The Zadok family has been serving the Houston community with fine jewelry and watches for generations and already operates one of the largest stores in the city. This year they are moving into a 28,000 square foot, two-story store that anchors the retail space of a multi-purpose development that they own and built. It is a massive undertaking that was almost floored by the impact of covid last year, but Jonathan Zadok and his family stayed the course and will move into one of the largest jewelry and watch stores in the United States this spring.
WATCHPRO: Everybody will hope that 2021 will see the pandemic beaten by the passage of time and vaccinations, but I am always conscious that there are tough times to come and that the economic downturn we have already endured will not have affected everybody equally.
JONATHAN ZADOK: It is fortunate in a way that this pandemic hit us at a time when, for years in the watch and jewelry business, we have been communicating with customers through text, email, Facebook, etc. We have obviously had to step that up, but if it weren’t for that technology, where would the world be right now? I was looking at the unemployment numbers and it would have been dramatically worse if we did not have the ability today to work from home and remotely.
The issues that we are facing today have forced most jewelers to up their games, to become more technologically savvy and hopefully pushed a lot of us into the 21st century.
WATCHPRO: As you know, I report on the watch market in Europe and the United States, and there do appear to be more jewelers’ websites in America that look like they were launched in the 1990s and have never been touched since.
JONATHAN ZADOK: That is true, but not for us. We have been continuously investing in our website and right now we are going through another project to make it more mobile friendly and user friendly for our clients. But we still do not view the high end luxury jewelry and watch market being dominated by click and buy customers. I am not saying that does not happen, but I believe that the internet is our new front door. Many clients meet us through our website, and we have to make that front door as welcoming as possible or they will not come into our actual store. That is where sales are made and relationships are made.
We are in a business that is wonderful, but it is not a necessity. Nobody needs a watch that costs thousands of dollars. Nobody needs a diamond ring that costs tens of thousands of dollars. But there is something fun about our industry. It is not a need, it’s a want and it makes people’s lives happier.
In my opinion, people still want the experience of walking into a store and dealing with another person; to have a conversation and feel special when they buy something.
WATCHPRO: Making sure you offer the very best in store experience is clearly the philosophy behind the new
20,000 square foot store you are opening in Houston. What can you tell me about that?
JONATHAN ZADOK: The new store will be almost double the size of our current store, and even so we are still agonizing over whether we have enough room and where everything is going to go. We are big believers in the brick and mortar side of the luxury business. We think buying beautiful watches or jewelry is an event, a treat.
Clicking to buy and having a watch turn up at your house is not the same. You need to try it on, you need advice on how to size it, you need to be shown how things work, and you need choices before deciding what to buy. There will always be a place for luxury retail with expert associates who can describe the differences and benefits between models and brands.
WATCHPRO: You are not alone in that view. Several of the world’s most successful watch brands concur and insist that their collections are only sold in stores.
JONATHAN ZADOK: So much of our new store is about adding new experiences. It is far more than just creating space for more branded boutiques. For example, we have four bars, we have a VIP lounge where clients can come and relax. They can use even it for their own events.
We have space for a pop up shop that will have a constant rotation of brands. We want to create experiences around products that are not necessarily jewelry or watches like a cool handbag or sunglasses designer; a boutique winemaker — anything that creates buzz and excitement for our customers.
We think this could attract people that might never think about visiting a high end jewelry store.
WATCHPRO: I think that cross-category luxury retail is going to be a big trend of the future, and so is building entertainment space within stores.
JONATHAN ZADOK: For us, it is about taking omnichannel further. It is more than just online and in store; it is going to be online, in store, events and special moments.
WATCHPRO: When you start mixing cross-category luxury with events and special occasions, you learn more and more about a wider community of customers. The best retailers take this knowledge and turn it into minable data that informs the way they approach customers. Do you adopt that strategy of relentlessly learning more and more about your customers?
JONATHAN ZADOK: It is interesting that François-Henry Bennahmias, CEO of Audemars Piguet, says we have to know more about our customers. He is so right. It is amazing that Target and Walmart know their millions of customers better than jewelers who should have far more intimate relationships.
It is our job as luxury jewelers to know and understand our customers. We are constantly trying to learn more. It has truly been a huge advantage to us over the past nine months of covid that we know our customers. Some have called us and said they do not really want to come into the store, but could we pick out three or four items my wife might like for Christmas, we are able to give them great options that we are confident they will like. Over time, it will become more and more important that we know our customers in this way.
