Industry Analysis: Retail Jewelry

Industry Analysis

General

The retail jewelry industry is highly fragmented in regard to business size with around 56,000 stores in the United States. The largest ten U.S. retail jewelry businesses comprise only about a quarter of total market share with the leader, Signet Group PLC, taking 9.7%. Chain stores are common but independent retailers throughout the country have longstanding local customer bases.

While disposable income is key when determining demand for jewelry, price is not the main factor determining sales. Small jewelry stores can and do compete with larger chains when they apply effective merchandising and marketing techniques. Why? The answer lies in the jewelry purchasing experience. Jewelry is generally thought of as a luxury item, is expensive, and is difficult for most consumers to evaluate; hence, many individuals seek a reputable local merchant or a retailer with a prominent name in the industry, for example Zales.

Consumer purchases are mostly made in the last quarter of the year and also spike around February 14 and in early May due to Valentine’s Day and Mother’s Day. Bridal jewelry is the only segment of the retail jewelry industry considered necessary, and is much less influenced by economic conditions. Items in all other segments are viewed as luxury goods.

Spending on luxury goods has been weak since the economy began its decline in early 2008. As unemployment increased, disposable income shrank and consumer confidence plunged. To make matters worse, the price of gold rose steadily, forcing operators in the industry to cut costs, typically by lowering wages and salaries. Another worry is that online and discount jewelry stores will continue to compete for market share. However, IBISWorld forecasts a solid recovery for the Jewelry Stores industry over the next five years. Four external variables are expected to increase and thereby provide the basis for the upbeat forecast by IBISWorld: Households Earning Over...