The U.S. jewelry industry continues to consolidate. Statistics for 2008 released by the Jewelers Board of Trade (JBT) show that the number of retail jewelers and manufacturers fell by about 2 percent, while the number of jewelry wholesalers was off by about one-half of one percent in 2008.

 

The JBT census shows that a net of 412 retail jewelry companies closed in 2008 (195 openings and 607 closings), a net 22 wholesalers went out of business (39 openings and 61 closings), and a net of 70 manufacturers closed (25 openings and 95 closings).

 

These trends – a decline in the number of businesses in the U.S. jewelry industry – reflect a long-term consolidation of the industry. Two decades ago in 1987, there were about 31,100 jewelry retail companies in the U.S.; at the end of 2008, this number had dwindled to about 22,600 merchants. Similar long-term trends, though less dramatic, also characterize the number of jewelry wholesalers and jewelry manufacturers who have shuttered their doors in the U.S. market.

 

While the Jewelers Board of Trade census reports the number of jewelry companies in the business (a chain like Zale counts as one in the JBT census), the number of jewelry doors which closed in 2008 is estimated to be around 1,500, though some believe it was closer to 2,000, since both Whitehall and Friedman’s, chains with over 1,000 stores, closed during the year. The U.S. government business census department which counts the number of doors in the jewelry industry runs nearly two years behind; thus, the latest government data is from 2006, and it is not meaningful for 2008’s analysis.

 

Fewer Jewelry Retailers

The Jewelers Board of Trade census numbers go back just over twenty years to 1987. In every year since then – except for three years in the early 1990s – the number of retail jewelry companies in the U.S. market has declined.

 

The graph below illustrates the number of jewelry companies in business in the U.S. since 1987. Due to a reclassification by the Jewelers Board of Trade, census numbers for 2007 and 2008 are on a slightly different base than prior years. Overall, there was a reduction of just under 400 retailers at the end of 2007 due to this reclassification. Hence, we have shown “07R” revised figures for 2007 on the graph. However, the trends are unchanged: there is an on-going reduction in the number of U.S. jewelers.

 

Source: Jewelers Board of Trade

 

The number of specialty jewelry companies opening and closing each year for the past decade are shown on the graph below.

 

Source: Jewelers Board of Trade

 

Financial Losses Mount

The Jewelers Board of Trade maintains a listing of jewelry company’s credit standings, including the number of jewelers who had their credit rating raised or lowered during the year, the number of claims suppliers made against the jewelers, and the average amount of those supplier claims.

 

The number of jewelers who had their credit ratings reduced in 2008 – 8,387 – exceeded the number of companies that had their credit ratings increased – 7,059. However, 2008 was a far more active year for credit ratings changes than 2007: 7,059 jewelers had their ratings increased in 2008 versus 5,000 in 2007. Likewise, 8,387 jewelers had their credit rating cut in 2008 versus only 5,669 in 2007. However, the ratio between credit score increases and decreases remained fairly stable in both years.

 

In 2008, the average claim for collection against a jewelry company was $7,770, up 23 percent from the prior year’s $6,333. As we would expect, the average size of the claim against a jeweler has continued to rise, as the graph below illustrates.

 

Source: Jewelers Board of Trade

 

In 2008, the number of claims against jewelers rose by only about 1 percent from the prior year to about 3,600.

 

Jeweler Bankruptcies: Fewer Each Year

As the jewelry industry has consolidated, the number of jewelry bankruptcies has declined, despite some volatility in the middle of the current decade, as the graph below illustrates.

 

Source: Jewelers Board of Trade

 

As a percentage of total jewelry companies in operation in any given year, the number of bankruptcies has held more or less steady at about 0.3 percent of total jewelry companies in operation (it jumped to 0.6 percent in 2005, but has settled back to its long term trend since then).

 

The graph below illustrates the jewelry industry bankruptcy ratio.

 

Source: Jewelers Board of Trade

 

Wholesalers Census Hold Fairly Steady

While most forecasters, including IDEX Online Research, suggest that the number of wholesalers will decline, this really hasn’t been the trend for the past decade. IDEX Online Research believes that wholesalers who add little value will disappear. As evidence, Zale has cut its supplier base by two-thirds (this includes wholesalers and producers). However, apparently wholesalers offer enough value added service to independent jewelers that they can justify their existence.

 

The graph below illustrates the trend in the number of wholesalers in the U.S. market. This data is from the Jewelers Board of Trade. At the end of 2007, JBT restated the census of wholesalers due to a reclassification. Thus, the census from 1996 through 2007 should be viewed as a unit, while the trend from 2007R and 2008 should be viewed as a unit. During 2008, the U.S. lost a net of 22 jewelry wholesalers. This was the result of 39 openings and 61 closings.

 

Source: Jewelers Board of Trade

 

Clearly, with the number of jewelers declining, the ratio of wholesalers to retailers is climbing. IDEX Online Research does not believe this trend will continue.

 

Jewelry Manufacturers Declining Modestly

Along with retailers, the number of U.S.-based jewelry manufacturers is projected to decline. There are many reasons that the number of upstream suppliers in the U.S. will likely diminish:

 

• More producers are moving overseas where labor costs and operating conditions are more favorable.

• Small producers can’t compete efficiently against growing large-scale suppliers.

• Mergers and acquisitions have increased, reducing the total number of suppliers.

• The surviving retailers have cut back on the total number of vendors with whom they will do business. This has put some suppliers out of business.

• The upstream pipeline is generally fragmented. No single supplier, nor no small group of suppliers, has pricing power. Thus, price is the major competitive differential. The suppliers who cannot product goods efficiently enough to compete on price are being driven out of business.

The number of U.S. jewelry manufacturers has declined, according to data from the Jewelers Board of Trade, as the graph below illustrates. At the end of 2007, JBT restated the census of manufacturers due to a reclassification. Thus, the census from 1996 through 2007 should be viewed as a unit, while the trend from 2007R and 2008 should be viewed as a unit. During 2008, the U.S. lost a net of 70 jewelry manufacturers. This was the result of 25 openings and 95 closings.

 

Source: Jewelers Board of Trade

 

Business Discontinuances Summary

The Jewelers Board of Trade also maintains a separate database of information about jewelers who disappear from the JBT census numbers. They call this new summary, introduced in beta form in April 2008, the “Business Discontinuances Summary.”

 

The table below summarizes the JBT Business Discontinuances report for the full year 2008. There is no comparable data for prior periods.

Source: Jewelers Board of Trade

 

Summary of Base Data

The following table summarizes the base census data supplied by the Jewelers Board of Trade.

Source: Jewelers Board of Trade