“Business is still declining” confesses the owner of a small jewellery shop in Italy. “Gold is too expensive. I will make you an example: if you wanted to buy those wedding rings, you would have to pay 20% more than last year and almost 50% more than three years ago”. But while marrying couples would not save money on the symbol of their eternal love, customers are becoming cautious when purchasing jewels for other occasions.
Gold prices have been growing for years, from around US$14 to over US$55 per gramme in the last decade. As the global economy slowed down and then fell into the global crisis, investors turned their attention to gold as a safe asset and are likely to cling on it until stability returns. While more and more gold was stockpiled in security boxes around the World, jewellers found its market price rising to anti-economic levels.
Investors might be comfortable in spending large sums for gold, but jewellery customers are not. Necklaces and earrings are not purchased as an investment for the future; they are special gifts bought for the loved ones or for special occasions. The only effect of this dramatic inflationary process is to drive customers away.
To keep selling their products in a depressed market, jewellers had no other choice than bearing the greatest share of gold costs, trying to keep prices as stable as possible. As a result, the markup on production costs plummeted to 3-5% – a level considered unsustainable for small-scale production. Not surprisingly this situation is taking its toll in Italy.
Located in the beautiful Piazza del Duomo in Florence, Torrini jewellery is one of the oldest in the World. Its story began in 1369, when Jacopus Turini registered as a goldsmith to the Republic of Florence. Despite its long tradition of beautiful designs and quality, Torrini almost faced default when the price of gold destroyed its business. The size of its retail store had to be reduced to one tenth of its original size.
Torrini is not an isolated case. Many traditional jewellers in Italy are either closing or sensibly reducing their production volume. But some of them, conscious that gold jewellery alone is not a viable business anymore, have decided to experiment with alternative materials.
Some goldsmiths have turned their attention to silver as an attempt to widen their offer. Despite being sensibly less valuable than gold, silver is fairly credited by customers. Those companies who in the past months have dared launching silver jewellery collections do not regret it: During last springʼs edition of Vicenza Oro, Italian jeweller Nardelli presented the sales figures for his “Sunsation 925” collection, which mixed sun-shaped silver jewels with small white diamonds. In just one year, the product had reached a volume of 10.000 pieces, accounting for 15% of the companyʼs total income. Nardelli is not a one-off instance: another important Italian jeweller, Damiani, also launched his silver and diamond collection “Damianissima.925” in 2011, and many others are now covering this section of the market.
Silver has not been immune from inflation; on the contrary, its price has risen at a rate substantially higher than gold and platinum (see comparative chart). But even though silver costs in 2012 six times more than ten years ago, its impact on the total price of a jewel is still minimal. A talkative jeweller offered to make me a practical example: “See those simple studded gold and diamond earrings? Only in gold, they probably cost the maker around 50€. Had they been made out of silver, the cost of material would be maybe 2?”. To my objection that silver is not gold, he replied with a smile: “Silver is not gold, but diamond earrings are diamond earrings”. Apparently for many customers this is what really counts.
If you believe that silver and diamonds are an odd (or even degrading) combination, you should take a look at the new trends in jewellery design. According to Italian jewel forecasting centre TrendVision, during the next years we will observe a proliferation of alternative materials. Designers are experimenting to create extravagant combinations between diamonds and less noble materials. Bronze, steel or even wood and glass are now used in combination with precious gemstones to create unexpected solutions.
Believing that such an adventurism in the choice materials is only due to high gold prices would be a mistake. On the contrary, there is a precise marketing strategy behind it: Western countries are increasingly attracted by the “green economy” principles. The green economy proposes a return to artisanal and eco-sustainable materials used in a stylish and fashionable manner, while rejecting ostensive display of luxury.
In this time of great changes creativity and design, rather than materials, seem to become a crucial indicator of quality.
Matteo Butera, Rough&Polished
