“Retail jewelry prices were up about 8.4 percent during the year, so ‘real’ jewelry sales rose by only 2.6 percent,” explains Ken Gassman, market analyst based in Richmond, Virginia.
Overall, Gassman says the recession has had only a modest impact on retail jewelry sales, despite many jewelers claiming hardship. “From 2007 through 2009, jewelry and watch sales dropped by only 11 percent in the U.S. market before posting a solid recovery in 2010 and 2011.” He notes that 2011 represented a return to 2007 levels or better.
The U.S. jewelry trade came into 2012 after solid holiday sales, with average retail sales up 4.2 percent in December over the previous year. Nordstrom, Saks and Macy’s were among the top sellers, up 3.5 percent to 6.2 percent. Online sales were exceptionally good, up 15 percent, according to ComScore, digital market research firm in Reston, Virginia. The Internet is now the second favorite mode for Americans to spend holiday dollars, displacing department stores and following Big Box locations, reports the CNBC All-America Economic Survey.
For the first quarter of this year, Gassman describes jewelry retailers showing mixed sales results, with an average 4.3 percent growth across retail channels. While Zale showed a nearly 11 percent gain for US jewelry stores, after several years of losses, others retailers realized more modest gains: Tiffany 3 percent, Blue Nile 2.5 percent, and Sterling 1.8 percent for U.S. jewelry sales.
Zale CEO Theo Killion attributes the retailer’s improving numbers to discipline and focus. “Even with the challenges in the North American economy and pressure from commodity cost increases, we continue to build business momentum,” he reports. “Our sales results were primarily driven by initiatives including improved core inventory and alternative credit program in the United States, a new marketing campaign, and integrated online and traditional store infrastructure, and strong execution by our customer-facing teams.”
Sales outlooks from Tiffany and Signet Jewelers suggest global economic worries are weighing on luxury spending in jewelry, echoing sentiment from other retailing segments. Tiffany cites slowing economic growth in many countries and softness in its U.S. operations, most notably a 4 percent drop at its N.Y. flagship store that relies heavily on foreign consumers, especially Europeans.
Factors impacting Tiffany sales in the Americas include restrained spending by customers employed in the financial sector and substantial competitive discounting, which Mark Aaron, vice president of investor relations, says has continued to particular softness in entry-level silver jewelry price points tied to resistance to price increases.
Gassman is not prepared to declare that high-end luxury jewelry demand is headed for long-term or even short-term trouble. “I've been reading the blogs, and it’s clear that no one really has the full story. There's more to this than we know. We've got to wait this one out.”
“Niche stores with a clear and distinct brand proposition and market presence, unique and consistent style, high quality, and extreme service are doing well in today’s retail environment,” says Peterson. “They have clearly defined their identity, know who they are and who their customers are, and have put their stake in the ground.”
She cheers smart retailers who embrace new distribution channels rather than complain about them. Peterson cites Nordstrom as innovative in its use of digital products and social media, offering free WiFi in its stores and encouraging smart phone technology where customers can shop the retailer online while they’re in store. “Retailers that get it aren’t afraid to go where consumers live.”
And, retailers are starting to get it. Killion describes new media initiatives at Zale including online ordering in its stores, the optimization of its Web stores for mobile access, and building its Facebook fan base. “We're blurring the lines between traditional brick-and-mortar and eCommerce.”
Jewelry shoppers have discovered that they can pick up a new piece for a great price if they shop smart. According to recent research by Unity Marketing, jewelry consumers are favoring department stores, Internet websites, artisans and art galleries, TV shopping, and discounters for new jewelry purchases.
Product Trends
Jewelers need new ideas and inspirations that will help them market successfully, shares Pam Danziger, president of the Stevens, Pennsylvania-based marketing firm and author of “Putting the Luxe Back in Luxury: How new consumer values are redefining the way we market luxury.”
"Traditional jewelry stores continue to lose in the game of selling jewelry,” laments Danziger. “They have to work harder and smarter to entice customers to buy. They need to think of creative ways to invite them into their store using all the marketing tools available such as social media, local community events, and partnering with other businesses.”
The U.S. market has clearer divides in what’s selling, says Peterson, who says the high- and low-end are both doing well, but the middle is suffering. She describes the consumer mindset as less about money, more about value.
Gassman reports that diamond jewelry is recovering, while precious gem and estate jewelry are registering solid gains, as both categories are value priced and offer something different. He also cites sales increases in designer goods and proprietary brands like the Leo Diamond.
Signet’s longest running exclusive brand, the Leo Diamond continues to be a strong performer for the retailer that also is expanding bridal brand offerings with Neil Lane (launched in October) and the Tolkowsky Diamond (in roll out phase).
Lili Diamonds is finding great success in its branded diamond and diamond jewelry collections, cites Nadav Attar, marketing manager. Last year the diamond manufacturer based in Ramat Gan, Israel, launched a new branding strategy that includes its 71-facet Meteor brand diamond. “Exclusivity is our edge,” he explains. “Customers are clamoring for something different, and these products offer jewelers better margins.”
Killion notes that Zale’s latest proprietary “Love” collection by Vera Wang has resonated well with customers, and the retailer plans to grow the line as a foundational part of its wedding business, which continues to perform well. In fashion, colored diamonds are selling, he adds, noting that the charm bracelet category, led by its partnership with Neil Travis at Persona, is strong.
