Industry Shrinkage Increased Dramatically in 2014, JBT Says

Industry consolidation saw huge jumps in 2014, as business closings skyrocketed 32 percent, with all sectors of the business taking a hit. 

According to Jewelers Board of Trade, jewelry business discontinuances in the United States reached 973 in 2014, versus 739 the prior year. That number includes companies that ceased operations, were merged or sold, or filed for bankruptcy. 

The number of companies that ceased operations also jumped 32 percent, to 770. The JBT reports that 612 retailers called it a day in last year, a 29.4 percent increase over the prior year. The number of wholesale companies packing it in rose 11.7 percent, to 86, and manufacturer closings soared a whopping 118 percent, to 72.

The year also saw 170 sales or mergers, up 48 percent from the past year. 

All this contraction reverses the trend of the last few years, says JBT president Dione Kenyon.

“The consolidation numbers went way up in 2009 and 2010, during the recession,” she says. “For the last years, we saw those numbers were dropping. But over the last year, the tide turned.”

And while the industry had a pretty good year recently, some companies are still reeling from the big declines in business they suffered when the roof fell in.

“2014 was not a strong enough year to keep the weak people in business,” she says. “If you think about the way the economy has recovered, it’s been slow. We are recovering at a 2 to 3 percent Gross Domestic Product rate, and that is probably not enough for a weak business to recover. So there is a tide, but it’s not lifting all boats.”

One thing hurting some jewelers: The slowdown in gold buying, as the metal’s price has fallen.

“Many stores were relying on that,” she says. “And in some cases, it was a brand destroyer.” 

Looking at the numbers, Kenyon is struck by how many of the closings were voluntary.

“People are throwing in the towel and choosing not to stay in business,” she says. “Either they don’t have successors or they are not willing to reinvest in the business. The baby boom generation is running those businesses and you get to that age when you think: What do I want to do with the next 20 years of my life? Do I have the energy? Do I want to take the financial risk?” 

The banks’ reluctance to lend often tips the scales, she says. 

“Without a lot of access to capital, retailers have to put their own money on the line, maybe mortgage their own house,” she says. “People do a lot of soul-searching when that happens.”

The sole positive statistic: The number of industry bankruptcies actually fell 20 percent, to 33, from 41 in 2013. 

“Those are historic lows,” Kenyon says. “I have never seen the bankruptcy numbers that low. People just don’t want to spend the money to go through the process.” 

The amount of new companies coming into the business also decreased in 2014, to 261, from 284 the year before.

While these numbers paint a negative picture, Kenyon stresses our industry is holding up well compared to others.

“The numbers may be big but think how big our industry is,” Kenyon says. “Look at other industries where independent retailers have disappeared—hardware stores, bookstores.

“I do think that there is role for the independent jeweler who knows their community and their customers. There is still lots of opportunity for people who want to adapt and be forward thinking.”

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JCK News Director