A multifaceted future: The jewelry industry in 2. The trends that have unfolded in the apparel sector over the last three decades appear to be playing out in the jewelry sector, but at a much faster pace. Annual global sales of . Consumer appetite for jewelry, which was dampened by the global recession, now appears more voracious than ever.
Fashion is a popular style or practice, especially in clothing, footwear, accessories, makeup, body, or furniture. Fashion is a distinctive and often constant trend. Trending in Home Cheap Living Room Updates That Make a Big Difference; These Perennials Should Get Cut Back in the Fall; 8 Things You Shouldn't Have in Your Kitchen.
But the industry is as dynamic as it is fast growing. Consequential changes are under way, both in consumer behavior as well as in the industry itself.
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Jewelry players can’t simply do business as usual and expect to thrive; they must be alert and responsive to important trends and developments or else risk being left behind by more agile competitors. To chart the most likely course of the jewelry sector, we analyzed publicly available data, studied companies’ annual reports, and interviewed 2. Our research indicates that five trends that shaped an adjacent industry—apparel—over the past 3. In this article, we discuss how these trends could affect the future of jewelry and what jewelry companies should do to prepare.
Internationalization of brands and industry consolidation. In the 1. 98. 0s, national apparel brands were the clear leaders in their respective markets: C& A in Germany, for example, and Marks & Spencer in the United Kingdom.
Today, many national brands have been outpaced by international brands such as Zara and H& M. Others have built or expanded their international presence. Hugo Boss’s sales outside Germany, for example, grew from 5. Apparel has become a truly global business. We expect jewelry to follow a similar path. Today, the jewelry industry is still primarily local. The ten biggest jewelry groups capture a mere 1.
Cartier and Tiffany & Co.—are in Interbrand’s ranking of the top 1. The rest of the market consists of strong national retail brands, such as Christ in Germany or Chow Tai Fook in China, and small or midsize enterprises that operate single- branch stores. Our interviewees expect that a handful of thriving national or regional jewelry brands will join the ranks of top global brands by 2. Swarovski is an oft- cited example. In addition, some local brands will almost certainly become known globally as a result of industry consolidation: international retail groups will acquire small, local jewelers.
Some industry observers project that the ten largest jewelry houses will double their market share by 2. And if the apparel industry does indeed hold any lessons for the jewelry industry, incumbent jewelry houses will soon be fighting bidding wars against private- equity players with deep pockets. The apparel industry is about ten times the size of the jewelry industry as measured in annual sales, but the average M& A deal value in apparel (. That said, average deal value in jewelry has been rising—by a compound annual growth rate of 9 percent between 1. Recent deals include British company Signet Jewelers’s 2. US- based retailer Ultra Diamonds and the Swatch Group’s acquisition of Harry Winston in January 2.
Growth of branded jewelry. Branded items already account for 6. While branded jewelry accounts for only 2. Exhibit 1). All executives we interviewed believe branded jewelry will claim a higher share of the market by 2. Most expect that the branded segment will account for 3.
Exhibit 1. Branded jewelry is on the rise. By contrast, future growth in branded jewelry is likely to come from nonjewelry players in adjacent categories such as high- end apparel or leather goods—companies like Dior, Herm. The trend toward branded jewelry will be especially hard on small artisans, who don’t have the marketing muscle of the large jewelry groups. One option for smaller players would be to seek distribution through ventures like Cadenzza, Swarovski’s chain of curated multibrand jewelry stores featuring well- known luxury brands as well as up- and- coming designers.
Reconfiguration of the channel landscape. In all major markets over the past decade, online sales of apparel have grown at double- digit rates; in the United Kingdom, for instance, online sales now account for 1. Our analysis suggests online jewelry sales are only 4 to 5 percent of the market today, with substantial variations across regions, brands, and types of jewelry.
Our interviewees believe this number—at least for fine jewelry—will reach 1. Their rationale: most consumers prefer to buy expensive items from brick- and- mortar stores, which are perceived as more reliable and which provide the opportunity to touch and feel the merchandise—a crucial factor in a high- involvement category driven by sensory experience. As for fashion jewelry, our interviewees predict a slightly higher online share of sales, in the neighborhood of 1. The bulk of these sales will come from affordable branded jewelry, a somewhat standardized product segment in which consumers know exactly what they’re getting. Jewelry manufacturers can use digital media as a platform for conveying information, shaping brand identity, and building customer relationships.