Jewelers report people buying larger items, with greater interest in color stones and diamonds in different cuts and colors. “Interest in color has increased more than I've ever seen before, especially in sapphires and gems like black spinel, rutilated quartz, and doublets that are now being used in silver lines,” tells Daniel Gordon, of Samuel Gordon Jewelers, Oklahoma City, Oklahoma. “People are more comfortable trying new stones. Fashion is strong, as evidenced by the latest trends for black diamonds and wood.”
Designer Barbara Heinrich, Pittsford, New York has taken up the theme of light but sizeable in her latest additions to her popular Ribbons Collection, crafted in 18k gold. Designs resemble streaming ribbons in cuffs, hoops, rings and other styles, often nestled with diamonds and gems in undulating curves. The look is delicate and feminine, yet it offers volume.
Trends trackers expect more flexibility and inventiveness in accessories that continue to be a key part of fashion style. Designers are venturing outside of classic gold and platinum looks to embrace not only silver, but also metals like titanium, brass, copper, and bronze. There is more focus on craftsmanship and designs that are thoughtful and meaningful.
Luxury consumers, with an average household income of $76,000, are buying more pieces made from semi-precious stones, and lower-cost metals and materials that might previously have been considered costume, reveals Unity Marketing research.
“Putting faux with semi precious might violate sensibilities of fine jewelry, but consumers are looking for alternatives to designs priced out of the market,” reports Danziger. “That doesn’t mean abandoning the high end, it means adding more variety within the brand.”
Peterson describes the customer’s definition of luxury as fluid, hence her new catch phrase, fluxury! Status is what the customer defines it to be, she says, from socially responsible products to alternative metals and materials mixed with precious gems to great design and craftsmanship.
“The same customer who would buy a $5,000 diamond piece would also buy a $40 Pandora bead,” says Peterson. “It’s not about money, it’s about what you get for what you spend.”
Christi Weaver, owner of The Polished Edge Fine Jewelry in Kansas City, Missouri, concurs that charm jewelry is a strong category, most notably the Chamilia brand of bead charms, the “story-telling” charm brand, Waxing Poetic that features silver and brass initial and iconic charm pendants. She says diamond fashion jewelry at priced below $200 or above $1,500 is selling too.
Danziger hails the Pandora paradigm-shift as giving customers the ability to design their own jewelry pieces, with each charm added representing moments and memories in a person’s life. This approach dovetails nicely with the current economic climate and luxury consumer behavior.
“Luxury consumers consistently report valuing experiences over physical possessions when they make a purchase of luxury,” says Danziger. “The unique nature of the pieces means that it is highly unlikely an affluent consumer will see her jewelry expression on the arm of another. This is a critical shift in a time of increasing class warfare and backlash against the rich. Charm jewelry allows the personality of the wearer to be more important than the branding message.”
Forecast for 2012
For 2012, Gassman projects modest growth of about 6 percent in 2012, with the wild card, inflation. “If prices for precious metals and polished diamonds continue to rise, jewelry sales will increase at a greater rate,” he says. “Jewelers will be forced to raise prices to compensate for higher material costs.”
Over the next decade, Gassman expects U.S. jewelry sales to grow by 3.5 percent to 4 percent annually, with modest inflation of about 2 percent and unit growth of 2 percent or less.
Throughout this year, the national and international environment is likely to remain unsettled. “The European debt crisis, which appeared to have abated earlier this year, has reared its ugly head again,” cites Gassman, who notes that it’s likely to raise prices for commodities like gold as investors flee an uncertain currency and economy.
Customer Growth Partners forecasts retail sales overall also will increase by nearly percent this year. A new report by the research firm based in New Canaan, Connecticut, “The Great Consumer Reset/The Great Retail Reset,” finds that falling household and credit-debt levels, along with higher savings rates, are fueling consumer spending.
“After sharply ratcheting down expenditures in 2008-09, consumers have indeed resumed spending, amazingly enough, at about the same 5 percent year-over-year growth rate seen prior to the recession,” reports Craig Johnson, president, Customer Growth Partners (CGP). “American consumers have now completed a historic reset, fueling the strongest retail rebound seen in decades.”
Similarly, retailers have had their own reset, cites CGP. “Merchants that bit the bullet during the recession found their prudent pruning paid off with new growth and higher store productivity,” says Johnson. The report notes that beginning in the mid-2000s, after decades of overexpansion, retailers curtailed store development plans, closed underperforming stores, cut overhead and staff costs, and redirected growth strategies more online.
“In 2009, jewelers got religion and everyone cut costs,” says Dione Kenyon, president of the Jewelers Board of Trade (JBT), who notes that a shake out occurred in the trade. She cites about 22,000 jewelers currently in the U.S. market, down about 15 percent since before the recession.
JBT, the Warwick, Rhode Island based jewelry industry credit information service, reports the industry hit two positive lows in 2011: number of bankruptcies and claims filed for unpaid debts. Industry bankruptcies fell 39 percent between 2010 and 2011, from 71 to 43, the lowest number of bankruptcies since the agency began tracking such data in 1996. Bankruptcies among retailers, which numbered 33, also hit a 15-year low.
Kenyon attributes the drop to improving sales and an industry that is more cautious about lending money and goods. “We’re seeing less trouble in the jewelry industry, and across industries in the United States.”
The biggest challenge for jewelers, Kenyon cites, is access to capital. But many independents, who are buying gold and diamonds from the public, created their own source of capital. Moreover, she cites larger retailers forming supplier partnerships as a way to secure credit and materials.
Although the recovery is not gangbusters, all signs point to an improving market, especially for those who continue to engage consumers with new products and services.
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