Study: Slow growth is leading to fierce competition in the jewelry market

Slower market growth means even more competition at the nation’s jewelry counters and the retail market for jewelry is going to get even more challenging in the immediate future as the effects of market saturation begin to be felt, said a consultant for the jewelry and luxury industries.

“With the jewelry market slowing, consumers are going to be unforgiving if retailers fail to meet their expectations. That is what happened this past Christmas season when Zale Corp. attempted to move their flagship Zales Jewelers’ brand from a mid-market jewelry retailer to a higher-priced, more fashion-forward brand,” said Pam Danziger, president of Unity Marketing. “There was nothing fundamentally wrong with Zale’s up-market strategy. The essential problem was how it was executed, and that was disastrous. The Signet Group, which operates the Kay Jewelers and Jared jewelry chains, capitalized on consumers’ confusion and took over as the nation’s number one jeweler as a result.”

After posting strong 6 percent growth in 2004, the jewelry market slowed in 2005, rising only 3.87 percent from $57.2 billion to $59.4 billion in 2005, according to the latest study of the jewelry market by Stevens, Pa.-based marketing consulting firm.

Contributing to what she states as “turmoil’ in the jewelry retail market are rising prices for gold and platinum which will start to impact jewelry prices, Danziger said. At the same time, consumers overwhelmingly feel that jewelry is overpriced so they search aggressively for bargains which they readily find at discount outlets like Costco and The Jewelry Exchange.

She says that in today’s jewelry market, it isn’t just the low-and-middle income shoppers clamoring for bargains, but affluent luxury consumers are passionate for value, Danziger said.

“Costco’s special order diamond program, where a member can create their own custom-designed diamond jewelry of 1k or more, gives luxury shoppers a value alternative to independent and high-priced jewelers. Savvy luxury shoppers won’t pay more for precious jewelry when they can get the same quality for less,” she said.

Danziger said that while the typical jewelry consumer is a ‘twenty-something’ to ‘fifty-something’ higher-income female, the jewelry market today is made up of distinct segments with entirely different preferences and desires. For example, the new Unity Marketing research identified three different types or personalities of female jewelry buyers:

• Fashionista Frances is the most price-sensitive jewelry shopper, who looks for the most ‘bling-bling’ for the price. She turns most often to fashion jewelry to make a fashion statement, but shops in discount stores and department stores where she expects lower prices or good sales. While Frances-types make up the largest share of the women’s jewelry market, this type also spends the least.

• Connoisseur Catherine is the most discerning jewelry shopper, always looking for the best. While she has the money to pay for the finest, she still wants good value when shopping. She strongly favors fine jewelry over costume and tends to shop in jewelry stores first to find new pieces. Her jewelry shopping is often stimulated by the need to get a new item for a special occasion. When she shops, she is looking for the finest quality materials and gemstones for the right price and she is willing to spend more for the perfect fine jewelry piece. Catherine-types spend about five times more than Frances-types buying jewelry.

• Dime-Store Debbie is just not that ‘into’ jewelry. She buys it when she has to, but her primary motivation in buying jewelry is to find a piece at the right price. She isn’t a “fashionista” like Frances, nor a connoisseur like Catherine. She buys jewelry as a reward for herself, but only when she can find the right item for the lowest possible price.

“The key to success for jewelry retailers is to really understand the different personalities that make up the market and present the kind of products, prices, and shopping experiences that the particular shopper desires. For example, Zales move up market failed because the brand historically played more to Dime-Store Debbie than Connoisseur Catherine, yet their new strategy alienated and confused Debbie and didn’t have enough time to build a connection with Catherine,” Danziger said.

For more information about the study, go to http://www.unitymarketingonline.com.