We enter a new year and for many people that means getting on with business in pretty much the same way that they approached prior years. It is business as usual. And, to some degree, that is true. Retailers will review their sales results and plan on deletions, additions and solving persistent problems, like gaps in price points. Suppliers will want to find new ways to tweak old standby's and turn new materials into innovative products. But everyone will be scratching their heads trying to figure out where our industry is headed. There are many market conditions inundating us, but here are five of my top ten for the coming year.
1. The Millennials are coming. More and more of our business is shifting from boomers to millennials. And with that has come a shift from brand to concept. For years we have heard of the importance of creating a brand or image. All industries have pushed to create or enhance their brands, but in most cases that has been little more than labeling a line, often at considerable cost. Now that we are buried in so-called brands - and have seen countless failures - we find that remarkably few are meaningful to us. Yes, BMW, Apple and Vuitton have all attained a cachet that means status and personal gratification to many people. I view those as unique feats that are stupendously difficult to achieve - and it is so easy to lose that cachet.
Jewelry retailers at all levels have attained some brand success, though even a Tiffany had to be saved from disaster about 30 years ago. But for the bulk of the industry, branding has meant very little. Three very different manufacturing successes, JAR, Yurman and Pandora, demonstrated that concept is more important than brand. JAR did it with zero promotion or advertising by creating extraordinary jewelry. Yurman did it by creating classic designs with great perceived value using silver, 18 karat gold and colored stones as the main components, which the industry sneered at. Pandora did it with inexpensive elements that gave the consumer the option to personalize their piece. And it should be noted that these three successes came at the very top end of the market, the middle market and the lower end market.
There are some other examples of this kind of success, but in each case success came by impressing the consumer with a product aspect - concept - that was meaningful. The millennials in particular seem unimpressed by brands per se, but do respond to the right message.
2. A rising tide is not raising all boats. We used to think that was true, that a recovering and growing economy benefits everyone. We have a few things working against that. The well-documented rift between the affluent and the working class means that a luxury category, broadly defined in our case as of a discretionary, status-oriented nature, has a narrowing appeal. Recent history illustrates that very well. In recent years there has been an effort by many retailers to "move upscale", thereby following the money. There has also been a broad expansion into bridal lines, the one area where the public at large does dig deeper to come up with the money to buy this signal product. Both efforts have met with very mixed results and many abject failures. The luxury/bridal pies are only so big, and several studies show that the truly affluent have assumed far more cautious habits in buying discretionary luxuries. In such an environment, weaknesses are quickly apparent - competence, location, marketing, inventories, quality, service, personnel, and image all play a role. Given a market area, for example, that has a number of fully qualified retailers, is there enough high-end business to carry all of them? In many cases, the answer is no. There will be a few strong winners, and far more losers.
3. Price volatility. The bedrock materials in the jewelry business are diamonds and gold. Both have experienced real swings in pricing, and we can expect that to continue. Some ten years ago, in a conference presentation, I emphasized that De Beers was backing out of its historic role as buffer in the diamond industry, and that we should expect price volatility, driven by changes in the supply/demand equation. Not only has that proved true, but it is compounded today by the continuing decline in the US market share, with 30% or less possible in the next year or two. US buyers will be dealing with availability and currency exchange rates at the same time.
Gold prices have already killed some one-time strong categories (especially gold chain). Gold is no longer much of a factor in jewelry under $2,000 retail, which was for so long a critical price range for retailers. Worse yet, we can reasonably expect prices to rise to well over $2,000 an ounce, possibly even this year, and higher in years to come. Will diamond fashion jewelry (that is, excluding bridal) become an elitist product?
4. The blurring line between jewelry and costume jewelry. We should note that silver is no longer the material of choice for the bottom of the market. The price has quadrupled in a few years, and it will rise further, especially because so many industrial and medical uses are being developed. Silver jewelry used to be the top end of the costume market. Now it is trying to find its footing in the "fine jewelry" field. This is occurring with some success (after all, David Yurman showed us the way!). Experimentation is rampant. We started with silver and gold-plated silver. Now we have silver-plated bronze, platinum-plated silver (as a step up), tarnish-resistant silver alloys, and the addition of steel, copper, wood, resin, ceramics, cobalt, titanium, and synthetic stones of every variety. The line between "fine" and costume jewelry is about gone. In the process, is the public being taught that it is acceptable to satisfy their desire for jewelry with products that bear only a taint of precious elements? The supply side is pushing the transition, in the hope of extending their existence. Jewelry manufacturers are interested in units - they want to produce more and keep factories busy. High priced gold and diamonds only reduces productions, and radically of late. So many companies have shifted to alternative materials, which makes life much easier. They bring fine jewelry skills to the costume business, which does mean more innovation and creativity in that world. But nobody really knows how all this will evolve.
