The acquisition of Ernest Jones for £25 million, funded by a 3 for 10 rights
issue, filled a portfolio gap in the middle to upper end of the market. Once
again, the family members of the board of Ernest Jones stayed in the com-
bined company for a few months but then left after ‘their ability to perform
their duties’ was undermined by the Ratners’ interference.^6 The 61 stores
which were in prime sites and had recently been refurbished filled in gaps
where the group was geographically underrepresented. Operating under
their own name, the stores were quickly subjected to the marketing and
logistics which had proved so successful elsewhere in the company. The bid
was not referred to the Mergers and Monopolies Commission (MMC),^7 a
decision criticized by the Goldsmiths group, the UK ́s fourth largest jew-
eller with a market share just over 1 per cent higher than Ernest Jones; but
it was felt that this would be Ratners’ last major acquisition in the UK.^8
By the end of the decade, jewellery had been transformed from an occa-
sional luxury purchase to the third most popular gift and Gerald Ratner
had achieved almost total segmentation of this market on price. Watches of
Switzerland was aimed at the highest level, offering brands such as Rolex,
Patek Philippe and Audemars Piaget; then came Ernest Jones; then H.
Samuel and its subsidiary James Walker, catering to the middle range; then
Ratners and Terry’s at the lower end.
Almost simultaneously with the Ernest Jones takeover, Ratners
announced its acquisition of Sterling, the fourth largest jewellery chain in
the US. Sterling operated in the market segment that matched the Ratners
and Terry’s format, and with which Gerald was so familiar. He was
reported as saying that the US market was ‘ripe for a shakeout and con-
solidation’. The US market, worth $20 billion per annum, was highly frag-
mented, in the hands of small chains and independents, and very similar
to the UK market of 1982. The market had been buoyant, enjoying nearly 8
per cent per annum growth for the previous five years. In the States,
Ratners then acquired Westhall and Ostermans, whilst in the UK the loss-
making chain of Stephens Jewellery was acquired for a nominal cash sum
and added 13 stores in the South East. Shortly after, they added a further
16 jewellery stores and 4 accessory stores in the UK with the purchase of
Time, a Jersey-based retailer, for £5.3 million.
The market share of the group had now grown to 19 per cent
from the 2.5 per cent that Gerald Ratner had inherited when he
took over as chairman. Turnover at H. Samuel had doubled since
acquisition, 18 months earlier, to £62 per square foot, and Ratners had
risen to £95. The buying power of the group allowed them to offer for
£94.50 a diamond ring for which other multiples had to charge £200.
Turnover was still pursued at the expense of margin, as the company con-
tinually searched for cheaper products which sold quickly, or what
Gerald Ratner was already describing as ‘crap’^9 in his conversations with
journalists.
258 Relationship Marketing