By accepting you will be accessing a service provided by a third-party external to https://www.ehudlaniado.com/home/
The diamond industry has been suffering for a good number of years now, and we have discussed the declines, pains, and challenges many times in the past. In those articles, we looked deeply into the midstream of the diamond pipeline, specifically at diamond manufacturers and traders. Sadly, they are not acting in disconnect from others in the pipeline, and the pain of manufacturers is felt in other places as well.
Just as there is no manufacturing sector without a mining sector, there is no business for either without a retail sector. In between, there are also jewelry manufacturers. These two, retailers and jewelry makers also bare the impact of declining consumer demand, shrinking availability of financing, growing expectations to meet the highest ethical standards, as well as the need to change with the times. To change, companies need to reinvent themselves and their products, evolve to keep pace with the changes in the market, and develop their workforce to execute their plans. Never easy.
Sadly, an examination of the retail landscape shows that specialty jewelers are finding it difficult to meet the changing retail landscape and the evolving expectations of consumers. According to the latest figures, the number of specialty jewelry retailers declined in 2018. In 2018, 893 retail jewelers in North America (852 in the US and 41 in Canada) ceased operating, according to the Jewelers Board of Trade (JBT) . Some of these retailers closed, others were acquired or merged. Some of them filed for bankruptcy. This is a small 0.8% increase from the 886 retailers that ceased operation in 2017, but part of a long-lasting trend of shrinking numbers.
The number of closures is staggering if you look at the long-term trend. During a five-year period, between 2013 and 2018, about 918 retailers closed on average every year. Only about 200 opened every year. The number of retailers dropped by nearly 13% during the five-year period, and in 2018 fell for the first time below 20,000, settling at 19,906 specialty jewelry retailers.
Further, the figures show that unless a company is a consumer-facing operation, the US is becoming even less attractive. The number of wholesalers that closed between 2013-2018 declined 14%, and the number of manufacturers fell even more: 17.6%. That is, the further upstream the company, the more likely that they will close in the US. The total number of companies in the industry that operate in North America fell by 13.4% during the period. This is testament to the difficult business environment in which these companies operate.
The decline in number of jewelers, while total jewelry sales increased in 2018 means that more jewelry is sold by multi-item stores such as department stores, clothing stores, online retailers, outlets, and discount clubs. If you are asking yourself why does it matter where jewelry is sold, as long as sales are rising, the answer is simple. Jewelry is an unusual item, and nothing like, say a home electrical appliance. Specialty jewelers are needed to promote the entire category. This is especially true in the context of the most important category – bridal. There is nothing romantic about buying a special item such as an engagement ring at Costco, squeezed between a huge bag of rice and a 50-pack of toilet paper.
This, of course, raises a question about jewelers’ difficulties in serving as the spearhead in selling jewelry.
Signet, the largest US retailer, reported that same store sales declined 1%. Signet’s brands, Kay, Jared, Zale, and a collection of regional retailers, offer mid-level priced jewelry. Their customer base is middle income folks, and they are based in malls. Both the US middle-class and malls are suffering from a decline. The first in income, the other in traffic (and consequently in income as well).
Tiffany is a very different kind of retailer. They sell high-end jewelry, catering to higher-income clientele. Tiffany, however, did not fare much better, recently reporting that their same store sales were flat.
According to a Morgan Stanley research report, demand during the holiday season declined 5-8% in the Asian markets. External factors such as tense US-China trade relations, weaker RMB, and falling property and stock markets contributed to the decline, but it would be wrong to say those were the sole reasons. Just as in the US, Asian consumers are not exposed to generic marketing, and the fiscal results are testimony of that.
For jewelry manufacturers and wholesalers, the past year was not without its difficulties. When retail sinks, so do they. The closure of manufacturing facilities, the downsizing, and the bankruptcies are all part of the bigger picture. And that bigger picture is that our offerings are not as exciting for consumers as they used to be. As long as that is the case, further declines will be the norm.
The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a Professional qualified adviser.
Diamond industrialist Ehud Arye Laniado is a man passionate about diamonds. From his early 20s in Africa and later in Belgium honing his expertise in forecasting the value of polished diamonds by examining rough diamonds by hand, till today four decades later, as chairman of his international diamond businesses spanning mining, exploration, rough and polished diamond valuation, trading, manufacturing, retail and consultancy services, Laniado has mastered both the miniscule details of evaluating and pricing individual rough diamonds and the entire structure of the diamond industry. Today, his global operations are at the forefront of the industry, recognised in diamond capitals from Mumbai to Tel Aviv and Hong Kong to New York.