Positive Forecast for Fine Jewelry through 2025
The U.S. gems, jewelry market likely to reach $20.2 billion this year.
The U.S. gems and jewelry market, valued at $19.7 billion in 2017, is likely to reach $20.2 billion in 2018, rising at a compound annual growth rate (CAGR) of 5.9 percent the last five years. By the end of 2025, it should reach $26 billion, increasing at a CAGR of 3.6 percent, projects the global luxury trends forecasting firm, The Futurist, in research for The Plumb Club.
Multiple reports cite 2017 holiday sales were better than expected: U.S. sales of fine jewelry and watches last November increased by 8.4 percent year over year, with jewelry store sales in December at $6.57 billion, outpacing December 2016’s $6.5 billion in sales, cites The Futurist research for The Plumb Club.
Retail sales in the first half of 2018 grew 4.8 percent year-over-year. In fact, the National Retail Federation (NRF) just upgraded its retail sales forecast for 2018. The NRF now expects sales to grow at a minimum of 4.5 percent over 2017 rather than the 3.8 to 4.4 percent range forecasted earlier this year, signaling momentum into the holiday season and fourth quarter.
The upgraded forecast considers government revisions to retail sales, personal income and consumption numbers from 2016 and 2017 that affect year-to-year comparisons. Retail sales grew year-over-year monthly since 2009 and rose year-over-year in all but three months since 2010.
The industry’s leading trade magazine, JCK, finds optimism high in the jewelry business, in its first State of the Industry Jewelry Report released at JCK Las Vegas in June. Some 88 percent of the more than 500 jewelry professionals surveyed—mostly retail jewelers, and some wholesalers, manufacturers and designers—said they are optimistic about the current state and near future of the jewelry business.
In fact, 57 percent are feeling good about the economy, with 46 percent considering it better now than a year ago, and over 40 percent forecasting better conditions a year from now, finds JCK’s report.
The data is consistent with broad sentiment for the economy. The most recent analysis by Deloitte finds the current economic situation in the United States surprisingly positive. The London-based accounting and professional services firm cites economic growth to be modest but sufficient to bring full employment. In fact, U.S. unemployment reached a 17-year low at 4 percent in June, according to the U.S. Bureau of Labor Statistics. Inflation and borrowing costs remain low, and asset prices have risen steadily with limited volatility.
While fundamentals remain positive, Deloitte’s economists also cite potential risks in the market, notably consumer spending that’s growing at a much faster rate than that of household income, due to less saving and more borrowing. This growth, Deloitte notes, cannot be sustained indefinitely, and unless growth in wages accelerates, spending on luxury and leisure goods will decline.
Some analysts warn of the risk of a potential bubble in asset prices and predict that if the Federal Reserve increases interest rates sufficiently, asset prices will fall. The result would be a drop in the wealth of consumers and increased stress in credit markets.
Deloitte also cites that significant protectionist measures introduced by the administration to save jobs will likely result in an increase in consumer prices and a fall in consumer purchasing power. The firm notes that protectionism aimed at China could provoke severe retaliation, hurt trade and damage economic growth on both sides of the Pacific.
Matthew Shay, NRF president and CEO, acknowledged in a recent statement that tremendous uncertainty remains going into the fourth quarter as to what extent the current trade tariffs will impact consumer spending. “Just the mere talk of tariffs negatively impacts consumer and business confidence leading to a decline in spending. It’s time to replace tariffs and talk of trade wars with diplomacy and policies that strengthen recent gains, not kill them.”
But tariffs aren’t keeping jewelers up at night; online competition is. Nearly half of respondents (47 percent) to JCK’s State of the Industry survey conveyed that as their biggest concern. Some 46 percent of jewelers surveyed sell product on their store’s websites, with nearly 60 percent reporting e-commerce to be less than 25 percent of their business intake, although 55 percent say e-commerce has increased their business. More than 80 percent consider social media marketing to be a top business practice, and 90 percent plan to increase their efforts.
A recent Jewelers of America (JA) jewelry market study conducted by Provoke Insights, which included a look at the jewelers’ perspective of their business, finds that 40 percent of local jewelers view e-commerce websites as their No. 1 competitive threat, with only 34 percent offering any e-commerce capability on their own websites.
“Jewelry stores don’t necessarily need to sell online to compete online,” says Amanda Gizzi, director of Public Relations & Special Events for Jewelers at JA. “But they need a strong digital presence. That means local jewelers must be positioned effectively online to be top of mind in customers’ pre-purchase research that often starts there.”
To compete today, Gizzi advocates jewelers give their physical stores regular facelifts, carefully consider their jewelry mix, and add digital customer service components like interactive websites, social media platforms, and apps. Rather than pitting the physical and digital channels against each other, jewelers can capture greater market share by giving consumers the best of both worlds using new technologies. “It’s critical for jewelers to make investments in technology that engages consumers on multiple levels to enrich their shopping experience.”
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