Research Points to Need for Sustainability and Innovation in Jewelry Sector
~ By Meghan Connolly Haupt
The jewelry sector is a $76 billion industry in the United States alone. Historically luxury goods have fared better in tough economic times than the economy as a whole. However, in the current economy, the old rules no longer apply.
Like the luxury goods market as a whole, the jewelry sector too has been hit hard by the recession. Many well-established retailers, such as Shane Co. and Finlay Enterprises, have been forced to file for bankruptcy protection. Shane Co., famous for its radio commercials in the Western U.S., owes more than $26 million to its top 20 creditors. Finlay, which operates 182 locations and is no newcomer to the business, having started in 1887, saw a first quarter loss of nearly $30 million despite sales growth of 12 percent.
The jewelry sector has existed with little change or innovation for more than a century. Even the décor of jewelry stores has hardly evolved with the times. Most still look like stale law offices, which are staffed by condescending people completely out of touch with today’s fashion. Indeed the sector prides itself on its long history of functioning in exactly the same way.
Two trends in consumer behavior that could possibly relieve much of the industry’s stress are being largely ignored by traditional jewelry retailers. The first trend points to better online options and the second to greater accountability and responsibility.
One of the primary contributors to the cash flow issues felt by many jewelry retailers is their inventory costs. Stores often hold millions of dollars of inventory, which forces them into a state of sales desperation. Much of that inventory is tied up in diamonds, which are not selling as well or at the price they once were.
Online shopping offers the opportunity for greater product selection while maintaining very low overhead costs. Additionally, online offers an unlimited consumer base. In the past two years, the percentage of the world’s population that has made a purchase over the Internet has increased by approximately 40%. Online U.S. sales in 2006 amounted to $146.4 billion and of that more than 40% was for clothing and accessories.
The younger generation has demonstrated a comfort in shopping online. The internet provides a private shopping experience, especially for larger ticket items, that consumers increasingly appreciate. While brick and mortar retailers still generate the highest percentage of jewelry sales, the internet is quickly gaining market share.
Luxury and Social Responsibility
It is no secret that the diamond industry has a long history of devastating social and environmental consequences. Despite the industry’s culture of secrecy, the Internet has provided consumers access to information creating a growing trend away from diamonds and toward greater accountability and responsibility.
Today’s consumers recognize jewelry is meant to represent ones emotions and commitments. As such, consumers are increasingly seeking out brands and products, including jewelry, that allow them to share positive stories reflecting their own values.
The Luxury Institute says that the number of wealthy consumers preferring socially responsible brands increased by 12 percent between 2006 and 2007. François-Henri Pinault, chairman and CEO of PPR, home to luxury brands such as Gucci, Yves Saint Laurent, Bottega Veneta, and Alexander McQueen said recently that, “The luxury business does not escape the logic that human beings and the planet should be protected together. On the contrary, it should play an important part in achieving that goal, as a leader.”
The consulting firm BBMG’s latest consumer report released in 2009 found that nearly seven in ten Americans agree that “even in tough economic times, it is important to purchase products with social and environmental benefits.” Half of those surveyed said they are still willing to pay more for sustainable products.
Jewelry permeates almost every culture the world over. It is a repository of culture and art. The sector certainly isn’t in any danger of extinction, but it is those retailers who can adapt to trends in consciousness and buying behavior who are more likely to thrive as the economy improves.
Meghan Connolly Haupt, a frequent contributor to fairjewelry.org, is the founder and principal of C5 sustainable fine jewelry, offering custom design services and ready-to-wear pieces that you can feel good about. C5 jewelry is responsibly made in the United States from recycled precious metals and ethically sourced gems (both fair-trade and lab-created).
