‘The gap below Cartier and Tiffany’: Michael Hill’s luxury play

And last month, it announced model and entrepreneur, Miranda Kerr as its brand ambassador who will feature in Michael Hill’s new advertising campaign and promotional activities.

“There were a lot of brands at the value end of the market and international brands dominating luxury,” Bracken tells BOSS.

“We saw this opportunity to push ourselves up into a premium position. But you can’t just wake up one day and say, ‘we’re a premium brand’, so we gradually started to elevate the product, increase quality, better materials, better diamonds.

“We gradually started to change our communication strategy, less focus on discounting and more focus on customer relationships.”

Despite the strategy, Bracken admits the past 12 months have been tough for retail after three record years during the pandemic. Last financial year delivered $630 million in revenue but its profits fell to $35.2 million.

Revenue in the first half of this financial year reached $363 million but the share price, which hit close to $1.50 in 2022 has since fallen back to pre-pandemic levels of around 60¢.

“Retail stocks have all taken a pounding,” he says.

“We are absolutely undervalued, the business is strong, while we’re in a challenging environment, the category is under a lot more pressure than we are.

“Mastercard data shows jewellery is down 12-15 per cent, and we’re nowhere near that which means we know we’re taking market share (currently around 15 per cent of the Australian market) and as the economy turns we know we’ll be top of the pack again.”

The CEO says the premium repositioning will help the business.

“Our average transaction value, since we started our journey to premiumise the brand has gone up over the last 3½-years, up 30 per cent,” he says.

Bracken says while they have slimmed down from around 175 Michael Hill stores in Australia to 145, they are betting big on having a physical presence.

“Because of the very nature of what we sell, we’re selling product for precious and treasured and loved moments in people’s lives, it’s a very considered purchase and it’s a high-value purchase, our average purchase is $600, $700, $800. Our online business is only about 8 per cent of our sales,” he says.

“We want them to meet our diamond experts, be shown the full range and try product on.”

The business has launched a new online business TenSevenSeven offering bespoke luxury “one off” pieces but “we’re planning on opening half a dozen showrooms and one of those may well go into the Bourke St precinct”.

Bracken says the biggest new trend is laboratory grown diamonds which in the US accounts for 30-40 per cent of all diamond sales.

“That’s not the case here, we were the first major brand to bring them here and we’re the number one brand in that category.”

He says it means customers can get “bigger for their buck. Where we might have sold a one-, or one-and-a-half, carat mined solitaires, we’re now selling two or three carat solitaires”.

Sir Michael’s secret to selling

Michael Hill, who remains on the board as the major shareholder, says it’s a long way from his humble beginnings, but he strongly supported the change in strategy.

The company recently marketed a video celebrating the origins of the business and his marriage with Lady Hill. The Fishers – Hill’s maternal lineage – came to New Zealand from Switzerland in the early 1900s, descended from a family of watchmakers.

Business was hard hit by the Great Depression in the 1930s and the family moved north to Whangarei, opening Fishers Jewellers.

Hill’s uncle Arthur inherited the shop and Michael’s father, Albert became store manager. The family folklore claims Albert was a born salesman, having worked selling Electrolux vacuum cleaners door-to-door.

Michael Hill left school early seeking to become a violinist but failing to find success, he came to sell in the store and learnt 10 steps of selling during a 23-year-long apprenticeship.

“If you add up all the things that makes a great salesperson, it’s actually winning the customer’s confidence [so] that they totally trust you and listening to their wants and desires and giving them the best possible experience,” Sir Michael tells BOSS over a drink on the rooftop of Chadstone’s five-star hotel.

“Jewellery is such a sacred purchase. It’s probably the most unique purchase because if you buy a piece of jewellery or an engagement ring it’s something that will always be handed down. The jewellery lives on.”

But it was only after a house fire destroyed his and Christine’s life possessions that Michael says he was motivated to start his own store in 1979 in opposition to his uncles.

“We had five shops quite quickly in New Zealand after I went on television,” Sir Michael says. “It was an amazing effect, I had this vision that to have a lot of shops would be the thing to do.

“We decided to have a crack at Australia and went to Brisbane because we thought there were more New Zealanders living in Brisbane,” he says of where Michael Hill is now headquartered.

“We managed to woo two centre managers to take us on. I went straight on television and it really rocked the market. All the other jewellers were so annoyed.”

US a bridge too far

Sir Michael says they managed to crack Canada using the same strategy, before he found the US a bridge too far.

“We went to New York and Chicago. That’s when anything we did was not heard at all. We were too small, you needed a couple of hundred shops to even have a chance.”

Sir Michael, who also owns an exclusive course, The Hills, in New Zealand, says his long-time strategy of discounting had “lost its lustre” and he realised they needed to build into a luxury brand.

“Daniel took on the challenge [as CEO]. Very hard to find. He’s one in a million that boy. I’ll never forget he said, ‘Michael it’s going to take 10 years and here we are at five’,” he says.

Sir Michael reflects that “nothing in life stays the same forever”.

“A business normally has about 30, 40 years and then it’s finished. If you look through history at a lot of the names when I grew up, the department stores, they’ve all gone, finished. In any business, unless it’s a major brand, [this change] is probably the only way that it can last forever, so that’s the way to go.

“But we still want to be not too high. Between the Cartiers and Tiffanys, there’s a little gap just below them which is quite empty.”