Skip to main content

Top 10 Issues for 2015 - #5. The New Consumer

Well, the summer break is over, and we are facing a Fall season that does not seem to have much momentum.  Last time, I wrote about retailers' issues, though there is much more one can say on that subject. Now, let's think about the consumers.  Where are they?  Who are they? And will they show up this season?

There is plenty of evidence that the public we have grown so accustomed to in the Consumer Age has evolved, or is evolving, into a very different public, one that has reset some values and taken a hard look what it takes to earn a dollar, and just how to spend that dollar.

Maybe the best way to begin to describe this transforming mindset of the public is to make a list of what we see.

  1. Keeping up with the Jones's is dead.  Acquisition for its own sake, and to show off what we own is no more, though personal satisfaction is still there.  So that means that what you own means less than what you've done and where you've been.  (I exclude the super-rich, who still buy 100-foot yachts.)
  2. In turn, that means, for many affluent families, that experientialism is in, big time.  Cruise ships are getting bigger and bigger (ugh!).  Rafting on the Amazon River, climbing Mt. Kilimanjaro, and hiking the entire Appalachian Trail is in. 
  3. Casual dress is now universal.  Gourmet restaurants have trouble getting men to wear jackets, never mind ties.  Getting dressed up is now for weddings and opening night at the Metropolitan Opera.  And, I should add, at weddings, where the diamond still plays a big role.
  4. Casual attire translates into accessories being cheap and essentially disposable - or, at least, convertible.  Rings and earrings can be hung on a neck chain.  And necklaces can be worn as bracelets.  A woman can use that when the outfit for the day is heels, tights and a t-shirt.  The recent growth of the costume jewelry business, and a decline in what is being spent on the average jewelry purchase, bears this out. 
  5. That, naturally, translates into lower average tickets for retailers.  Even with higher margins on lower-priced pieces, getting to an operating break even is harder than ever.
  6. Only about 60% of working age Americans now have jobs, and many of those are either part time or well below historic hourly wages for many people.  Moreover, average wages have actually declined in the last five years, adjusted for inflation, after stagnating for about 30 years.  And, of course, among the working population many have had to move to lower paying jobs.
  7. As has been going on for decades, the middle class (where the jewelry industry really lives) has been in steady decline.  Either people have managed to climb up, or have seen their standard of living decline substantially, which is the predominant case.  These are not free-spending buyers of luxury products.  $15 minimum wages are a great idea, long past due, but those kinds of wages mean people can survive, not splurge.
  8. This change is not necessarily the result of greed, or of ridiculously high executive salaries, in spite of the political issue that has become. It is the result of booming technology that has steadily extinguished jobs, and the need for people.  Companies constantly look for ways to reduce "head count."  Robotics is how the US will remain a high tech, low labor manufacturing society, while high tech startups hire handfuls of people as compared to assembly line factories. Expect this issue to only get bigger.
  9. As for those people that have jobs, many have learned a bitter lesson living through the Great Recession, which still lurks about everywhere.  They have seen families crushed by job losses, or experienced unemployment themselves.  The financial and legal industries, two instances where people earned big wages in the past, have seen steep drops in employment.  In both examples, technology and outsourcing have had a hand.  What better sign is there of a basic restructuring of labor and productivity than the Fed's reluctance to raise interest rates in spite of years of economic stimulus? 
  10. If anything, those still earning good wages now consider money in the bank and avoiding debt as priorities.  Jewelry or a weekend house in the country are further down the list.  A fascinating study conducted by MasterCard, which has access to deep knowledge of how people spend money, revealed that spending habits have radically changed, even as banks continue to believe that consumers continue to shop as they have before.
    This study, to give one example, showed that the number of credit cards carried by a consumer or family, has declined since the advent of the recession, from seven to four.  Those four are typically a loyalty card (like a department store), a cash-back or points card, and a cash management card.  Consumer debt has fallen a great deal as people have deleveraged, and now  use cards to extend payments for short periods.  MasterCard calls these buyers "Transactors" who manage their cash flow, rather than becoming long term borrowers.  There are far fewer long term, high interest, maxed out cards.  That is where banks really made their money in the past.  The credit card business is about to undergo big changes and far more competition.
    The public is thinking save first, then spend.  So what might have been a $5,000 sale in jewelry some years ago, might now be $2,000.  It would be foolish to think that these changes in consumer mindset are going to revert to what it used to be.
  11. Millennials (and now the upcoming Gen Z!) are the customers of the future, and already have an important impact on our economy.  But they carry a burden that was practically non-existent in the Boomer years, educational debt.  It now comes to over $1 trillion.  What the Millennials are learning is that paying interest can be managed, as persistent as it may be, but paying off principal is really tough.  And even though most of the debt keeps being paid off, everyone - including friends and family - sees how a debt burden can hurt.
  12. Finally, we have to add that the cost of materials needed for fine jewelry puts too much of it out of reach for too large a percentage of the public, hence the rise of costume or near-costume jewelry.  This is educating the public that alternatives are OK, that we can accessorize perfectly well without breaking the bank.  It will, in my opinion, lead to a greater shift to man-made materials in the coming years, as I wrote about earlier this year. 
When we consider all these factors (and more) we inevitably come to the conclusion that we are undergoing a societal change that has begun to alter how the economy works.  In jewelry we saw an explosive expansion during the Age of Acquisition, roughly from the early '60s to the mid-'80s.  There was a rapid expansion of malls and strip centers, and the supply side expanded accordingly. That expansion halted and reversed starting a dozen years ago, and continues today.  The US is a fully mature market and as retailing continues to evolve in response to the demographic changes just described, we will see new winners emerge at the same time that many traditional retail formats fade away.

