Engagement rings, wedding bands, earrings, necklaces, pendants, chains, bracelets, watches, and more – Michael Hill offers it all in a range of metals and gemstones.
Founded in Whangarei by Sir Michael Hill and his wife, Lady Christine Hill, the first Michael Hill store opened its doors in 1979. While this is not too long ago, roughly less than 50 years, the company has risen to prominence rapidly.
Michael Hill boasts exclusive product offerings, dramatic store designing, and impact advertising, among many other factors driving its popularity north.
Today, the brand is a renowned global multi-channel retail jewelry chain with a substantial presence in Oceania and North America. It is committed to crafting jewelry that people can cherish for a lifetime.
Here are some recent facts and statistics from 2021 that signify the prestige of Michael Hill:
- Annual group revenue of AUS $556.5 million
- Market capitalization of AUS $539.7 million
- Net profit after tax of AUS $45.3 million
- Return on Equity of 26%.
- Over 2000+ permanent employees
- Total of 285 stores across Australia, New Zealand, and Canada
- Share price of AUS $0.83 at the end of 2021
- No. 1 among jewelers according to Trusted Brands Australia 2021
Let’s take a look at Michael Hill’s incredible journey of growth, right from the time it was founded in 1979 to today.
From Ashes To Stock Exchange
About 160 kilometers north of Auckland lies the town of Whangarei, where the journey of Michael Hill began.
A tragic fire destroyed much of Sir Michael Hill’s possessions and beckoned him to start all over again.
Business Out Of Ashes
When Sir Michael Hill saw his entire life possessions burning in a raging house fire, he would have never imagined he would lead on to create an iconic jewelry empire as big as Michael Hill Group.
Even today, Sir Michael Hill remembers the night of 1979 when he drove up the hill to realize that everything he had was gone.
Following the traumatic house fire, Sir Michael opened his jewelry shop in 1979. The focus of the new shop was simplicity, and it sold only jewelry rather than antiques, china, or silverware, which was the standard at the time.
The company’s focus was to make jewelry buying less intimidating and more accessible to buyers. Differentiation in terms of product offering and the physical experience was the unique selling point of the first Michael Hill store.
From A Violinist To A Sales Expert
Michael Hill always wanted to become an acclaimed violinist, spending days practicing in his teens until his parents and uncle intervened to do some “real job”.
Thus, he was sent to watchmaking workshops, and from there, his father transferred him to sales which showcased his natural creativity and perfectionism. A 23-year long apprenticeship at his uncle’s store in Whangarei taught this entrepreneur the art of “10-steps of sale”, a tactic Michael Hill Group still uses.
However, Sir Michael went a step ahead as his company’s CEO as he innovated the sales tactic according to the time. His quirky take on the television advertisements for Michael Hill Jewellers led to the company’s success.
Goals, Adverts, & Expansion
By 1982, the shop has turned over more than NZ$1 million. Michael Hill set the goal of opening seven shops in New Zealand in seven years, convinced of the value of goal setting and articulating a clear vision for the business.
The company also focused on innovative advertising — firstly on radio, print, and then on television. The advertisements, fronted by Hill, became cult hits.
In the early years until 1987, Michael Hill developed crazy adverts featuring Sir Michael Hill himself. The company also had attractive windows with few items going as far as having Coke cans featured in them. These unusual windows with cool designs were made to attract customers, which ultimately led to enhanced sales.
Listing on NZ Stock Exchange
Following Sir Michael’s strategy, in 1986, the company achieved the goal of “7 stores” by opening the eighth store in Newmarket, Auckland. By 1987, Hill wanted to grow the company further — first to a store in Auckland’s Queen Street and then into Australia — but he needed capital to expand.
Hill had bought out his initial investors using a bank loan but required ready cash. The company’s accountant, Johnny Ryder, suggested taking the company public.
On 9 June 1987, “Michael Hill Jeweller” was listed on NZX, providing sufficient funds to develop the company both locally and internationally. Four months before the stock market crash, Michael Hill raised NZ$3 million, with the Hill family retaining a 52.5 percent share.
Many ordinary shareholders came from Hill’s local district of Whangarei, and Hill remained joint managing director and chairman of the board.
4 up-to-date Michael Hill shops started working in Brisbane as the Hill family relocated to Australia.
