Although the recession may be officially over, consumer sentiment is low and jewellery purchases are not top of the list of priorities for much of the public.
According to www.antwerpfacetsonline.be, it's not just a million-dollar question, but rather a multi-billion dollar question: what is the state of the U.S. diamond jewellery market, and what level of sales is the world likely to see in the United States this holiday season? The conventional wisdom is that sales will be higher than last year, but will still be lower than the average recorded during much of the past decade.
Given that the sales season last Christmas was one of the worst ever, it clearly won't be difficult for this year to be better. But for the most part, diamantaires are expecting an unspectacular outcome given that the U.S. economy is still feeling the effects of the recession.
Recovery in the world’s largest economy is, by all accounts, likely to be a long drawn-out affair. U.S. consumers, battered by the worst financial crisis in living memory and concerned about employment, are first looking to pay off debts and concern themselves with essentials. As a report in the New York Times stated: "In this economy, many consumers would rather keep their money in their wallets than on their fingers, necks or ears. As people re-examine their budgets, jewelry is turning out to be one of the easiest places to cut back or trade down."
Although jewellery is clearly an obvious candidate for consumers to delay buying, it should be noted that the bridal jewellery market has remained stable. People are still getting engaged and married and buying, albeit many purchases have been downgraded. Retailers are reporting a strong demand for single-stone jewellery as buyers seek to reduce their outlay.
The short term still looks difficult for U.S. diamond jewellery retailers. “The United States has clearly been hit hardest in consumer spending in this economic recession,” said Stephen Lussier, executive director of the De Beers Group. “It’s still in a pretty deep recession, unemployment is rising and Americans are becoming more pessimistic about their future.”
However, Lussier argued, history shows that “as soon as the money is back, the desire returns to buy diamonds.” Recovery may take longer in the “very high-end product categories,” he said.
There are a large number of factors at work. For example, in many circles flamboyant spending is not considered socially acceptable today. How could it be, they ask, with unemployment rising and people being ejected from their homes? Commented Tom Bodenberg, chief economist at Unity Marketing: “As more and more American families feel the negative effects of recession, the idea of luxury and the luxury lifestyle is assuming a negative connotation. So while some affluents will relieve pent-up demand for luxury goods as a vehicle of lifestyle aspiration and expression as the recession ends, the media’s focus on ‘recession chic’ — personal expression that deliberately excludes luxury goods — may leave a lingering distaste for conspicuous consumption and parading luxury labels.”
But, compared to the gloom and doom mood that was all-pervasive 12 months ago, in general terms, there is today a feeling of stability in the U.S. diamond jewellery market. This can also be seen in reports that those jewellery stores, which were offering huge discounts last November and December, have largely ended the practice.
“We are seeing less discounting and markdowns and more signs of increasing consumer confidence," said Claudia D’Arpizio, a partner in Bain & Co. "Growth will be timid in 2010, but it’s showing movement in the right direction." Bain & Co.'s 'Luxury Goods Worldwide Market' study said the luxury category for jewellery, watches and other hard luxury items will be hit the hardest this year, with the firm forecasting an 18 percent decline worldwide, with sales in the United States forecast to fall 16 percent from 2008.
Bain & Co. also predicts another wave of consolidation due to a turbulent recovery and from new players who are entering the market specifically to meet fast-changing desires from the consuming public. D’Arpizio said, “The world of luxury will see dramatic shifts in the decade ahead.”
Meanwhile, the National Retail Federation said that retailers hoping U.S. consumers would open up their wallets ahead of Christmas are likely to be disappointed. It predicts that holiday retail industry sales will decline for the second consecutive year. The trade group forecasts a 1 percent fall in sales in November and December from the same period of 2008 to $437.6 billion. The main factors are consumer fears over job security and home values, the NRF reported. Sales fell 3.4 percent in November and December last year.
A decline again this year would be the second straight year of sales following a period of rising sales since 1995 when the NRF started monitoring holiday sales. Over the past 10 years, holiday sales have averaged a growth rate of 3.4 percent.
Many reports speak of U.S. retailers essentially practicing “just in time” ordering. Wholesalers say their clients are buying at lower price points, in smaller volumes and with increased frequency. Unlike in previous years, retailers are not buying goods for stock since they clearly are uncertain about the strength of demand and do not want to be left with goods that they won't be able to shift.
Another indicator of the declining power of jewellery sales in the United States comes from the international auctions arena. Where New York was once the automatic choice for the location of an auction of high-end diamonds and jewellery, it appears to have shifted to Asia, particularly Hong Kong, the gateway to the increasingly important Chinese market. Both Christie’s and its arch-rival Sotheby’s say that in the past several years, the Asian financial centre of Hong Kong has become their preferred hub for sales of not just high-end jewellery and gems, but also fine wines and works of art.
Alex Shishlo, Editor of the Rough&Polished European Bureau in Brussels