WATCHPRO: I wrote an article last month that said that ‘clienteling’ was the business concept of the year for 2020. It is so important that, even if your store is closed, you are able to reach out to your loyal customers with specific suggestions based on their purchasing history, their family or the special dates in their lives.
JONATHAN ZADOK: No question. It is not only knowing what your client wants, but also what they do not want. The last thing you want to do is keep bothering them with ideas that they have no interest in. What I am constantly telling my consultants is that their job is to know their clients so that they can provide the very best service.
We are constantly working on this, and it is not always easy for a family-owned independent jeweler in Houston, Texas, to write massive amounts of software or systems to understand our clients better, but thankfully there have been new types of software that we have been able to integrate into our systems that do help us to understand our clients better.
WATCHPRO: It is a tragedy that I cannot travel to see you in person, but I have seen pictures of your current store and renderings of the new store and it does look amazing.
JONATHAN ZADOK: It has been a long journey and we are massively excited. In some ways it is bittersweet. We have been here 45 years and I grew up running around the current store as a young boy with my brothers causing mayhem. It makes me happy when I see our clients come in with their families and the kids are doing somersaults in the aisles. If their parents tell them to stop, I always tell them it’s fine, that my brothers and I did the same thing at that age.
WATCHPRO: When I was reading up about your new store, I was not quite clear on your family’s involvement in the entire new building project.
JONATHAN ZADOK: We bought the property about 10 years ago when it had an old style strip shopping center on that we managed and operated for about eight years before demolishing it and starting this new project. During that time, we looked at several different development options. At one time we even had a plan with a very large 5-star hotel chain to build a 42-storey tower with our store at the bottom and the hotel and condominiums above it. We scrapped that idea because to do something on that scale would have required outside investors.
Instead, we took the view that we really wanted this project and this building to be a long term legacy for our family so that our children could be part of it if they choose to be.
One of our biggest fears with our current location is that the building will be sold and the shopping center will be torn down by the new owner and redeveloped into high rise.
Eventually that will happen and we wanted to ensure that we did not lose the ability to continue with this business because of something out of our control. By developing and owning the new property alone, even if it is a lot smaller than the 42-storey project, it ensured we would always have ownership and control over the business.
Me and my brothers have seven children between us, and I have another one on the way in March, and we want to ensure that the family legacy can continue to that next generation. Hopefully at least one or two of them will want to come into this business.
WATCHPRO: What is the current status of the project [speaking in mid-January]? I cannot imagine it has been easy to stay on track for your planned opening date in March with all the covid restrictions.
JONATHAN ZADOK: It has certainly been an interesting journey over the past 10 months. Thankfully the city of Houston has allowed construction to continue as an essential service, but there have been issues where we have had several subcontractors on site that have come down with covid and that has forced us to shut down. We have had issues where product that was supposed to arrive from Europe or China has been delayed. Right now, because we are building branded boutiques for Vacheron Constantin, Jaeger-LeCoulture, IWC and A. Lange & Sohne, they are sending their workers over for installations, but we have difficulties with travel, with visas, with quarantine for people traveling back and forth.
Despite all of that, we are dead set on moving into the new store on March 1.
WATCHPRO: I wish you the very best of luck, particularly since this new variant of the virus that originated in the UK is now making travel from Europe even tougher. I would love to promise I will be there for the opening, but I don’t think that will be in my control.
JONATHAN ZADOK: I know. We keep being asked when we are going to have an opening party, and I always reply it will happen as soon as it can. At this point, we just want to be open and serving our clients. I would love to have a party, but I think it is going to have to be some time after the summer once the vaccine rollout has reached most people. We would love to have you here for that.
WATCHPRO: The watch industry is all about partnerships with the brands, which can be pretty robust in their demands for the best positions, a extra few square feet more than their competitors, a corner, a window, a boutique. What sort of a politician have you been to put the layout together?
JONATHAN ZADOK: It has been an interesting experience. It has been like trying to coordinate peace in the Middle East sometimes. We have over 25 watch brands that we work with and it has been interesting how they want at least one inch more than the brand next to them. I understand brands are fighting for their image and their prestige, so to me it is about trying to be fair and working out what they need and what we are able to offer. We try to find the right balance, and that has been more difficult with some brands than others, but overall it has been OK.