Brisbane Becomes The Sandbox For Michael Hill’s Model
In Australia, Michael Hill established its growth model, opening one or two stores in a ‘cluster’ before moving into a new area. Every store had to operate as a standalone business; once each store and cluster was operating efficiently and profitably, the company expanded to a new area.
However, moving into the Australian market was challenging. Sir Michael and his team pitched to the managers of the large Brisbane shopping malls with no success. However, they did manage to secure a site at the Myer Centre, an upscale shopping mall that was still under construction.
Sir Michael also confirmed locations at the Chermside and Indooroopilly malls in suburban Brisbane and rented the eleventh floor of the new IBM building as the head office.
The opening of the head office coincided with the October 1987 stock market crash. However, Sir Michael knew that the company wasn’t overcommitted plus they were able to service their loan. Hence, the recession was not too much of a problem for them.
Strategic Learnings To Expansion
By mid1988, Michael Hill had five stores in Brisbane, and in its first year as a public company, it recorded a turnover of NZ$25.3 million.
Brisbane’s third and fourth stores opened in Ipswich and Toowoomba, both satellite towns to Brisbane. Hill had been discouraged from opening a shop in Ipswich because it was a socioeconomically disadvantaged area. However, he persevered after market research showed that residents had decent disposable incomes.
The cluster expansion model proved successful. Michael Hill opened seven stores in suburban Brisbane, the Gold Coast, and smaller Queensland towns before opening two stores in Canberra in 1989. Just as in Brisbane, the company initially struggled to lease stores in Canberra, although it eventually found stores in the City Centre and Woden Plaza key shopping areas. It launched the stores with a high-profile Christmas sale advertised on television.
Canberra proved a learning experience. While the stores were profitable, the lack of direct flights from Brisbane increased supply chain and operational costs. In retrospect, Sir Michael felt the company should have further grown the brand in Queensland before expanding elsewhere.
The first Michael Hill Jeweller store in Sydney opened in August 1992, and by 1994, the company had a massive 27-store chain in Australia in addition to its 30-store empire in New Zealand.
Manufacturing And Advertisements
Michael Hill opened a manufacturing arm in Brisbane so that
(1) stock did not have to be shipped from Whangarei
(2) jewelry could be tailored to Australian tastes, subtly different from New Zealand customer preferences.
The company struggled to find experienced Australian jewelers, and eventually relocated some of its New Zealand jewelers from Whangarei to Brisbane. It had invested heavily in television advertising in Queensland, which quickly built its brand name.
Television advertising for jewelry was unusual in the Australian market, where jewelers usually relied on catalog and newspaper advertising. The Sydney market proved more challenging: television advertising there was prohibitively expensive, and the company had to rely on catalog marketing until revenue from the stores made television advertising feasible.
Michael Hill Goes Into Shoes
Michael Hill decided to diversify into footwear because the company was actively looking to mitigate risk by 1992. The status of shoe-business in 1991 was remarkably comparable to the status of the jewelry business by the point Michael Hill began to expand its first chain of stores.
As a result, the directors chose to handle the shoe-industry in the corresponding manner as they ran jewels-business, believing that Michael Hill's current resources and administration will suffice.
Sir Michael outlined plans to rename and expand the chain throughout New Zealand and stock mass market, midrange footwear rather than the expensive shoes.
The company opened six Michael Hill shoe shops throughout New Zealand, many of which were next door to the Michael Hill Jeweller stores. The new stores were fitted out in green and gold, and Sir Michael fronted television advertisements using shoes as props.
Fighting Back The Closure Of Shoe Business
Michael Hill's shoe-business had a benefit of NZ$3,300,000 in the first place, however by 1993, it went down to NZ$2,800,000. A deficit of NZ$ 1,110,000 was declared.
The New Zealand's jewels industry began to fall and revenues from shoe-shops could not meet the projections.
The shoe industry differed from the jewelry industry on multiple fronts, posing a logistical challenge for the supply chain: shoe pairs had a problem in the shipping process while they had significantly shorter season turnover.
The directors declared by Q1, 1994 that the shoe business would be shut down by liquidating all the stocks. Michael Hill Shoes lost NZ$2,900,000, particularly NZ$1,380,000 for trade losses. The company's founder went on to identify a number of concerns that would come to characterize the organization’s commitment.
