Yikes! Jewelry Losing Market Share (and Consumer Interest)

Jewelry Losing Market Share (and Consumer Interest) - Edahn Golan
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Since October 2014, sales by specialty jewelers have been declining, while total retail sales in the US have been expanding, leading to a steady, yet constant loss in fine jewelry market share. Clearly, when given a choice, American consumers prefer spending their money on products other than jewelry. However, even in the recent past, this was not always the case.

In April 2015, sales by specialty jewelers, as well as overall fine jewelry sales and overall watch sales declined compared to the previous year – a seven-month trend and the longest such contraction since the 2008-2009 economic crisis.

In April, according to our analysis, overall US jewelry market sales totaled $4.87 billion and overall watch sales reached $648 million. According to preliminary government figures, sales by specialty jewelers totaled $2.22 billion.

On a year-over-year basis, overall jewelry sales declined 1.4%, watch sales dropped by 2.7% and specialty jewelers’ sales softened 2.4% in April.

Jewelry Losing Market Share (and Consumer Interest) - YoY % Change in US Jewelry & Watch Monthly Sales

Jewelry Market Share Shrinking

Since November 2009, the American retail market has been expanding, posting anywhere from 0.6% to 10.4% year-over-year monthly growth. When measuring US economic activity in respect to retail sales, many analysts exclude car sales, parts and food from this category because these tend to fluctuate in a non-seasonal specific manner and therefore tend to obscure real retail activity.

Taking this into consideration, total US retail sales excluding cars, parts and food declined throughout 2014, but recovered in the first four months of 2015. Yet, even against this less vigorous performance, jewelry purchases were a shrinking component of consumer share of wallet – an alarming trend.

Jewelry Losing Market Share (and Consumer Interest) - YoY % Change in Jewelry Market Share vs US Retail Sales

A New Trend

This loss of market share was not necessary. In the 60 months (five years) between May 2010 and April 2015, the number of months when specialty jewelers lost market share actually equaled the number of months when market share increased – 30. Thus, for the entire five-year period, market share was about flat.

In contrast, during the same period, overall fine jewelry sales – sales by specialty jewelers as well as by multi-item stores such as Macy’s, Wal-Mart, Amazon and Costco – fared much better. In 40 months of the 60-month period, their market share expanded. They lost market share only during 20 months. Thus, overall market share of non-specialty retailers actually increased in the five-year period.

Where is Consumer Interest?

This picture is not rosy or clear-cut. Even though overall market share increased in the May 2009-April 2015 period, the most recent trend cannot be ignored. The overall jewelry industry has lost market share since September 2014. Jewelry sales lagged behind overall retail sales every month, except in October when a small revival was experienced. Even during the all-important November-December period of 2014, jewelry sales lost out to purchases of other retail goods, falling respectively 0.5% and 1.7% year-over-year, a reversal of a long trend of growth in market share.

Jewelry Losing Market Share (and Consumer Interest) - Nov-Dec Holiday Season: Changes in US Fine Jewelry & Watch Sales 1998-2014

So here is the emerging trend: at first fine jewelry purchases slowly yet steadily shifted from specialty jewelers to multi-item stores over the years, and then more recently, consumers started losing interest in jewelry almost regardless of the outlet.

In a wider context, overall jewelry retail sales hit record levels in the past couple of years, but the growth rate failed to catch up with the rise in overall retail sales improvement. The share of consumer wallet, which had remained relatively steady for years, began to decline and jewelry lost market share. At the same time, American consumers bought many more jewelry items at much lower average price points, which may at least partially explain why specialty jewelers and their higher price point items lost favor in the eyes of consumers.

Yikes! Jewelry Losing Market Share (and Consumer Interest) - Fine Jewelry Retail Sales Losing Market Share

April Showers Bring May Flowers or April Rains Bring May Flames

The recent stretch of declining jewelry sales – both nominal and relative to the entire US retail market – is a worrying trend. For the global diamond and jewelry industry, the US jewelry market is the most important one, and in a way, the most promising one today due to the challenging environment in China.

Many hopes are placed on a turnaround in US consumer demand for fine jewelry, which begs the question: is there room for optimism in the short term? The best bellwether is probably the recent Las Vegas show, which provided mixed results. Lower cost items were not in demand, while branded and higher-end jewelry were in better demand.

For the longer-term period, the forecast is less certain. Diamond imports for US jewelry retailers are declining, indicating less confidence on the part of retailers, mainly independents. The larger chains are buying cautiously, looking for special items to renew consumer interest. However, it is not yet clear if this is enough.

The most recent downward trend is the most worrisome. In the past couple of years, jewelry sales in the November-December period have shifted to earlier parts of the year. The holiday season represented 33% of specialty jewelers’ annual business in 1995, declining to nearly 32% of annual sales in 2000 and dropping to less than 26.5% in 2014.

During the same years, sales in the first four months of each year were 23.4% (1995), 25.3% (2000) and 29.2% (2015) of annual activity. If the importance of the January to April period is rising, and sales in the four-month period declined in 2015, it is possibly indicating that 2015 will be a very weak year.

If overall US retail sales (excluding cars, parts and food) are heading towards a decline, then the best hope is for market share to be maintained in the face of a downturn.

Outlook – A Market in Flux

The US jewelry market is obviously going through changes, and with the exception of the rise in total expenditure on jewelry, these are largely not positive changes. Sales and market share in the past seven to eight months are declining, and these are hard facts.

So where does the US jewelry retail sector, indeed the US jewelry industry, go from here? A fresh approach in catering to a changing consumer is desperately needed. A couple of ideas on how to do it have been voiced (here, for example), and the expected return of generic marketing will provide important support. A new push forward can help turn the tide and overcome the recent slump.

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