5. The Internet. This is hardly a new issue. Still, it is important to accept that the development of the Internet, in all its manifestations, is still at a very early stage. I have often imagined - and read about - where it could all go, and the prospects are stunning. This industry has in large part hated this intrusion into our comfortable, established, profitable business. But the Internet now accounts for about 10% of all retail, and is expanding all the time. The reality today is actually quite simple. Every time any of us hear about a name, a brand, a store, a company, or anything new to us, we instinctively run a search on our smartphones or computers. How one appears on the Internet now sets the tone for who we are and what we offer. Absence is inexcusable for anyone in business, any more than not having an e-mail address. As we can readily see, there are many retailers and suppliers who do not have web sites, and many that do have done an awful job. Whether a company offers e-commerce or not, those that do not present a strong message on their sites (or do not even have a site) are obsolescent and will decline or fail.
All of that should be apparent to everyone (though I know some are still in denial). But there are more changes to how our industry works that have already been imposed by the presence of the Internet. One has been the long-held requirement by retailers that suppliers give them exclusivity on the products they buy. For a long time, this made some sense for distinctive product (one could hardly ask for exclusivity on serpentine chain or Tiffany-style solitaire mountings). The retailer down the street should not have the same product, as that diminishes its uniqueness and it breeds price competition. That is all fine where a retailer's world is truly local. Today, that is gone. Retailers in other cities now show the lines they carry, and compete across state lines. Internet retailers offer the lines for immediate sale. And the public has become very accustomed to buying all kinds of products from all over the world.
In the years to come, jewelry retailers will find that this change to non-exclusive arrangements will be of great benefit to them. Jewelry, as everyone loves to point out, is a product that many, if not most, people want to see, feel, and try on. For those people, seeing a piece on-line and then going to a store to ask for it will be their preference. I have seen that effect lately, with a supplier calling up an Internet retailer to relate that they received calls and orders from traditional retailers because of the Internet retailer's campaigns. Both types of retailers will be accepting that broadly advertised lines will benefit everyone. This will no longer be just a local business. A good part will be national, and international, in nature.
Next time - the other 5 trends I see.......
1. The Millennials are coming. More and more of our business is shifting from boomers to millennials. And with that has come a shift from brand to concept. For years we have heard of the importance of creating a brand or image. All industries have pushed to create or enhance their brands, but in most cases that has been little more than labeling a line, often at considerable cost. Now that we are buried in so-called brands - and have seen countless failures - we find that remarkably few are meaningful to us. Yes, BMW, Apple and Vuitton have all attained a cachet that means status and personal gratification to many people. I view those as unique feats that are stupendously difficult to achieve - and it is so easy to lose that cachet.
Jewelry retailers at all levels have attained some brand success, though even a Tiffany had to be saved from disaster about 30 years ago. But for the bulk of the industry, branding has meant very little. Three very different manufacturing successes, JAR, Yurman and Pandora, demonstrated that concept is more important than brand. JAR did it with zero promotion or advertising by creating extraordinary jewelry. Yurman did it by creating classic designs with great perceived value using silver, 18 karat gold and colored stones as the main components, which the industry sneered at. Pandora did it with inexpensive elements that gave the consumer the option to personalize their piece. And it should be noted that these three successes came at the very top end of the market, the middle market and the lower end market.
There are some other examples of this kind of success, but in each case success came by impressing the consumer with a product aspect - concept - that was meaningful. The millennials in particular seem unimpressed by brands per se, but do respond to the right message.
2. A rising tide is not raising all boats. We used to think that was true, that a recovering and growing economy benefits everyone. We have a few things working against that. The well-documented rift between the affluent and the working class means that a luxury category, broadly defined in our case as of a discretionary, status-oriented nature, has a narrowing appeal. Recent history illustrates that very well. In recent years there has been an effort by many retailers to "move upscale", thereby following the money. There has also been a broad expansion into bridal lines, the one area where the public at large does dig deeper to come up with the money to buy this signal product. Both efforts have met with very mixed results and many abject failures. The luxury/bridal pies are only so big, and several studies show that the truly affluent have assumed far more cautious habits in buying discretionary luxuries. In such an environment, weaknesses are quickly apparent - competence, location, marketing, inventories, quality, service, personnel, and image all play a role. Given a market area, for example, that has a number of fully qualified retailers, is there enough high-end business to carry all of them? In many cases, the answer is no. There will be a few strong winners, and far more losers.
