Diamond IndustryDiamond IndustryThe value of diamonds lies on their physical properties that make them suitable for many applications. Natural diamonds are only of high value if they are scarce in nature. Realizing this, De Beers Consolidated Mines was formed to control the supply of diamonds from mines across the world. The diamond market is influenced by mine production, rough diamond distribution, preparation/cutting, and retail markets. The project will be concentrating on the retail markets for diamonds and other high end jewelry.
Jewelry purchases are highly discretionary because they are heavily affected by adverse trends in the general economy and are measured by disposable consumer income. The first half of fiscal 2003 can be described with a lackluster economy, lower consumer confidence and an unstable geopolitical environment. However, general economic conditions and consumer confidence improved in the second half of fiscal 2003, resulting with increased sales. Since the economy has taken some major strides towards recovery, the jewelry industry represents a bullish market. Large and small retailers are evaluating expansion opportunities outside of the traditional regional mall venue. With this in mind, it is the intention of this paper to assess the comprehensive strategies of the cyclical retail jewelry industry.
The jewelry market in 2007 was a weak, low, depressed, and poor performers as it recovered from recession to recovery in the second half of the year. However, the decline in the jewelry industry continued to be modest, lasting only a few weeks on average. The jewelry sector saw a steady growth in revenues and a decline in the total value of purchases, due largely to price increases in jewelry imported from abroad. It was expected that this decline would be moderated by domestic and export pressures. However, for many jewelry products of domestic origin, foreign-produced price increases were offset by a significant increase in international sales which resulted in a decline in the jewelry industry’s net income. The jewelry industry declined from 2012 to in 2013.
The jewelry industry experienced a decline in real-estate development opportunities, mostly due to lower home prices, which were offsetting an increase in jewelry sales. The new U.S. homes bought outside the housing market became more popular. In November, for example, two homes for sale were sold in a market between San Francisco and Los Angeles that began in late 2008 and ended in 2009. In that case, sales also began to increase, although in some markets sales were lower. For jewelry manufactured outside the global market, sales in foreign-produced jewelry were offset by foreign-made purchases. Other foreign-made jewelry manufacturers, which do not meet international sales standards, were also affected. Despite this, overall shipments of jewelry to the U.S. fell to almost 300,000 cases a year of 2009, a decrease of more than 8 percent from 2007, the year before the recession. Â
Figures from the U.S. Consumer Price Index showed that there was a decline in jewelry sales following the financial crisis in 2008. The majority of jewelry sales in 2009 came from jewelry makers and dealers and the bulk of sales from jewelry suppliers were in the U.S. and most from abroad. However, there were other changes, including a reduction in sales by jewelers as well as jewelry dealers. In the third quarter of 2009, jewelry suppliers began selling domestically in more than 50 percent of their products. The decline in jewelry sales in the fourth quarter of 2009 continued for a longer period.
Figure 1. (a) Jewelry sales by jewelry makers and dealers. (i) Data available from the U.S. Consumer Price Index. (ii) Numbers based on the U.S. Census Bureau. For more information about the jewelry market (including chart data) click here. (b) Data available from the U.S. Department of Labor. For more information about the jewelry industry click here.
This study uses consumer data from 2007 to 2013 to derive the general economic outlook for jewelry. Specifically, it examines sales and income for the four most recent quarters of the year. Â By using consumer data from 2007 to 2012, we see that jewelry has remained fairly stable in the third quarter of the year. However, sales have fallen precipitously, due largely to price increases and exports.
Figures 1 and 2 summarize sales and income, which include income for each of the four primary industry categories, as well as a measure of how those categories compare to the general economy
In this highly competitive industry which is extremely sensitive to the level of discretionary consumer income and the subsequent impact of the type of good purchased, competitors include foreign and domestic guild and premier luxury jewelers, specialty stores, national and regional jewelry chains, and department stores. To a lesser extent there exist catalog showrooms, discounters, direct mail suppliers, televised home shopping networks, and jewelry retailers who make sales through internet sites.
It is a highly fragmented US market estimated at approximately 54 billion dollars. The breakup of the industry is accordingly: mass merchants representing 10%, chain jewelers with 100+ stores as 14%, chain department stores representing 12%, TV home shopping with 4%, independent jewelers taking the largest share at 36% and other (general, misc.) accounting for 24%. (Please refer to exhibit E)
The specialty retailers with the highest sales are Zale Corp ($2.2Bn), Signet US($1.7Bn), Tiffany ($.8Bn) other players include Friedman’s ($.4Bn) Whitehall ($.3Bn), and Samuels ($.1Bn). (Please refer to exhibit D) In terms of long term industry growth there has been a 5.7% increase since the 1980s. (Please refer to exhibit C)
The success retailers in this industry depend on various factors. This includes general economic and business conditions. In 2001, as US retail sales as a whole across all markets took a steep hit so did the jewelry market. This market of luxury goods is highly dependent on consumer spending. It is crucial to find a balance with the performance of a retailer’s operations and the acceptance by consumers of the merchandise and marketing programs.
Industry competition is expected to increase with the consolidation of the retail industry that is occurring. Competition with other general and specialty retailers is based primarily on trust, quality craftsmanship, product design and exclusivity, product selection, service excellence and, to a certain extent, price.
In 2000, the consumer market for fine and costume jewelry rose 5% over 1999 levels to total $39.8 billion. Contributing to the growth in the jewelry market is the expanding availability of jewelry at the retail level. Nevertheless, there seems to be an interesting organic growth trend in this cyclical market. According to the National Jeweler, top 50 retailers plan to open 263 stores in 2004 vs. 292 stores in 2003, a decrease of 11%. These jewelers do not plan to add new units, but instead, aim to work on improving sales, margins and operating efficiencies within their