The decline in jewelry store revenue over the last 18 months has seen many jewelers wondering where the good times have gone. Although volumes have been maintained, and even increased, the drop in average spend has had the biggest affect on most stores, and this shows no signs of easing. One of the biggest average spend categories, diamonds, warrants further analysis. This month we review recent sales of this category.
So where has the decline happened? Given the level of the drop, the most obvious answer would be volume, the result of fewer people purchasing higher-end jewelry because of economic conditions. However, this has not necessarily been the case. Let’s analyze these numbers a little further. The table below is from our sample of stores across the United States and demonstrates the decline in diamond sales, per average store, between the year ended July 2008 and January 2010 (the figures are a 12-month total per store). Interestingly, we actually see a small increase in the volume of diamond jewelry sold.
Surprisingly, the period of steepest decline in average diamond sale has been since September 2009, when the economy started to show signs of improving. The 12-month average was struggling but staying over $1,500 through most of 2009 but dropped sharply to $1,400 in October and has barely increased since.
The biggest impact obviously has been in top-end diamonds where the percentage contributed from these higher-end sales has fallen considerably. But as we have seen in other data, volume has been maintained. This has shown a consistent trend during the economic crisis—there have not been fewer customers buying jewelry, just a reduction in the amount being spent on each transaction.
It’s important for jewelers to respond to the market, and if you haven’t refreshed your diamond rings recently, then any updates you plan to make should reflect this emphasis on the market’s current price point. Look at what percentage of your own sales comes from which price points and ensure your inventory is balanced to reflect this mix of sales. Don’t neglect the top end, however—at some point the market will change and consumers will again look to indulge in higher-price product. Keeping a solid range of higher-end diamonds will show your customers where your market is at and ensure you will be at the front of the queue when these better sales start to happen. In particular, look at what quantity of rings you have in each category and at what price points. Watch for any big gaps in prices between key price points. It isn’t uncommon for jewelers to complete this exercise and discover they have no rings between $1,300 and $1,900, as an example.
Although the decline in average sale will be largely influenced by consumer sentiment, don’t underestimate your impact in this decision. At least some of this average sale decline will have been caused by the belief among owners and staff that customers want to spend less, and, as a result, lower-price items are being stocked and shown to customers, thus encouraging a lower spend. This may be a reason why the steepest average sale decline happened when the green shoots were starting to show—the lag between consumer demand and store inventory may well have seen customers willing to pay more but finding lean selections. Remember, you should never assume what your customer wants to spend. The inventory you carry (and your staff’s expectations) should reflect future sales, not where the market has been.
Keep your staff focused on diamonds. Organize training sessions regularly. They may not be asked for diamond product as often as they have in the past, but make sure they’re still prepared to deal with enquiries as they occur.
|Diamond Sales Per store||Average Spend||Quantity Sold|
|All Diamond Sales—12 months ended July 2008||$485,100||$1,575||308|
|All Diamond Sales—12 months ended January 2010||$439,920||$1,410||312|