Tiffany's Biggest Threat Of All Could Be Apple

Sales growth has slowed, and business could get worse before it gets better.

Consumers want function instead of show, meaning that tech companies are thriving while frivolous retailers like Tiffany struggle.

"Luxury is battling the tech industry," said Brian Sozzi, chief equities analyst at NBG Productions. "People want the hottest gadget and are willing to pay full price because it offers greater function."

For instance, a shopper can justify buying an iPad mini or iPhone 5 because it's something he or she will use constantly.

At the end of the day, a $500 Tiffany necklace just isn't functional enough, Sozzi said.

Consumers are scaling back following the fiscal cliff and obliteration of the payroll tax credit, meaning that they're very choosy about what they'll spend on.

"The iPhone 5 and a great case that could fundamentally alter one's life for the next two years or a Louis Vuitton bag that doesn't match all the outfits in the closet?" Sozzi asked. "You decide."

In order to thrive in this challenging market, Tiffany and other luxury retailers are going to have to convince shoppers that their products serve an everyday purpose.

Unfortunately, Tiffany's had the same marketing campaign for years, said Pam Danziger, president of Unity Marketing.

It refuses to change.

"If Tiffany is set in its ways and keeps repeating its 'same-old, same-old' strategies, it gives more adaptable companies an opportunity to capture market share lost by Tiffany," Danziger said."Marketers must translate key consumer insights into marketing strategies that will draw the customers in and get them to buy."

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