LIKE A LOT of people in our industry these days, I’ve been thinking a ton about the changes that technology and consumer behavior are causing for our business. Not only are consumers better educated on jewelry than ever before, not only do they have access online to most jewelry they might like to purchase, but they are also changing in terms of what jewelry means to them and why they buy it, which in turn is changing what they buy.
As I was researching all of these phenomena, I came across a fascinating report by McKinsey & Company, a worldwide consulting and research firm, that projects what they think the jewelry industry will look like in 2020. (And it’s weird to think that’s only five years from now, isn’t it?). This report was written last February, but many of their findings have already begun to play out in just a year’s time. I want to share some of the high points with you, and I hope they will inspire you to think about making changes to the way you do business.
First, the good news: The report forecasts growth of about 5-6% in global sales each year, stating that consumers’ appetite for jewelry is increasing after the recession. But then comes the bad news: More and more of that money is expected to go to online retailers, national and even international players, and big brands. The three McKinsey directors who wrote the report see the jewelry industry following the path of the apparel industry, in which international brands now lead the way and independent retailers are leaving the business as big companies with deep pockets acquire both manufacturer and retail concerns, allowing them to interface more directly with consumers and maintain their brand identities both upstream and down.
Branded jewelry accounts for 20% of the overall jewelry market today, but according to the report and its sources, that number should swell to 30-40% by 2020. The people buying branded jewelry include “new money” consumers who want to show off their newly acquired wealth, emerging-market consumers for whom established brands inspire trust and the sense of an upgraded lifestyle, and young consumers who turn to brands as a means of self-expression. Future growth in branded jewelry is likely to come from non-jewelry players in adjacent categories, like Dior, Hermes, and Louis Vuitton, rather than the expansion of established jewelry brands. Why? These brands already hold customer loyalty and are thought of as aspirational names. Unknown jewelry artisans stand to suffer, unless they figure out how to distribute through better-known (and better capitalized) ventures.
Lastly and most interesting to me, the report goes into “hybrid consumption,” which is the phenomenon in which consumers are wearing both high-end and low-end fashion brands at the same time. That is, clients who are buying fine designer jewelry are likely also wearing “designer looks” in fashion jewelry. The report sites Helen Hunt’s 2013 Academy Awards attire as an example: an H&M dress paired with $700,000 worth of Martin Katz jewelry. McKinsey & Co. advises fine jewelers to introduce new product lines at affordable prices to entice younger or less affluent consumers, giving them an entry point into brands. OR, the company also says that retailers can cater exclusively to the high-end and communicate that message through every channel. If yo’re not selling at the high-end exclusively and you haven’t begun to incorporate some fashion offerings into your inventory, it might be time to consider it.
As fast-fashion has come to dominate the apparel world, McKinsey & Co. expect that to happen in the jewelry world as well. Their conclusion: “In the fast-fashion world, flexible companies with adaptive business systems reap disproportionate awards. Innovative jewelry players… will react to trends quickly and reduce their product-development cycle times.”
How flexible and adaptive is your business? Do you have a plan to capitalize on technology, rather than suffer its effects? And how will you sell to customers whose buying behaviors are changing?