AT THE RISK OF offending those people who are still finding their way out of the recent doldrums, our industry data appear to be showing a continued improvement in trade across the industry. Our average store’s monthly performance for June was more than $9000 ahead of the equivalent month last year and up 11 percent on a month-to-month comparison. This has had the positive impact of lifting the year-to-date rolling percentage increase by almost 1 percent on an annualized basis in the last month alone, as the graph below shows. Given the average store is still down 10 percent on total sales and gross profit we won’t break out the champagne, but if this rate of growth continues then we can expect to be back to normal trading conditions ( a la early 2008) within the next 12 months.
Most larger stores continued their May trading patterns into June and although smaller stores appeared to find trading conditions a little tougher than the preceding month there were good indications of growth in the diamond market. Average sales continue to stay lower but there has been an improvement in quantities sold.
One area that seems to have noticed a serious decline since the financial crisis and continues to do so is colored stones. This area appears unpopular at the moment with little signs of bouncing back.
As the chart shows, the percentage of sales coming from this product has dropped from 13 percent in July 2008 to under 8 percent for June 2010.
So where has the sales mix changed to compensate for this? With sales on the increase then somewhere the difference is being made up. Diamonds, although improving, have not returned to contributing the percentage of sales that they once did and with the price of gold rising there is a limited market for this product also. We’ve seen a slight increase in watches but there is only one area that has been responsible for the turnaround in sales:
Silver. Hardly a surprise, I’m sure!
Silver now accounts for close to 17 percent of the average stores sales, up from under 7 percent only two years ago.
Let’s compare those figures more closely:
In the space of two years we have seen a fundamental shift in business. Diamonds, although still significant, have dropped by close to 10 percent (47 percent to 43 percent) of market share in a declining market. Gold has faired even worse with a decline of nearly one-third (14 percent to 9.5 percent) and the colored market has dropped by more than 40 percent in terms of market share (13 percent down to 7.5 percent). As mentioned, this is a declining market so the real dollar drop for these categories has been even greater. With most stores still down by 10 percent in sales and gross profit from where they were in mid-2008 the real dollars lost from these declines is even greater.
So what has caused it? Has it been driven by fashion or the price-conscious buying of customers who simply don’t have the money anymore? Well, probably a little of both. The bead market takes responsibility for much of the pre-occupation with silver, but economic factors have certainly played their part. Would the bead market have been so successful without the global financial crisis? We can’t be sure. To compare the US market to Australia, which has suffered very little from the recession, there has been an even greater fascination with bead product there, so we can be sure that the economy is not the only driver of this trend. Gold has definitely suffered from an increase in price. Colored stones have suffered the dual impact of being a higher priced item in a slow economy, as well as from the fickle nature of fashion. Diamonds are very much a price issue, but this has also been about supply and demand, with many retailers reducing the value of their selection and, ultimately, contributing to a decline in average sale, and therefore total revenue.
So what next? Will the trend continue? Will silver continue to increase its share of the jewelry market? Will we see a preference by consumers for disposable fashion items as opposed to higher-end quality jewelry? Or is this a passing trend driven by fashion and economic circumstance that will end as quickly as it started? (And if so is there another trend on the horizon?)
If only I knew — we’d all love to see into that crystal ball. But if nothing else, it has highlighted the need to stay in touch with the industry, to keep comparing with peers as to what’s selling and what’s not, and to take advantage of the plethora of data that is now available to us all, information that can keep you in the game and ready for what might eventuate.
This story is from the September 2010 edition of INSTORE.