What is this storm?
The U.S. economy, press about the U.S. economy, DeBeers moved to change their marketing investments in the U.S., their direction to their sight holders to concentrate on more growth markets, i.e., not the U.S., consumer research telling us that they have too many places to spend their money, the price of metals, the under 35 market telling us that they are bored with shopping at typical fine jewelry stores and the under 25 market not interested in wearing watches because they use their cell phones to tell time 24/7. They also tell us that because they're on their computers so much, it's not comfortable to wear a watch while typing. Global issues such as fair trade, colored stone and diamond treatments also play a role in what our future looks like. Plus the exchange rate of the U.S. dollar with our trading partners is affecting everyone. How we sort this out and more importantly, what does the future hold for us, is where we need to focus.
All of these issues are contributing to the temporary downturn of the fine jewelry market in U.S. but as we have seen historically our market always rebounds and comes back stronger than ever before.
Why would this situation be any different? It would not. What is the forecast for the U.S. market?
There are two different ways to find the answer to this question. First, if you give too much weight to the media reports you hear, you will be missing out on the accurate story. The media's job is to sell advertising in their newspapers, TV channels, and Internet programming. Sensationalism sells advertising and nothing else. Because of this reality, the media often goes out of its way to sensationalize even the most unimportant piece of information, for example, last month I read in the Wall Street Journal a quote that the U.S. unemployment rate is the worst in two years. Well, that would be 2005 when we were at the top of our economic growth. You truly have to take what you read in the media with a grain of salt.
The second way to answer the question over the short and long term is to ask fine jewelry retailers themselves. Currently, retailers seem to be falling into three different camps. First, being very conservative, not going out of their way to launch any new marketing plans or to take advantage of new opportunities. They are going to only focus on tried and true methods to sell products. The second camp are going out of their way to seek new opportunities in hopes of drawing in their current clientele and to attract new consumers. These retailers are seeking support from the marketplace through innovative suppliers and support associations and brands such as the Tanzanite Foundation, diamond brands, Moissanite, etc. The third camp is made up of retailers who are seeking major capital investment into their companies and / or seeking to sell their companies. These retailers have probably been building up their need for an influx of cash over the last few years and realize that with a downturn in the market they would be better off to partner with a company who can offer that supports in the way of cash, products or expertise that they currently lack. The last two categories of retailers have opened the door for many Indian companies to develop very close ties directly with U.S. retailers. This will benefit both the retailer and the Indian manufacturer over the short and long term.
After reviewing the economic data from reliable sources, it seems apparent that the U.S. market will certainly suffer from a downturn in the Holiday 2008 selling season.
How long this downturn will last, is the big question. And possibly the bigger question is, What can we do as an industry to placate this downturn and minimize its effect on all of our businesses?
In January of this year I gave a talk in Mumbai about the importance of taking on the situation full force by helping the U.S. retailers drive consumers to their stores. I believe this needs to be an international project based on the idea that we can entice more consumers to buy jewelry whether it's in a fine jewelry store, department store, mass merchandiser, shopping channel and / or Internet retail.
To fund this idea, in the case of India, there could be a trade-off between the major U.S. retailers and the Indian jewelry manufacturers who sell them. The retailer puts these manufacturers under a lot of pressure. If the retailers can back-off of some of this pressure, which includes long memo programs, long payment terms, large product returns, etc., we believe that the Indian manufacturers could receive a boost to their bottom line which would increase profits. If this were to materialize they could contribute to a U.S. fine jewelry marketing ‘super-fund.’ This money could be used to help drive consumers to retail stores. Indian product would directly reap the benefit of larger sales in the medium and lower level product categories which is the bulk of sales in the U.S. market.
Of course this idea should not be the burden of just Indian manufacturers but should be shared with all of our major gem, jewelry and watch trading partners. U.S. domestic manufacturers should also be asked to contribute equally. This is just one idea to help all sides of the equation reap some benefit from the need to make drastic changes in our industry to survive this downturn.
We have seen in the U.S. that during downturns in the market, many independent fine jewelry retailers consolidate or go out of business altogether. Jewelry store closures did slow in 2007. There were fewer jewelry stores going out of business than there had been in the previous decade. Many of these 10,000 or so independent retailers who went out of business were affected by major chains coming into their marketplace, lack of a succession plan and/or lack of adequate financing. It currently doesn't appear that many of the major chain stores will be expanding their numbers of outlets in the near future. Therefore, this should not be a factor on the number of retailers closing their doors permanently.
With this current downturn in the market, we may see additional stores closing their doors. Certainly, major retailers such as Zale are closing stores in weak areas. But other retailers such as Helzberg Diamonds might be taking advantage of the downturn to purchase store locations where they see growth potential for their brand.
If I had a crystal ball, I believe I would see the global industry working together to bring change to the way we all do business as a matter of necessity. The key factors will include; the implementation of a well defined marketing strategy (not just based on generic diamond jewelry advertising from DeBeers since that will be very limited in the future); retailers reinventing their selling environments to move current and younger consumers to buy jewelry; a push to innovate the uses of metals and new product styling to impress consumers who have been viewing the same type of product for almost a decade.
How can we hold off the ‘perfect storm’ from drowning all of us in a sea of change and uncertainty?
‘Teamwork’ can be our salvation. If so, Holiday 2008 and 2009 can look very positive indeed. But more importantly the next decade can see a renewed interest by consumers to spend their disposable dollars on fine jewelry and watches in America.
