of stores. Gilbert opened a shop in Wichita, and Barnett moved the Kansas City store to a new location and opened another store in Topeka, Kansas. In 1928 Barnett opened another bigger store in Kansas City.

Expansion in the Midwest in the 1930s and 1940s

The prosperity of the 1920s gave way to the Great Depression after the stock market crashed in 1929. Barnett Helzberg continued to run his stores undeterred. He married the daughter of another prominent Kansas City jeweler in 1930, and in 1932, despite the poor economic conditions, he began a major overhaul of the flagship Helzberg store. Helzberg’s doubling of the size of its 11th and Walnut Street store was the single major business expansion in Kansas City for that year. The scope of the job was so extraordinary in view of the overall business climate that Helzberg’s cabinet maker hung a huge placard in front of the jewelry store announcing how many men were at work and boasting that the cabinet plant was running at full capacity. Barnett Helzberg continued to run the small jewelry chain with panache, dreaming up more eye-catching promotions such as offering special deals on children’s bicycles. He also advertised on the radio, sponsoring a popular weekly music show. Gilbert Helzberg died in 1934, in an automobile accident. Barnett Helzberg then purchased Gilbert’s Wichita store, and a few years later opened a new location in Des Moines, Iowa. The firm lost money one year during the Depression, but otherwise weathered the downturn well. By 1940, the chain of five stores was deemed the largest jewelry business in the Midwest.

During World War II, Helzberg churned out advertisements with patriotic themes. The stores advertised special “Certified Perfect” diamonds, a scheme Helzberg evolved that tagged certain items as having been declared “perfect” under ten-power magnification. This scheme apparently had great resonance with Helzberg customers, and set the chain’s products apart from its competitors.

By the late 1940s, Helzberg Diamonds had grown to include 11 shops in the Midwest. In 1948 Helzberg opened a grandiose shop called House of Treasures in Kansas City’s Country Club Plaza. The swank, three-story jewelry, china, and silver store was a step up from the other Helzberg shops, which sold on credit to middle-income customers. The House of Treasures was meant for Kansas City’s elite. Also in 1948 Helzberg relocated the old Wichita shop and transformed it, too, into a large and luxurious emporium. However, these two stores apparently made a disproportionate strain on the rest of the Helzberg chain. Other new stores that opened later were not on as grand a scale.

Retrenching to the Suburbs in the 1960s and 1970s

Barnett Helzberg, Jr., joined the diamond firm in 1956, after getting a degree in business from the University of Michigan. The chain continued to open new stores in the Midwest throughout the 1950s. By 1963, when Barnett, Jr., became president of the company, Helzberg Diamonds had 39 shops, almost all in downtown shopping districts. But the rise of the suburban shopping mall in the 1960s began to pull customers away from traditional business districts, and Helzberg Diamonds suffered. When Barnett, Jr., took over the top job, he began closing the chain’s downtown locations. By 1970, Helzberg Diamonds had shrunk to only 15 stores. These were all new stores opened in suburbs and shopping centers, except for the luxurious Country Club Plaza store opened in 1948.

With the move to the suburbs, Helzberg Diamonds began to court a more youthful image. The signal representation of the company in this era was the “I Am Loved” campaign from 1967. Helzberg manufactured lapel buttons bearing the words “T Am Loved” as a store giveaway, and the slogan became a huge success. “I Am Loved” was the inspiration of Barnett Helzberg, Jr., who according to lore thought of the button gimmick after proposing marriage to his girlfriend Shirley Bush. The initial ad copy suggested that, if you could not give your love a diamond, you could at least speak your feelings with the “I Am Loved” pin. Helzberg made up 50,000 of the buttons for the 1967 debut of the campaign. These sold out very quickly, and the “I Am Loved” slogan was soon carried on everything from drinking glasses to golf balls. The company gave away an estimated 18 million “I Am Loved” buttons before it was through. Hospitals passed out Helzberg “I Am Loved” buttons to homesick young patients, and the buttons made their way to soldiers serving in Vietnam. It was a marketing campaign that far surpassed the company’s expectations.

In the 1970s, Helzberg began opening more stores, aiming for three a year through the decade. The company exited some of its ancillary lines of business. Helzberg had had a mail-order business since the early 1950s, serving mainly rural customers who were exposed to Helzberg’s advertising but could not drive in to the stores. Barnett, Jr., sold off the mail-order business in the early 1970s, and also sold the company division that had run licensed jewelry departments in stores including Kmart and Woolco. Helzberg also eventually stopped selling watches, long a jewelry store tradition, and focused on diamonds and gems. Its mall stores took on a new format, meant to be more enticing to customers. This was an open floor plan, with the jewelry counter located right inside the open border to the mall. Instead of peering in the windows, customers who were “just looking” might come right in.

