International retailers are feeling the pinch of high gold prices and seeing their markets split into high and low ends. But the forecast for 2013 and beyond remains bullish.
Despite economic turbulence in Europe and a slowdown in China, the worldwide jewelry business continues to shine—or so a handful of jewelry trade editors and analysts tell JCK, describing the rosy state of the market in their regions.
The future looks equally bright, they contend. For starters, jewelry sales saw double-digit growth in 2011 and the trend is likely to repeat itself in 2012, according to Euromonitor International, a market research firm that tracks jewelry sales in 32 countries. Fine jewelry is driving the growth, accounting for 87 percent of the estimated $275.4 billion global jewelry market. In fact, Euromonitor analysts say that within the past five years, fine jewelry has seen the highest growth period in history, rising 46 percent between 2007 and 2012. They project a compound annual growth rate of 7.4 percent by 2017.
But details on what consumers are buying and where they’re buying it vary by region. “Jewelry and watch specialist retailers are the leading retail channel for jewelry retail sales worldwide,” says May Ling Tham, Euromonitor’s global head of personal accessories and eyewear research. “Department stores form an important part of the retail landscape in China. In the face of economic uncertainty and high unit prices for gold jewelry, both these channels are experimenting with discounting strategies and promoting event-specific collections for attracting consumers.”
The bipolarization of the market—that is, strength at the entry-level and in the luxury sectors—appears to be consistent everywhere. “The two extremes—high end and low end—have shown the highest growth,” says Luiz Lacombe, who heads the international division at IBGM Brazilian Gems & Jewellery Trade Association, echoing comments from trade representatives in France, Germany, and China. The high cost of gold is altering buying behavior similarly: Many consumers are experimenting with less expensive materials. Style-wise, fashion-oriented pieces with large, bright-colored stones are in demand.
Passport to China
Estilo earrings in 18k rose gold with fluorite; $5,200; Carla Amorim, Chicago; 312-305-6476; carlaamorim.com
In China’s luxury market—by 2015, the country will account for more than 20 percent of the world’s luxury sales, according to a McKinsey & Co. report—international brands, led by Bulgari, Cartier, Van Cleef & Arpels, and Tiffany & Co., rule the roost.
Chinese customers have also catapulted premier domestic stores like C.S.S. Jewellery Co., Luk Fook Jewellery, and Shanghai Lao Feng Xiang into the international spotlight. At the upper end, gold, diamond-set, and jadeite jewels are taking center stage. Meanwhile, at China’s low to medium end, surging material costs are reshaping consumption patterns, creating an uptick in sales of colored-stone pieces and fashion styles. Across the board, demand for jewelry and other status signifiers remains high.
“In giant markets such as China, rapid urbanization and growing wealth beyond the first-tier cities are creating many affluent markets with smaller pools of wealthy consumers in other cities such as Qingdao and Wuxi,” says Fiorence Chan, editor-in-chief of Hong Kong Jewellery & Jade Manufacturers Association’s Hong Kong Jewellery magazine.
In 2011, the German jewelry industry posted retail sales of 853 million euros ($1.08 billion), according to the Federal Office of Statistics of Germany and estimates by BV Schmuck & Uhren. That’s a 25 percent rise over 2010 figures. Exports grew 8 percent. According to Petra Bäuerle, editor-in-chief of Schmuck Magazin, consumers are gravitating toward charms, bracelets, and pendants. Among the country’s most popular luxury brands: Wellendorff, Leo Wittwer, Kriëger, Rivoir, Hellmuth, and Jörg Heinz. Consumers also are investing in gold, platinum, and precious stones in an effort to protect themselves from Europe’s financial woes.
Red Carpet Collection ring with 51 cts. t.w. tourmaline, 3 cts. t.w. rubies, and 1 ct. t.w. diamonds in 18k white gold; price on request; Chopard, NYC; 800-CHOPARD; chopard.com
The high cost of gold has forced many designers to work with less expensive materials such as wood, synthetic materials, and colored stones. Even in the bridal market, designers are questioning the use of traditional materials and settings. Vreden, Germany–based Niessing, for instance, just debuted a tension-set ring that’s both slimmer and crafted from a special platinum alloy. “The sizes of the stones are growing, the share of gold and platinum is decreasing,” says Bäuerle. “Another remarkable trend: Rose gold and red gold are back in the game. A lot of [retailers] are cautious and observant, but some are doing quite good business.”