- The shoe brand diverted top leadership's attention away from its primary duties in the jewelry industry, resulting in missed opportunities.
- The shoe operation failed to link with the current supply chain structure, resulting in inefficiencies. The company opened stores too quickly across the country rather than focusing on one geographical area at a time.
- The promotion of shoes and jewelry had diluted the strength of the jewelry brand and its relationship with the customers.
Despite the setback, in 1995, total revenue was NZ$87 million. Revenue climbed to NZ$191 million by 2000. The company continually refined its business, closing down its Whangarei office and consolidating head office, manufacturing, and senior staff in Brisbane.
Throughout the 1990s, Michael Hill's particular aim - that influenced creativity - drove its growth and helped clients remember key life milestones. Quality workmanship may assist every individual in discovering their true radiance.
Key Takeaway 1: Understand The Market Before Diving In
From 1979 to the 1990s, in a very short span, Michael Hill went from one shop to a successful chain established in two countries. The key growth strategy for the company during this period was to focus on expanding consistently yet sustainably.
For instance, it's one store and cluster at a time tactic enabled it to explore new markets without having too many resources at risk. Once the cluster was successful, the company would add new stores to the lineup.
Channeling Love Through Craftsmanship And Strategy
The start of the new century brought about opportunities and goals for the fast-growing Michael Hill brand yet it was not without its challenges.
In 2002, with group revenue crossing NZ$200 million for the first time, Michael Hill set a new longterm goal to open 1000 stores in 20 years. To achieve the vision, MHI needed to expand further than Australia.
The company conducted a feasibility study into overseas markets. It settled on Canada, which it considered a market with low barriers to entry, relatively low risk, and strong potential to grow the business over time.
Also, Canada had a highly fragmented jewelry market with no single dominant chain. US jewelry giant Zale Corporation owned Canada’s two largest jewelry chains (People’s and Mappins) with 215 stores and annual sales of US$260 million. Still, together they held only 3% of the jewelry market.
The only other public company in the top five was Birks and Majors, which operated 35 stores in total. The other three major jewelry retailers were privately owned and operated between 30 and 60 stores each. The rest of the market was made up of independent retailers and small, regional chains.
Michael Hill planned to open four stores in Canada in the first year, four more in the second year, and anticipated opening to 120 stores. The company used the same ‘controlled growth’ approach through cluster-based expansion, as they had in Australia.
Entry Of Emma Hill And Challenges
The move into Canada had initial funding of NZ$3.3 million, with a total investment of NZ$6.63 million in the first four years. Emma Hill was appointed general manager of Canadian operations, and the company established a head office in Vancouver, British Columbia.
The initial stores opened with a big opening discount and a lot of catalog promotion, but they didn't sell enough.
There was little consumer awareness, and Canadians' tastes in jewelry differed from those of Australians; while clients came into the shops to explore, this did not translate into sales. The firm changed several of its current merchandise and purchased through typical vendors, which boosted sales.
Considering the size of the Canadian industry, brand awareness took a long time as compared to Australia. There were 150 Canadian tv stations, and large advertisements were unaffordable.’
Between 2003 and 2005, the company’s earnings improved by 59 percent. The Canadian stores broke even in 2007, realizing total revenue of almost NZ$2,500,000 out of the company's total of NZ$3,480,000.
Michael Hill ventured into Alberta in 2006, launching a store in Calgary, after opening 11 shops in Vancouver and British Columbia in 4 years. It added 4 more outlets in 2007, 3 of those were in Alberta. It launched five locations in Toronto, Ontario, in 2008.
The clustering concept was somewhat modified to match the geopolitical dispersion of Canadian people, although the corporation focused on a single state at a point.
Consolidating Supply Chains
The Canadian expansion proved a catalyst for other changes within the company, including streamlining of the supply chain and distribution facilities.
Historically, Australia, New Zealand, and Canada used a decentralized approach, for each nation had its own operations, procedures, and warehouses.
Michael Hill's logistics were centralized at the Brisbane office in 2005, as well as the New Zealand warehousing was transferred to Brisbane. The Australian and New Zealand stock managements were consolidated into one network.
Later in the same year, warehousing in Canada and order fulfillment services were also relocated to Australia, allowing Brisbane to cover the markets of the company. Concurrently, Michael Hill continued to expand in Australasia, opening 9 stores in New Zealand and 59 in Australia.