3. Price volatility. The bedrock materials in the jewelry business are diamonds and gold. Both have experienced real swings in pricing, and we can expect that to continue. Some ten years ago, in a conference presentation, I emphasized that De Beers was backing out of its historic role as buffer in the diamond industry, and that we should expect price volatility, driven by changes in the supply/demand equation. Not only has that proved true, but it is compounded today by the continuing decline in the US market share, with 30% or less possible in the next year or two. US buyers will be dealing with availability and currency exchange rates at the same time.
Gold prices have already killed some one-time strong categories (especially gold chain). Gold is no longer much of a factor in jewelry under $2,000 retail, which was for so long a critical price range for retailers. Worse yet, we can reasonably expect prices to rise to well over $2,000 an ounce, possibly even this year, and higher in years to come. Will diamond fashion jewelry (that is, excluding bridal) become an elitist product?
4. The blurring line between jewelry and costume jewelry. We should note that silver is no longer the material of choice for the bottom of the market. The price has quadrupled in a few years, and it will rise further, especially because so many industrial and medical uses are being developed. Silver jewelry used to be the top end of the costume market. Now it is trying to find its footing in the "fine jewelry" field. This is occurring with some success (after all, David Yurman showed us the way!). Experimentation is rampant. We started with silver and gold-plated silver. Now we have silver-plated bronze, platinum-plated silver (as a step up), tarnish-resistant silver alloys, and the addition of steel, copper, wood, resin, ceramics, cobalt, titanium, and synthetic stones of every variety. The line between "fine" and costume jewelry is about gone. In the process, is the public being taught that it is acceptable to satisfy their desire for jewelry with products that bear only a taint of precious elements? The supply side is pushing the transition, in the hope of extending their existence. Jewelry manufacturers are interested in units - they want to produce more and keep factories busy. High priced gold and diamonds only reduces productions, and radically of late. So many companies have shifted to alternative materials, which makes life much easier. They bring fine jewelry skills to the costume business, which does mean more innovation and creativity in that world. But nobody really knows how all this will evolve.
5. The Internet. This is hardly a new issue. Still, it is important to accept that the development of the Internet, in all its manifestations, is still at a very early stage. I have often imagined - and read about - where it could all go, and the prospects are stunning. This industry has in large part hated this intrusion into our comfortable, established, profitable business. But the Internet now accounts for about 10% of all retail, and is expanding all the time. The reality today is actually quite simple. Every time any of us hear about a name, a brand, a store, a company, or anything new to us, we instinctively run a search on our smartphones or computers. How one appears on the Internet now sets the tone for who we are and what we offer. Absence is inexcusable for anyone in business, any more than not having an e-mail address. As we can readily see, there are many retailers and suppliers who do not have web sites, and many that do have done an awful job. Whether a company offers e-commerce or not, those that do not present a strong message on their sites (or do not even have a site) are obsolescent and will decline or fail.
All of that should be apparent to everyone (though I know some are still in denial). But there are more changes to how our industry works that have already been imposed by the presence of the Internet. One has been the long-held requirement by retailers that suppliers give them exclusivity on the products they buy. For a long time, this made some sense for distinctive product (one could hardly ask for exclusivity on serpentine chain or Tiffany-style solitaire mountings). The retailer down the street should not have the same product, as that diminishes its uniqueness and it breeds price competition. That is all fine where a retailer's world is truly local. Today, that is gone. Retailers in other cities now show the lines they carry, and compete across state lines. Internet retailers offer the lines for immediate sale. And the public has become very accustomed to buying all kinds of products from all over the world.
In the years to come, jewelry retailers will find that this change to non-exclusive arrangements will be of great benefit to them. Jewelry, as everyone loves to point out, is a product that many, if not most, people want to see, feel, and try on. For those people, seeing a piece on-line and then going to a store to ask for it will be their preference. I have seen that effect lately, with a supplier calling up an Internet retailer to relate that they received calls and orders from traditional retailers because of the Internet retailer's campaigns. Both types of retailers will be accepting that broadly advertised lines will benefit everyone. This will no longer be just a local business. A good part will be national, and international, in nature.
Next time - the other 5 trends I see.......
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Tammie Teeter