The chain increased its pace in the 1980s, opening many more stores. By the end of the decade, Helzberg Diamonds had essentially doubled its size, ending 1989 with 81 stores. Barnett Helzberg, Jr., had made essential changes while he was president of the company. The old downtown stores were gone, and Helzberg Diamond Shops had been reinvented as sleek suburban mall stores. The firm’s territory covered 19 states by the end of the 1980s. Financially, the chain seemed to prosper, and even expanded when many other jewelry chains were showing little or no growth. Annual sales for the company were estimated at around $70 million for 1986, and some Helzberg stores were bringing in $2 million each in the late 1980s. By the end of the decade, the Helzberg chain was accounted the 12th largest jewelry retailer in the United States. Only a few jewelry chains nationwide had more than 100 stores at the end of the 1980s, and Helzberg was on its way to catching up to these leaders, such as the Texas-based Zale, and California’s Barry’s Jewelers (later Samuels Jewelers).

Company Perspectives:

Our mission: to serve each and every customer in a very special way, always reflecting our 86-year heritage of excellence and value.

Outside Management from the Late 1980s Onward

In 1988 the firm hired a new president, Jeffrey Comment. Formerly an executive with a Philadelphia department store, Comment was the first to hold that top managerial spot outside the Helzberg family. Other outside executives also joined Helzberg around this time, and the chain again worked on refocusing its mission so it could expand further. Customer service had always been extremely important to Helzberg stores. Company advertising sometimes featured thank yous from satisfied customers, and the firm thrived on bringing in repeat business. When Comment took over, he re-stressed customer service, which was backed up by sophisticated database management. Customers were asked for information when they made purchases, including dates of birthdays and anniversaries. Helzberg used this to generate mailings, hitting prime customers dozens of times a year. Mailings included catalogs, announcements of special sales, and personal notes such as birthday cards.

Comment also revamped the store format. Stores opened after 1988 were larger than their predecessors, averaging 1,500 to 1,600 square feet. Comment also introduced an even larger “superstore” format. The superstore was named Jewelry3, because it offered three times the selection of most jewelry stores. The first superstores opened in strip malls, with a 4,000-square-foot floor plan. New stores, both the regular format and the Jewelry3 design, blanketed the Midwest and moved into the Southeast as well. Sales for 1993 were estimated at over $250 million. Comparable store sales rose markedly, from about $700,000 each annually in 1983 to around $1.7 million a decade later.

In 1995, the Kansas City Business Journal reported that Barnett Helzberg, Jr., was thinking of taking the family firm public. Helzberg was 61 that year, and he was apparently concerned about preserving the value of his business when it passed to his heirs. Helzberg Diamonds had reportedly already held preliminary talks about a public offering with investment banker Morgan Stanley when the story came out in January, 1995. Two months later, talk of the public offering was canned when the firm was sold to Berkshire Hathaway, the holding company of renowned investor Warren Buffett. A Helzberg company publication claimed that the sale to Berkshire Hathaway had come about through a chance meeting on the street in New York between Buffett and Barnett, Jr. For an undisclosed sum, Buffett’s holding company took over Helzberg, which had grown to be the third-largest jewelry retailer, with 148 retail outlets and annual sales around $300 million. Berkshire Hathaway owned an array of companies in many sectors, including financial services, beverages, consumer products, and retailing. It also owned Borsheim’s Inc., another regional jewelry chain based in Omaha, Nebraska. Barnett Helzberg, Jr., gave up his post as chairman and was no longer associated with the firm after the buyout. Jeffrey Comment continued as president.

After it became a subsidiary of Berkshire Hathaway, Helzberg Diamonds continued uninterrupted on the growth plan Comment and his team had mapped out in the late 1980s. Store openings were increased from 20 to 30 a year, with more of the Jewelry3 large-format stores in the mix. The company also worked to continue to raise comparable store earnings. In early 1996 the sales average per store was over $2 million, already up from $1.7 million three years earlier. The company aimed to bring the sales average up to $3 million over the next few years. Helzberg shops also began entering markets in a splashy way, saturating particular areas with large numbers of stores. When Helzberg planned to begin retailing in Philadelphia in 1996, it anticipated not one or two store openings, but eight, all in the superstore concept. The Chicago region already had ten Helzberg stores by 1996, but the firm planned to add 11 more by the end of the year.

Helzberg continued its expansion through the late 1990s and into the 2000s. By 2001 it had over 200 stores, and was one of the largest jewelry retailers in the nation. Stores had been opened in most of the 50 states.