The Australian jewelry market remained buoyant despite the global recession although retail spending declined in 2009 as food, property, and fuel prices rose.
However, online retail spending continued to boom, and the high Australian dollar meant that 44 percent of online purchases were from overseas companies. Michael Hill’s EBIT from Australia more than doubled between 2007 and 2011. The company believed there was still capacity to open another 20 stores, particularly in Western Australia and Tasmania.
By 2008, Michael Hill employed 2000 staff in three countries and had total revenue of NZ$376 million. The company introduced intellectual property reforms so that shareholders could no longer claim dividend imputation credits because of the geographic spread of earnings and less money being made in the New Zealand business.
U.S. Expansion and Understanding The Market
In July 2008, Michael Hill unexpectedly announced via the New Zealand Stock Exchange that they had bought 17 shops for NZ$7 million from Whitehall Jeweler Holdings, one of the US’s largest jewelry chains. Michael Hill called the Whitehall purchases an ‘acquisition to test its retail model in the highly competitive US market’, and a ‘bold entry’ into the U.S. Fourteen of the shops were around Chicago, Illinois. Three stores were in St Louis, Missouri.
Emma Hill described the purchase as motivated by the competitive US retail property market. Michael Hill simply bought seventeen locations and changed the brand name.
It initially focused on retraining staff, clearing out old merchandise, and trialing product ranges for the US market. However, the move into the US was challenging. It was a highly competitive made up of bigname jewelry chains with strong brand recognition (e.g. Zale, Sterling Jewelers, and Tiffany) and scores of smaller chains and independent jewelers. Also, the market was credit-driven, with up to 50 percent of jewelry bought with internally managed, private label cards.
One of the key channels for US jewelry distribution was television and the internet, including home shopping network QVC US, which media conglomerate Liberty Media Corporation owned. QVC US had sales in 2010 of $1.18 billion and a viewership of 98 million households.
While the global financial crisis had caused a drop in store numbers, significant retailers still had an expansion target of around 3%. North American consumption habits and US consumer tastes in jewelry were also changing in response to the economy.
In 2009, ‘real’ jewelry sales dropped by 14% while costume jewelry sales dropped by only 4%, although the popularity of expensive bridal jewelry remained relatively strong. To maintain profits as consumer confidence and credit dropped, jewelers discounted heavily. According to Emma Hill, the biggest challenge faced by Michael Hill was how to compete in an environment where retailers were heavily discounting and running constant sales.
In July 2009, MHI announced that eight of its 17 US stores would be closed to concentrate on the ‘sites with the most promise’. The company noted that some demographics were proving very difficult for them to achieve the level of consumer credit approvals expected, which was impacted on the revenue of these stores as they were unable to sell higher ticket items.
The combination of these factors, property issues facing some of the stores, unfavorable employment numbers, and a poor US economic outlook led the company to focus on fewer retail outlets. The 9 remaining stores would be refurbished to align with the company’s global concept of an international brand and adapted to US preferences.
Global Market Challenges
In 2010, the US operations recorded an operating deficit of US$6.2 million, which dropped to US$3.4 million in 2011.
The company had no plans to open more stores within the United States, instead of concentrating on improving samestore sales and the current stores’ performance to reach breakeven. It also focused on increasing samestore sales within Canada, as well as investing more in electronic and television advertising over the Christmas period and targeting the lucrative bridal market throughout the year.
It wanted to open 5-10 stores per year in Canada, but found securing new sites ‘challenging due to the demand from American and European retailers entering the market’.
Professional Care Plan
In October 2010, the company unveiled the Professional Care Plan (PCP), a valueadd service in which customers could pay upfront for ongoing care and maintenance of their jewelry, with costs calculated on the price of the jewelry purchased.
PCP was treated as ‘deferred revenue’ in financial statements but was brought to revenue over time. The practice proved successful — by 2012, PCP generated deferred revenue of NZ$26.9 million. Michael Hill was confident that PCP would contribute towards overall margins and profitability.
In 2012, North American sales, in general, were doing well. US, Canada, and New Zealand sales were recovering postrecession.