According to a recent Mc. Kinsey survey, two- thirds of luxury shoppers say they engage in online research prior to an in- store purchase; one- to two- thirds say they frequently turn to social media for information and advice.
The offline landscape is also evolving. In apparel, monobrand stores have been gaining ground at the expense of mail- order players and some multibrand boutiques; department- store sales are stagnating (Exhibit 2). The same is happening in jewelry. Pandora, for example, quadrupled the size of its store network in just four years—from 2. In 1. 99. 0, there were just 2 Swarovski boutiques; by 2.
Exhibit 2. The channels that are gaining share in jewelry are also winning in apparel. Another potentially promising channel is multibrand boutique chains that provide a carefully curated assortment of brands and products as well as a unique shopping experience—which is what the aforementioned Cadenzza store concept aims to provide. To achieve sufficient margins, however, such concepts may need to operate on a global scale. Polarization and hybrid consumption. In apparel, both the high and low end of the market are growing—while the middle market stagnates. High- end apparel players have been able to create a substantial premium: our analysis shows that a Gucci suit that cost .
At the same time, mass- market prices have dropped: an H& M suit that cost . The jewelry industry is starting to see evidence of this hybrid consumption.
One of our interviewees observed that in some parts of the world, more people are trading up from what some consider to be the standard one- carat diamond engagement ring to two, three, or four carats—with five- or even six- digit price tags. At the lower end of the market, however, department stores and other general retailers are waging price wars. Furthermore, the previously clear- cut boundaries between fine jewelry (characterized by the use of precious metals and stones) and fashion jewelry (typically made of plated alloys and crystal stones) are starting to blur.
For example, fine jewelry used to be almost exclusively a gift purchase, but today’s consumers are buying higher- end items for themselves. Some fine jewelry is available at bargain prices: Tchibo in Germany sells gold diamond rings starting at .
On the flip side, brands such as Lanvin and Roberto Cavalli sell fashion jewelry for thousands of euros. Industry insiders expect that segments will increasingly be defined by price points and brand positions rather than purchase and wearing occasions. One of our interviewees put it as follows: “We encourage our customers to layer and mix high and low price points, and just go for it—to do what they’re doing with apparel.” In this spirit, actress Helen Hunt paired $7. Martin Katz jewelry with an H& M dress at the Academy Awards in 2.
In light of this trend, fine jewelers might consider introducing new product lines at affordable prices to entice younger or less affluent consumers, giving them an entry point into the brand. Alternatively, fine- jewelry players could decide to play exclusively in the high end and communicate that message strongly through its advertising, in- store experience, and customer service. A brand like Harry Winston, for instance, is very clear about what it stands for; a lower- priced offering would be dissonant with its image and dilute its brand. Fashionability and acceleration. Over the last two decades, “fast fashion” has revolutionized the apparel industry.
This trend is characterized by two factors. The fashionability of everyday apparel. Clothes inspired by haute couture are now available at bargain prices faster than ever before—sometimes within days of a fashion show.
Mass- market retailers sell items that look like they’re fresh off the catwalks of Paris, Milan, London, and New York. Additionally, large retailers are teaming up with top designers: Gap worked with Stella Mc.
Cartney, for instance, and H& M with Karl Lagerfeld. There is also a constant information feedback loop from the stores and the streets that helps manufacturers and retailers reflect the latest trends in their merchandise. Zara, for instance, has reporting systems that allow store staff to regularly send feedback to headquarters—anything from “the sleeves on this jacket are too long” to “our customers don’t like to wear yellow.”An acceleration of supply- chain processes. Fast- fashion players have dramatically shortened time to market: new products can go from concept to shelf in a month.
Stores receive a continuous stream of fresh merchandise—as many as 1. Fast fashion started in the affordable- clothing segment in the mid- 1. H& M, Zara, and Topshop. It has recently spread to higher- end brands: Coach, Diesel, and Juicy Couture, to name a few, have introduced “flash programs” and a greater number of collections per year. Fast fashion is well established in developed markets—in the United Kingdom, for instance, it already accounts for 2.