The U.S. economy, press about the U.S. economy, DeBeers moved to change their marketing investments in the U.S., their direction to their sight holders to concentrate on more growth markets, i.e., not the U.S., consumer research telling us that they have too many places to spend their money, the price of metals, the under 35 market telling us that they are bored with shopping at typical fine jewelry stores and the under 25 market not interested in wearing watches because they use their cell phones to tell time 24/7. They also tell us that because they're on their computers so much, it's not comfortable to wear a watch while typing. Global issues such as fair trade, colored stone and diamond treatments also play a role in what our future looks like. Plus the exchange rate of the U.S. dollar with our trading partners is affecting everyone. How we sort this out and more importantly, what does the future hold for us, is where we need to focus.
All of these issues are contributing to the temporary downturn of the fine jewelry market in U.S. but as we have seen historically our market always rebounds and comes back stronger than ever before.
Why would this situation be any different? It would not. What is the forecast for the U.S. market?
There are two different ways to find the answer to this question. First, if you give too much weight to the media reports you hear, you will be missing out on the accurate story. The media's job is to sell advertising in their newspapers, TV channels, and Internet programming. Sensationalism sells advertising and nothing else. Because of this reality, the media often goes out of its way to sensationalize even the most unimportant piece of information, for example, last month I read in the Wall Street Journal a quote that the U.S. unemployment rate is the worst in two years. Well, that would be 2005 when we were at the top of our economic growth. You truly have to take what you read in the media with a grain of salt.
The second way to answer the question over the short and long term is to ask fine jewelry retailers themselves. Currently, retailers seem to be falling into three different camps. First, being very conservative, not going out of their way to launch any new marketing plans or to take advantage of new opportunities. They are going to only focus on tried and true methods to sell products. The second camp are going out of their way to seek new opportunities in hopes of drawing in their current clientele and to attract new consumers. These retailers are seeking support from the marketplace through innovative suppliers and support associations and brands such as the Tanzanite Foundation, diamond brands, Moissanite, etc. The third camp is made up of retailers who are seeking major capital investment into their companies and / or seeking to sell their companies. These retailers have probably been building up their need for an influx of cash over the last few years and realize that with a downturn in the market they would be better off to partner with a company who can offer that supports in the way of cash, products or expertise that they currently lack. The last two categories of retailers have opened the door for many Indian companies to develop very close ties directly with U.S. retailers. This will benefit both the retailer and the Indian manufacturer over the short and long term.
After reviewing the economic data from reliable sources, it seems apparent that the U.S. market will certainly suffer from a downturn in the Holiday 2008 selling season.
How long this downturn will last, is the big question. And possibly the bigger question is, What can we do as an industry to placate this downturn and minimize its effect on all of our businesses?
In January of this year I gave a talk in Mumbai about the importance of taking on the situation full force by helping the U.S. retailers drive consumers to their stores. I believe this needs to be an international project based on the idea that we can entice more consumers to buy jewelry whether it's in a fine jewelry store, department store, mass merchandiser, shopping channel and / or Internet retail.
To fund this idea, in the case of India, there could be a trade-off between the major U.S. retailers and the Indian jewelry manufacturers who sell them. The retailer puts these manufacturers under a lot of pressure. If the retailers can back-off of some of this pressure, which includes long memo programs, long payment terms, large product returns, etc., we believe that the Indian manufacturers could receive a boost to their bottom line which would increase profits. If this were to materialize they could contribute to a U.S. fine jewelry marketing ‘super-fund.’ This money could be used to help drive consumers to retail stores. Indian product would directly reap the benefit of larger sales in the medium and lower level product categories which is the bulk of sales in the U.S. market.
Of course this idea should not be the burden of just Indian manufacturers but should be shared with all of our major gem, jewelry and watch trading partners. U.S. domestic manufacturers should also be asked to contribute equally. This is just one idea to help all sides of the equation reap some benefit from the need to make drastic changes in our industry to survive this downturn.
We have seen in the U.S. that during downturns in the market, many independent fine jewelry retailers consolidate or go out of business altogether. Jewelry store closures did slow in 2007. There were fewer jewelry stores going out of business than there had been in the previous decade. Many of these 10,000 or so independent retailers who went out of business were affected by major chains coming into their marketplace, lack of a succession plan and/or lack of adequate financing. It currently doesn't appear that many of the major chain stores will be expanding their numbers of outlets in the near future. Therefore, this should not be a factor on the number of retailers closing their doors permanently.
With this current downturn in the market, we may see additional stores closing their doors. Certainly, major retailers such as Zale are closing stores in weak areas. But other retailers such as Helzberg Diamonds might be taking advantage of the downturn to purchase store locations where they see growth potential for their brand.
If I had a crystal ball, I believe I would see the global industry working together to bring change to the way we all do business as a matter of necessity. The key factors will include; the implementation of a well defined marketing strategy (not just based on generic diamond jewelry advertising from DeBeers since that will be very limited in the future); retailers reinventing their selling environments to move current and younger consumers to buy jewelry; a push to innovate the uses of metals and new product styling to impress consumers who have been viewing the same type of product for almost a decade.
How can we hold off the ‘perfect storm’ from drowning all of us in a sea of change and uncertainty?
‘Teamwork’ can be our salvation. If so, Holiday 2008 and 2009 can look very positive indeed. But more importantly the next decade can see a renewed interest by consumers to spend their disposable dollars on fine jewelry and watches in America.
But perhaps they are building into a ‘perfect storm.’ America is such a crucial force in the global fine jewelry and watch industries that our hiccup or full-blown cold, can topple companies, disrupt thousands of working peoples lives, affect countries and even bring the most enthusiastic person to the brink of silence.
Forecast U.S. Markets
Taking The Trade To New Dimensions