However, Michael Hill had begun to experience a slowdown in the Australian market as ‘same store’ sales dropped, and three underperforming stores were closed. The impact was significant in urban areas like Melbourne and Sydney, which did not feel the mining boom’s effects in Queensland and Western Australia.
Efforts To Understand Customers And Ignite e-Commerce Markets
Michael Hill realized the customers’ emotional attachment with its product range and launched a new collection in 2012. It was called “Infinitas” representing a connection as deep and strong as time itself, traced in the eternal curves of the infinity symbol.
While the company was filling the customer needs, the company didn’t lose foresight. It expanded its differentiated proprietary collections to span watches, diamond jewelry, charms, and engagement rings. In 2013, the company invested in a new e-commerce platform as a focal point for digital marketing efforts in all four markets. This step proved phenomenal when customer buying behaviors changed with lifestyle advancements.
Going digital also allowed the company to launch “The Michael Hill Designer Bridal Collection” in North America. The collection was built around Sir Michael’s love of music, and each engagement ring features a natural pink sapphire in the band. Here again, product differentiation helped Michael Hill stay consistent in the markets.
Sprits Bay, Emma & Roe, And Road to ASX
As Michael Hill saw different innovative large and small brands on the horizon, it launched a new interchangeable jewelry brand called “Emma & Roe” in 2014. The launch was possible after a successful trial during the preceding 18 months under the trading name “Captured Moments”.
In 2015, Sir Michael opened the first Michael Hill New York City store at Queens Center to capture more and more customers in the city’s heart. A second New York store was opened in Roosevelt Field.
Though the company had lagged after the economic crisis of 2008, it still steadily moved on to its 1000 stores target. The 300th Michael Hill store opened at Vulcan Lane – one of Auckland’s most iconic laneways.
As fashion trends started shifting in New Zealand’s market by 2015, the company launched “Sprits Bay” in New Zealand – a collection designed by Christine Hill from the ring-like form of Totoere shells, worn down by the elements. As Michael Hill’s revenues and market dominance heightened, it moved its primary listing to the Australian Securities Exchange (ASX) with a secondary listing on the New Zealand Stock Exchange (ASX/NXZ Code: MHJ).
Key Takeaway 2: Provide Extra Value To Customers
While Michael Hill continued its expansion overseas, venturing into the US market, it did not lose sight of the products that its customers resonated with.
The Professional Care Plan, the Infinitas collection, and Emma & Roe are all examples of how it constantly enhanced its offerings to go the extra mile for customers and ensure the brand remained relevant to changing trends.
As a result, the company grew on multiple fronts, even leveraging the potential in e-commerce.
Learning From Strategic Internal & External Environments
Consumer trends and industry dynamics change more rapidly now than ever before. Michael Hill has made is a part of its mission to align itself with these dynamics, keep up the pace, and ensure its growth in the future.
Expansion On The Go
By 2015, Michael Hill’s New Zealand business was continuing to perform well while the Australian market had been more complex.
Steady store growth continued in the Canadian market, yet the test of the US market was ongoing and Michael Hill continued to make improvements to their retail model in this critical market.
2 stores were secured in the US, New York & New Jersey, to test the model in this lucrative market. The Emma & Roe brand was trialed to prove the brand and model in the coming year.
During 2015, 12 new Michael Hill stores were opened, and 2 Emma & Roe stores were opened. Suitable locations were harder to secure than anticipated. Two new stores opened including the first Emma & Roe store in New Zealand.
Michael Hill’s e-commerce sales increased 122%, and the Group achieved strong growth in digital and social media channels. Aspects of omnichannel are introduced in a staged rollout across all markets in 2015-16.
Focusing On Customer Experience
By 2016, Michael Hill had been working for some time now to differentiate their ranges with 13 unique jewelry collections designed in-house with a meaningful story behind their creation which builds emotional engagement.
Providing a superior customer experience had always been in company’s priority. The managers were trained and developed to be gifted sales coaches.
Also, the customer journey also changed enormously. 55% of customers visited online channels before visiting a store by 2016. They were more informed, had less time, and connected to the company than ever before.
Understanding Strategic Environment
Michael Hill markets of Australian and New Zealand’s markets of Michael Hill provided the highest benefits in the background of the horrible retail ecosystem by 2017. It was an excellent testament to the strength of their teams, who brought the customer experience to life.