That comment applies tenfold to retailers in Paris, a Mecca for tourists from China, Russia, and the Middle East. To appreciate just how important shopping is to the City of Light, consider that the department store Galeries Lafayette welcomes more people through its doors on any given day than the Louvre museum. The French jewelry and watch market combined is currently worth 5.5 billion euros ($6.9 billion), and has grown at a very high rate within the past 12 months, according to Françoise Izaute, executive director of Platinum Guild International (Italy).
While Europe’s economic woes are evident on the low end, where designers are experimenting with 9k gold, the climate has yet to adversely affect jewelry sales in France. Even with a decrease in weddings, platinum bridal sales have increased double digits every year. (French consumers prefer a classic look in white metals and diamonds.)
Brisk demand for watches has made Paris one of the world’s most popular watch destinations after Switzerland, says Izaute. A large number of consumers are buying timepieces worth 3,000 euros and up from brands like Rolex, Patek Philippe, and IWC. As a sign of confidence in the high-end watch business, Richemont is on track to open a multibrand watch store in the Old England building in La Madeleine, the fashionable Parisian shopping district, in 2013. The boom in Paris-based flagship stores is intriguing, says Izaute. “It shows how much the country is ready to welcome high numbers of people coming from around the world.”
The Buys in Brazil
43 mm Gigantium Skeleton watch in stainless steel case with 1 ct. t.w. diamond bezel and white alligator strap; $22,450; Kriëger, Miami; 800-441-8433; kriegerwatch.com
Across the Atlantic Ocean, in the Brazilian jewelry market, estimated to total about $5 billion a year at retail, a surge in illegal imports is making life difficult for retailers. Lacombe says it has also been challenging for jewelry to steal market share away from electronics and mobile phones. Jewelry sales are still climbing, however. Due to the high cost of gold, silver, plated, and costume pieces with natural stones have seen an uptick.
“The economic growth in Brazil has improved and the purchasing power of the Brazilian population has positively affected consumption,” says Lacombe. “Many consumers who had no access to the market are seeking jewelry, whether plated, silver, or gold.”
Gold’s Diminishing Glow?
As for global demand for fine jewelry, the landscape appears to be shifting—primarily with respect to gold. Italy recently lost its status as the premier gold exporter in the world to India and the United States, the Italian goldsmith federation Confindustria Federorafi told Reuters in November. The high euro price and Italy’s struggling economy contributed to the 7 percent decline in the third quarter of 2012, according to the World Gold Council’s quarterly report. Meanwhile, the WGC reports that India accounted for 30 percent of global gold jewelry demand, the strongest performing market in the third quarter. China’s slowing economic growth saw demand for gold jewelry lose momentum, falling 5 percent in the quarter. In the United States, demand for gold jewelry rose 5 percent, the smallest year-over-year growth since 2005. (Blame the 10k trend and the fact that alternative metals continue to gain market share.) Turkey’s growth came early in the quarter then tailed off as its gold prices dovetailed with U.S. prices. Meanwhile, Russia’s rising incomes and lower unemployment led to 2 percent growth in the quarter, the strongest since 2008.
Swiss watch exports also were slightly down in September, compared with the same month one year earlier due to the weakened Chinese economy, according to the Federation of the Swiss Watch Industry. September’s downturn was attributable to watches costing less than 3,000 Swiss francs ($3,167.90). Timepieces costing more than 3,000 Swiss francs improved 3.7 percent. Still, from January through September, total Swiss watch exports rose 13.6 percent compared with the same period in 2011.
Most analysts believe the bumps on the road are merely that, however. All eyes remain on—you guessed it—Asia. From January to August, exports of fine jewelry out of Hong Kong reached HK$33.95 billion ($4.2 billion), a 21.5 percent rise compared with the same period in 2011. Says Chan: “The markets in Asia, lead by China and India, are considered the future for global fine jewelry exports.”