On the festive Christmas evening of December 24 buyers in one of the main shopping areas of San Diego, CA, who put off their gift purchases to the last minute, make a hasty promenade visiting boutiques. One of the stores selling Apple gadgets has no room to swing a cat – it is overcrowded with customers eager to see new versions of phones and tablets. Next door there is a jewelry boutique of a famous brand. Apart from the bored guard, it is completely empty. This picture as it was seen by the correspondent of Rough&Polished, is a good illustration of the holyday shopping season in the United States in the end of 2012, which, unfortunately, was not heartening to most jewelers.
MasterCard Advisors, the analytical division of Master Card, released a SpendingPulse™ report in early January, summing up the results of the festive season by key categories of goods, including jewelry. According to the report, sales went up by mere 0.7% from October 30 to December 24 compared to one year ago, whereas sales in December, the main shopping month, were 2.5% below November sales.
According to the pre-holyday forecast issued by the National Retail Federation (NRF) and IDEX, retail sales in the U.S. were to grow by 4%. But the eventual results of this season were the worst since 2008, when the nation was going through a severe economic crisis.
According to IDEX, a small increase in sales was all due to inflation, while unit sales were expected to be flat at best.
Preliminary data from ShopperTrak, keeping watch over retail foot traffic, prove that retail sales and store traffic went up 2.5% in November and December versus the same period of 2011. Total retail sales reached $ 248.8 billion in the holiday season. The U.S. Department of Commerce will release official figures in February.
Recall that in its initial forecast ShopperTrak anticipated a growth of 3.3% in holiday sales. Bill Martin, the founder of ShopperTrak, told the National Jeweler that his company had decided to lower the forecast, because sales did not meet expectations for the holiday season. “I wouldn’t call this a robust retail sales number. I understand the department stores and everyone saying,‘We are disappointed. It’s not what we expected,’” he commented.
Online retail sales were also lower than expected. According to the official forecast of comScore, a leading Web analyst, they were to grow by 17% last year against 2011 and reach $ 43.4 billion. However, in reality e-commerce sales lagged behind the forecast by more than $ 1 billion having slowed their growth by 1%. Total online sales gained $ 42.3 billion and increased by 14%, while in 2011 the increase was 15%.
After the holidays, the stock price of Amazon, a major online retailer, fell by 4% knocking off almost $ 10 per share. This is an indicator pointing to distress in the state of retail market as a whole, according to the Associated Press.
Jewelry standard-bearers Tiffany and Zale Corporation reported not too successful holiday sales. For Tiffany, November and December meant an opportunity to improve business after a disastrous third quarter, when its revenue fell 30%. However, the brand’s sales in its flagship store in New York were down 2%, while its sales across the United States increased, but not too much - by 2%.
Zale Corporation’s sales rose 2.3% in November and December while in 2011 comparables sales growth was 5.9%. In this case we can speak of a 2.5-percent growth slowdown.
As I learned from an employee of the jewelry department at Macy's in Pasadena, CA, sales were sluggish in the penultimate weekend before Christmas due to a small number of customers and their weak interest towards jewelry.
It seems that Signet Jewelers, a major jewelry retailer, had the best season driving its U.S. sales upwards by 4.7%. Mike Barnes, the company’s CEO, was probably the only one to state: “We are pleased with our Holiday Season performance in both sales and margins.” However, Signet Jewelers’ growth rate slowed down twice compared with the same period in 2011, when its sales increased by 9.2%.
In the opinion of many jewelers, whom I polled, consumers were once again cutting back their spending and "just did not spend as much as before." The cautious buying behavior during the past holiday season was the result of a big impact produced by the threat of ‘fiscal cliff’ in case the U.S. government could have failed to come to an agreement on fiscal policies against the background of a series of laws automatically coming into effect and introducing higher taxes and lower government spending.
According to Associated Press, consumer spending accounts for roughly 70 percent of the U.S. economy, so it is very dependent on consumer behavior. If customers stop buying, this provokes a very dangerous situation fraught with falling corporate incomes followed by a deteriorated stock market.
The effect of a weak holiday season, a significant slowdown in sales compared to 2011 and the uncertain mood of American consumers can have serious consequences for the incoming year. These aspects will haunt the entire supply chain, from jewelry retail stores left with unsold inventories and questioning "What happened to the men who used to buy jewelry for holidays," to jewelry manufacturers.
Retail will not be able to place new orders with suppliers until they sell available goods. Wholesale demand may decrease and bring about a weaker business environment for manufacturers and diamantaires working for the American market. At this point, the United States remains the largest jewelry and diamond market in the world.
Olga Patseva, Editor in Chief of the American Bureau, Rough&Polished
