At the start of the fourth quarter, there’s one thing retailers want to know: Will Christmas sales be a lump of coal or a welcome gift? Although the fickle stock market cast a long shadow across the third quarter, retailers, manufacturers, and market watchers predict that—barring any unforeseen shocks to the economy—seasonal jewelry buying will give store owners a slight-to-good increase in overall sales for the holiday season and the year.
As with most upbeat market forecasts, however, there’s a pinch of caution thrown in: Owing to higher material costs, sales are expected to increase while the volume of sales will most likely decrease. “With a 30 percent increase in melee prices and gold closing in at $2,000 an ounce, last Christmas’ $350 gold ring will cost $500,” says Rex Solomon, president of Houston Jewelry in Houston.
“The boost in sales will bring a corresponding increase in profits,” says Stuart Robertson, a research director for Gemworld International and JCK contributor. “But there won’t be the huge improvement some are looking for. Right now the [economic] indicators are messy. Getting credit is still a problem and people are still unaware about possible interest rate hikes.”
Robertson also urges retailers who are adding profits from gold buying to their gross profit margins to recognize they may be giving themselves an inflated view of Christmas sales. “If you take gold buying out of the equation, most retailers are still doing well, but there are no real indicators to support there’ll be a strong season at this point,” he says.
The uncertainty is one reason that spending thresholds are expected to drop. Solomon predicts that customers who were willing to spend $500 to $1,000 last Christmas will spend 20 to 35 percent less this holiday season. “Many people are becoming increasingly aware of just how bad the U.S. economy is,” he says. “The economic malaise many people are feeling will impact consumer confidence.”
This season, many store owners said they will concentrate on jewelry items that retail for $500 or less. That’s the price range Lyn Hoppe, co-owner of Hoppe Jewelers in Richmond, Ind., is banking on for what she thinks will be an “okay to good” holiday season. In recent years, Hoppe has increased her diamond-set silver and pearl jewelry inventories by 15 percent. “Pearls, namely necklace strands, continue to be a great value for the money,” she says.
Hoppe also predicts pendants will be strong sellers this holiday because they typically have less gold content than rings and earrings.
At Jack Lewis Jewelers in Bloomington, Ill., owner John Carter had the foresight to stock plenty of fashion-forward, sterling silver pieces that retail for $500 or less. But he anticipates those going mainly to first-time customers.
“In late August and early September, regular customers were making significant purchases of diamonds ranging from 2 to 2.5 carats and watches ranging in price from $7,000 to $15,000,” says Carter. “I see this momentum carrying into the holiday season.”