Distinct advertising across all communication channels supported each collection and conveyed its stories. The strategy allowed the company to move away from regular price-driven promotions and events, supporting the traditional middle-market jewelry sector.
Recalibration & Repositioning
2018 was recalibration and repositioning year for the Michael Hill Group as it made significant progress towards delivering its strategy. It decided to exit the loss-making US and Emma & Roe businesses, putting it in a stronger position to deliver sustainable and long-term growth.
The company’s board completed a wide-ranging review which identified an opportunity to increase market share and profitability of the Michael Hill brand by accelerating its evolution into a design-led, customer-centric jewelry brand.
Exiting the US and Emma & Roe businesses allowed the company to focus on increasing the profitability of the Michael Hill brand in its three established markets. Canadian business grew strongly in terms of revenue and earnings. The Australian and New Zealand businesses essentially held their positions in challenging markets. Furthermore, the company anticipated that its differentiated omnichannel offering will help to deliver growth in these regions and improve the overall quality of earnings.
Dawn of COVID-19
COVID-19 resulted in an unprecedented temporary closure of the entire store network, severely impacting operations, sales, and profit. While the effect of the pandemic Michael Hill’s business is material, throughout the crisis, it was adapting and embracing learnings to remain strong and well-positioned to support our colleagues, customers, and the communities.
As the crisis unfolded, Michael Hill accelerated a range of digital engagement platforms, such as virtual selling, enabling our customers to connect with its brand and sales professionals even when they can’t visit it in person.
The virtualization of a one-to-one selling model is a great example of Michael Hill’s continued quest to meet changing customer needs. It emerged from the crisis a stronger, leaner, more relevant business.
Michael Hill delivered a record financial result, with all metrics up in 2021. The result was a credit to both the execution of strategic initiatives, dedication, and resilience of its team. Half Canadian stores were closed for many months, Victorian stores were closed for more than three months, and multiple short sharp temporary closures were experienced across the global network resulting in over 10,000 lost store trading days.
Yet, due to deliberate planning, the pandemic did not significantly disrupt the company’s inventory supply chain. Notably, the business prioritized its team members’ ongoing health, safety, and well-being and our customers.
The company’s significantly improved net cash and targeted inventory position at year-end demonstrated a cost-conscious culture across every aspect of the company. Michael Hill optimizes its supply chain, improves the global store network, and enhances its credit propositions globally.
Key Takeaway 3: Learn From Your Mistakes
The last decade or so has seen Michael Hill undergo significant changes and make several difficult decisions. These have proved critical for the company to thrive.
For instance, exiting the unsuccessful US market and shutting down the Emma & Roe stores was difficult, yet necessary decisions that allowed the company to divert it attention to more important aspects. Resultantly, when the going got tough for others during COVID, Michael Hill prospered.
Growth By Numbers And Key Takeaways
From a small setup in Whangarei to one of the largest jewelry retail brands, the story of Michael Hill’s growth is extraordinary.
Of course, it wasn’t always smooth sailing, yet the company set an example with its ability to come up with innovative strategies and always find a way to persevere.
Growth By Numbers
Despite having seemingly reduced its physical operations slightly in recent years, the company has undertaken remarkable measures to cut down costs while boosting profits and clientele as can be seen in the stats below:
No. Of Stores
Here are some of the key strategies takeaways from Michael Hill’s journey:
Take A Measured Approach To Expansion
Even though Michael Hill has operations in multiple cities of multiple countries, it has always tried to not get to ambitions with its expansion plans. Instead, the company takes a very calculated approach to mitigate its risks. For example, the cluster-based strategy enabled it to penetrate new markets without incurring too many costs and safely establishing its positions.
Build A Connection With Customers
Over the years, Michael Hill has consistently shown that its focus is always on providing its customers on extra value with its products. From the PCP to the Infinitas collection, it updates its offerings, differentiates itself from competitors, and ultimately builds a strong, exclusive bond with its customer base. Consequently, it has grown into a brand with immense customer loyalty.
Never Too Late To Learn
For a brand of Michael Hill’s stature, it can often be difficult to go back on its decision. Especially if they involve overseas businesses or are heavily invested in products. Yet, when the company was sure that the US market was not going to do well or the Emma & Roe brand wasn’t a profitable one, it made the tough decision to close down those ventures and focus on more profitable areas.