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Polishing the Jewellery Market

Fashion jewellery, exquisite luxury pieces, and loose diamonds provided a glittering backdrop to the JCK Las Vegas in June, America's largest jewellery and diamond trade show.

Amid the glitz, it appears that the jewellery industry is undergoing a transformation. A massive consolidation and a steady decline in the number of small independent stores is seen alongside growing demand, especially for higher-end pieces.

The industry's global sales of €148 billion are predicted to grow by a healthy five to six per cent annually, reaching €250 billion by 2020, according to McKinsey, the global management consultant. In line with this, luxury jewellery retailer Tiffany & Co reported a 13 per cent year-on-year net surge in its worldwide sales in the first quarter of 2014. The company topped US$1 billion in global sales fuelled by strong results across nearly all regions and product categories. In the Americas, its total sales increased by eight per cent to US$439 million. Growth was even more dramatic in the Asia-Pacific region, with a 17 per cent boost, taking the total to US$261 million, thanks largely to sizeable contributions from Greater China and Australia.

Evolution of Retail Channels

As in many retail sectors, the Internet is transforming jewellery shopping. The general sentiment at JCK Las Vegas, though, was that the new opportunities are still being missed.

"We're a fragmented industry and we're decades behind in technology,” said Abe Sherman, Chief Executive of the Buyers Intelligence Group, a specialist jewellery consultancy based in California. “On the supply side, manufacturers, who used to sell to retailers, now sell directly to the consumer. At the same time, though, they're more willing to sell to independents.”

Mr Sherman noted that consumers are more willing to buy online, which is also used for research and comparison shopping, before they buy from traditional shops. The trend, he said, is putting additional stress on falling margins, and also requires a greater level of sales staff expertise.

According to Scott Lachut, Director of Research and Strategy for PSFK, a New York-based marketing consultancy, this changing consumer behaviour can actually open new doors for jewellery stores. "From discovery to fulfillment, the purchase funnel has stayed the same. But now the retailer can understand who that shopper is and meet them with a set of relevant services.”

Mr Lachut  advises retailers to offer multi-retail channels, whether online, on a mobile device or in a store. The approach, he said, turns every product encounter into a purchase opportunity. "When a consumer sees the product in a magazine ad or encounters it through social media channels, you can seamlessly create a purchase."

He cited the success of Wired Magazine, a publication where every product mentioned is directly buyable. Given the advances in visual recognition technology and the advent of Google Now(Google's proprietary smartphone-friendly "personal assistant"), which can alert buyers to the presence of products they were looking for in nearby stores, the potential is hard to overestimate.

Man-Made Diamonds

New technology is also affecting other areas of the industry. Synthetic diamonds are nothing new, but the controversy surrounding them is growing as manufacturing technology continues to improve and demand for diamonds remains strong around the world. These synthetic gems particularly appeal to the younger generation, who are often less affluent and more environment-conscious consumers.

"If diamond prices keep rising, you'll see a market opportunity for better quality man-made diamonds,” said Russell Shor, a Senior Industry Analyst at The Gemological Institute of America (GIA). “While De Beers used to look at synthetics as anathema, the world is having to adjust."

Online jewellery sales are hurting margins of independent stores
The jewellery business has become a fragmented industry, say experts

Synthetics can be extremely difficult to distinguish from natural diamonds, especially for small independent retailers. As a result, the industry is upgrading its detection technology and processes. In light of increased calls to screen smaller stones and a general rise in demand for its reports, the GIA is considering adding new testing labs, with India earmarked as a priority.

"I always say you know it's man-made because it's too beautiful," said Lita Asscher, President of?Royal Asscher?of America.

Ms Asscher has, indeed, embraced this new technology, building its "Rebel Chique" product line around it. "We find it very exciting,” she said. “We all want a three-carat pink, but we can't afford it. A man-made stone, then, is often bought as a second or third choice piece."

Style and Personalisation

Natural or man-made? Only the experts can tell

Despite technological innovations that are rewriting the industry's rulebook, some traditions remain in place. For Vatche Derderian, a wholesaler with California-based Vanna K, bridal remains the biggest seller.  "Young people are more interested in elegant, daintier pieces – no bulky designs. We're seeing more styles with smaller stones, but sometimes they can be quite expensive, depending on the quality of the diamond," he says.

Amir Askari, a retailer with Florida-based Best in Gold Guys, came to the show to find loose diamonds for his bridal pieces. "Most of our customers are looking to spend under US$5,000. We are finding that people are moving from solitaires to more extravagant designs, but with smaller centre stones."

This demand for elegance was also noted by Bronson Leung, a Director of Hong Kong Universal Jewellery Ltd. "In the US, people like elegant designs – long earrings, long necklaces," said Mr Leung, who noted that the Hong Kong International Jewellery Show appears to be attracting more buyers from the Middle East, Japan and South Korea.

Canadian retailer John Zeke, proprietor of Zeke's Quality Jewellers Ltd in Manitoba, was in Las Vegas to find new fashion pieces that would appeal to his affluent demographic. "Our economy is pretty strong and people are looking to buy better quality goods," said Mr Zeke.

The highlight of the show for Mr Zeke was meeting entrepreneur Jesper Nielsen, who, after years with Denmark-based global jewellery giant Pandora, recently quit to launch his own brand, Endless Jewelry, with a focus on leather bracelets and charms. "Pandora is still strong, but you always wonder when to get out of the line. Maybe this new brand will take over," he said.

It was the hope of meeting retailers like Zeke – rather than high-profile jewellery entrepreneurs – that brought Virtue, a UK brand, to JCK. "Composable jewellery is still very strong,” said Stephen Austin, the company's Marketing Manager, who was promoting Virtue’s range of interchangeable sterling silver lockets. “Retailers are getting it. Even the multiples have come along and showed interest. "

The company's line features more than 900 lockets that can be paired with a variety of disk inserts, including semi-precious stones and rose gold plates.

The concept of composable jewellery was taken a step further by Reena Ahluwalia, a Toronto-based jewellery designer, with a distinctly Indian style. Her synthetic diamond rings came complete with a QR code on the flipside, which links directly to a personalised app page. "It turns your ring into a digital talisman,” said Ms Ahluwalia.

Whoever is giving the ring can then compose a message and upload a picture to the site.  “It lets you celebrate your special moment and keep it close to your heart."

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Content provided by Hong Kong Trade Development Council