We have found that, when we explain why we have treated one brand in a certain way compared to another, they have come around and got behind the wider goals of the store. But I will say that it has been hard from time to time, and I am glad we are past that stage. It was months and months of work to get brands comfortable with their locations, and then some of them would suddenly come back and demand something different. Eventually, we had to say it was too late to make any more changes.
WATCHPRO: At least you have not had to deal with Patek Philippe or Rolex, which would certainly have been the most demanding when it came to demanding the biggest and best positions.
JONATHAN ZADOK: I would say that is a plus and a minus. There would certainly be many advantages to working with those brands. I will tell you we work with Tudor, which is part of the Rolex family, and they were one of the first to have their design in order. They realize that they are an up and coming brand with great potential and they do everything so smoothly.
WATCHPRO: Am I right that there is only one Patek Philippe AD in Houston and two with Rolex? That seems like an underserved city to me. Are you hoping that the new store might open an opportunity with either of those brands? The other brand you have not mentioned is Omega. Will you have that in store?
JONATHAN ZADOK: We do have Omega in the new store with a shop in shop. The new brands we are adding are Omega, Roger Dubuis, Cartier and Lange.
Lange will have its own boutique, the only one in the southern United States. You are right about Patek Philippe, there is only one store in Houston. There used to be two, including Tiffany, but now there is just one. There are about five Rolex dealers if you include the greater Houston area.
We did hope to get Rolex in the new store, it would have been nice. But they move slowly and maybe one day they will bestow the crown to us.
WATCHPRO: Tell me about the Houston market. We keep reading about billionaires from California being attracted to Texas by a more accommodating tax environment.
JONATHAN ZADOK: Houston is a wonderful city, a great place to live. We have two major segments of the economy. We have oil and gas, which has been a bit bumpy over the past five years, and we have the medical industry. We have the largest medical center in the world in Houston, which has grown dramatically over recent years.
Historically, Houston has been a bit of a boom or bust city because of the oil industry, but it has diversified and now we have the likes of Hewlett Packard moving its headquarters here from Silicon Valley, which will bring several thousand high tech jobs here. It is important that the city continues to diversify more. Austin is ahead of us with Apple and Tesla building huge facilities there. Oracle is also moving to Texas.
Tons of businesses, whether they are from California or New York, are being attracted to Texas because it is a very business-friendly state. They do not have to pay state income tax here and their employees can have a much better life here with less money. Companies are looking to get out from over-regulated and over-taxed state authorities.
WATCHPRO: How many members of your family work in the business, and how big is the whole Zadok Jewelers team?
JONATHAN ZADOK: There are seven of us working here out of a team of 45 now. We will probably have to add at least another five people when we move. One of the things we are really excited about in the new store is the addition of a state of the art watch repair facility and we are also upgrading our jewelry manufacturing facility.
Our watchmaker has been certified by Richemont to service watches from most of the group’s brands except Lange and Vacheron. That is an exciting facility for the new store. It is about being able to provide a full 360 degree service to our clients and to turn around their work more quickly.
WATCHPRO: We have hardly mentioned the pandemic so far, which is refreshing and perhaps a result of Texas doing everything possible to keep the economy moving, but tell me how the past 10 months have been impacted.
JONATHAN ZADOK: Texas has been one of the more lenient states in terms of allowing businesses to operate. We were closed on March 23 and reopened on May 1 with limitations on the number of employees and customers we could have in store.
It has been a very challenging year to navigate, right down to details like customers coming into stores with masks on, and needing a policy that they have to show their faces for security cameras. We take the temperature of all our employees twice per day. We have sanitization supplies everywhere and we have had teams of hospital cleaners come in to do deep cleans.
Over time, we have seen employees and customers become more comfortable about coming to the store. It has helped that we are not in a mall or an enclosed space where there are a lot of people they do not know. We do not have hundreds of people in the store at any one time, so there is always plenty of space.
WATCHPRO: Most retailers tell me that 2019 was a great year and the first quarter of 2020 was one of the best on record. But how nervous were you with such a huge capital-intensive project underway that the pandemic might close you down for longer than six weeks?