As I have often said, jewelry isn't going away.  The signature transaction, the engagement ring, is  still there and strong, though it needs to be nurtured as more and more affordable "alternatives" rise.

This coming season, maybe next year's as well, will be pivotal for many people.


Unknown said…
Great break down Ben, especially point #4, very true. It's a fresh perspective of the issue. It also may be one of the explanations for the drop in total consumer expenditures on jewelry in the US. You may want to check out my recent article on this decline (

All the best,

The Diamond Guy said…
Oops you did it again Ben. A true perspective on the realities of today's economic picture as well as the changing social outlook among the next generation. Thank you.
Thanks, Edahn. I did read your article, and the stats are very revealing. I did not cover some other aspects of the change in consumer mindset. The blog was long enough! Two good ones are "burnout", as we see in the sharp decline in jewelry sales in TV shop-at-home (that channel may be burning out altogether, but they have also seen how hard it is to build interest in any brand of jewelry). And jewelry has become very boring, as retailers focus on established classics - same old, same old. The industry largely fails to cause any excitement. Big winners? Pandora, Alex & Ani. Good grief, is this what jewelry has come to?
Thanks, Diamond Guy, I know you have been a steady reader. Could you tell us what you are doing under these circumstances? And perhaps who you are.
Anonymous said…
good insight BJ, about the debt burden of the country. Now that is crushing further fact. Diamond solitaires and diamond stud earrings are still in vogue and enduring. Sometimes there is a revert to the traditional mentality at work....
I think private debt is, of course, always a factor. But most people remain oblivious of public debt - except where local jurisdictions raise taxes to pay off debt. On balance, not sure it is a factor. I do agree that the classics, or "basics", remain most important.

Popular posts from this blog

The Top 10 issues for 2015 - #2: The Second of Three Tipping Points of Man-made Diamonds

Last week I posted a blog covering the first of the three tipping points for man-made diamonds (MMD's), moments when MMD's will have dramatic effects on the diamond business.  (If you have not read it, I suggest doing so before going on with this blog.) No sooner had I posted tipping point 1 , when news came out that a very high quality 10-carat diamond was produced by New Diamond Technology, a Russian company claiming that they possess a new process that is far more efficient.  They claim it took them 300 hours to create this stone, which was cut from a much larger piece of rough, over 30 carats.  Let's see, 300 hours is 12.5 days for a 10-carat diamond.  Whether is was a promotional effort of regular production, most miners would love to have a finished 10-carat high quality stone every ten days. Then I read that both Helzberg's and Sam's Club, each of whom address somewhat different market segments, are both offering larger diamonds in pink, yellow and whit

De Beers, Lightbox and the Impact on the Diamond Industry

De Beers has announced the formation of a new company, Lightbox, that will be selling man-made diamonds (MMDs), mounted in earrings, pendants and bracelets - no rings. I will assume everyone has read the details, and heard their rationale for claiming that this move will have little or no impact in the natural diamond industry.  Briefly, they will be selling MMDs in finished jewelry with total weights up to one carat, mounted in silver or gold, and with simple pricing - $800 per carat.  There is no grading of the stones, which are white, yellow, blue or pink; the jewelry is meant for “moments” not “milestones” (like weddings). De Beers has arrived at this moment after a few decades of seeing their business transformed from a monopoly into a commercial venture facing all the pressures of a competitive market.   At the turn of the century, Rio Tinto, with their major mine at Argyle in Western Australia, went their own way, sensing that they would do much better by selling

The Future of Jewelry, Part 2: Millennials

Last time, we wrote about the Gig economy, and now we move on to an important part of that movement, the Millennials, and, by extension GenZ.  It is most important to think about our youth carefully, not only out of concern for their future, but also because they now account for the biggest part of our economy.  And, in many ways, they will either accept or reject much of the extraordinarily complex world we are passing on to them.  I restate the list issues covered in the series of posts: The Gig Economy Millennials Climate Change Consolidation and/or Decline Natural Diamonds vs Lab-Grown Banking Image  Demographics Retail Evolution Industry Structure Millennials.   This generation is now fully into its prime working years, but does not have the sense of optimism felt by the Boomers and even GenX.  For those who are the children of the top 10%, there is some sense of entitlement, earned or not.  But for the rest, forget any sense of entitlement.  For them it m