JONATHAN ZADOK: There was a lot of worry. You are right that January and February were stellar months and we thought that the virus would not come our way when it first emerged in China. We thought it would be another bird flu epidemic that would make headlines and then never reach us. We did not see it coming and, even when we were forced to close, we thought it might be for just one or two weeks. Who would have thought that a year later it would still be closing down cities?
Outflow of money was significant, not only on this project, but we have other real estate projects underway or under management. There was a lot of negotiating with tenants to make sure they could stay in business, and the inflow of cash was significantly reduced.
Thankfully, we are a very cautious family and we had reserves to handle it. It has been like a man walking through a desert with a bottle of water who does not know how long the water will last or how far it is to get out of the desert. He has to drink very slowly to survive. We had to manage our money the same way.
I can tell you my brothers and I came in every day to help clients, to do kerbside, to reach out to customers and keep the business moving. Our numbers were significantly down on the previous March, April and May, but it could have been a lot worse.
PPP [Paycheck Protection Program] was a big help. We never laid off any of our staff and paid them throughout, we are very proud of that because they are like a family to us. We found other ways to cut expenses like reworking our advertising and, for the first time in many years, we did not match the 5% that employees pay into their 401Ks. I am glad to say we have already reinstated that for next year. Taking care of our employees has been paramount to every decision we have made.
WATCHPRO: Was there ever a point when you looked at the new building and thought you might have to pull the plug on it?
JONATHAN ZADOK: There were many points at which I thought we could not have timed this any worse. Who could have predicted that we would be going into our family’s largest ever real estate project and then, boom, covid hits. But there there was no pulling the plug. We were under construction and we had to hunker down and get through it as a family.
It was very stressful because we did not know how things were going to go. It is a mixed use development with two restaurants, an office component. People were not eating in the type of restaurants we had planned. People were not looking for office space. The main tenant we had lined up for the office space is very strong, but we did not know what might change. We did not know whether people would even go back to working in offices. But we had no choice but to keep moving forwards.
WATCHPRO: How large is the family real estate business compared to jewelry and watches?
JONATHAN ZADOK: Real estate is bigger and over time it has grown larger and larger. It is an important part, but the jewelry business is our first love. We have been in jewelry for seven generations. It is in our blood. There is no better place to be between a love of art and business.
WATCHPRO: What was causing you more stress last year, Zadok Jewelers or the real estate business?
JONATHAN ZADOK: I will say that, were we not building the development, my stress levels would have been a lot lower. We had money flying out and paying for massive amounts of construction. We were negotiating with the brands and trying to get them installed. We had loans being taken out for the construction. Our cash flow had been significantly impacted. If we were not doing that project, my stress level would have been 80% lower.
WATCHPRO: One of the things that might have helped bring that stress down to manageable levels would have been robust trading once you reopened the store in May. Has the retail side performed since then?
JONATHAN ZADOK: Our 2020 was better than our 2019. If you had told me in April or May it would be that way, I would have said you are on drugs. It looked impossible after the first half of the year, but thankfully the luxury business rebounded very strongly in Houston. Many of my friends in the business tell me the same thing.
I put that down to a few things. First, people were not spending money on other things like luxury vacations and big parties. The lack of big parties was bad on one hand because people were not buying jewelry for them, but good because they were saving money.
People still wanted to enjoy themselves, the stock market has done well and people have cheered themselves up with a bit of retail therapy. Jewelry and watches are a great way to feel better, and that helped our business bounce back in the second half.
WATCHPRO: Once you reopened, was that it until now? You never had to close your doors again?
JONATHAN ZADOK: No. What we did face soon after reopening were the riots in the United States started. We got nervous about needing to close at that point, but we did see another significant drop in traffic because people were scared to leave their houses again. Once that settled down, there was another spike in covid that kept people home. It has been a total rollercoaster ride.
WATCHPRO: What are your expectations for the rest of 2021?
JONATHAN ZADOK: It is always hard to predict, but my personal belief is that the new administration will bring a bit of confidence. I hope as the vaccine rolls out, there will be a lot more people comfortable with getting out and about, shopping, going to dinners, concerts, holidays, generally enjoying life again.
It will be interesting to see how people spend their money. On the one hand, they will be more active and more confident. On the other hand, there will be a lot of things they could not do last year that they will want to do this year so they may spend their money that way rather than on jewelry and watches.