It All Plays a Part: Occupation, Household Size, Home Ownership and Ethnicity

Occupation: Makes A Big Difference

Occupation has a major impact on jewelry expenditure. However, it’s not the color of the collar – white-collar versus blue-collar occupations – that really matters. It is all about the earnings that a particular occupation pays.

 

Professionals, sales and self-employed consumers are usually white-collar workers; they are typically well-paid. Construction personnel are blue-collar workers, and they are typically also well-paid. All of these consumers – professionals, technical, sales, self-employed and construction workers – are important to the jewelry industry because they spend more on jewelry than workers in other categories. The self-employed and professionals are particularly important because they spend well above the national average for jewelry.

 

Graph 6 illustrates jewelry spending by major workforce occupations in the U.S. market.

 

Professionals Offer the Most Market Potential for Jewelers

While four occupations – self-employed, professionals, technical and construction – stand out a generating strong jewelry demand, the group of professional workers offers the most potential.

 

• Only about 25 percent of all U.S. workers are employed in management, financial and business occupations – termed the “professional” workforce. Their aggregate spending represents about 50 percent of total annual spending on jewelry.
   
• While other occupations spend heavily on jewelry, their market potential simply isn’t nearly as meaningful to jewelers.

Graph 7 illustrates the relative importance of each occupation versus jewelry demand.

 

Income of Occupation Is Key

Once again, cash is king. Consumers who work in occupations with higher-than-average incomes spend disproportionately more on jewelry. 

 

Household Size: Two-and-Four Person Households Appealing

For jewelers, a household with two people holds significant potential for buying jewelry. This household is most likely to represent the traditional husband-wife relationship, with an emotional bond that helps drive an emotional purchase – jewelry. It also helps that both spouses are likely to work full time. As a result, these two-person households have the highest per-capita income of any size household. That means those households also are likely to have the most discretionary income.

 

Multi-person households also offer fertile fields for jewelers trying to reach consumers with a high propensity for purchasing jewelry. In fact, larger households with four people have the largest aggregate jewelry spending of any American household. But those multi-person households also have relatively lower per-capita spending on jewelry of any American households.

 

Graph 8 summarizes jewelry expenditures in 2007 by household size.

 

Data from the 2007 BLS CES changed somewhat from the results in prior surveys, as graph 9 illustrates. In 2004, 2005 and 2006, five-person households were heavy jewelry spenders, a statistic that we could never adequately explain. Now, it appears that this sampling anomaly has been rectified.

 

Per-Capita Spending Tells A Different Story

While large households have high per-household jewelry expenditures, it is important to recognize the importance of per-person spending on jewelry. Analysis of 2007 data related to per-person spending on jewelry confirms the same information that prior survey data revealed: while single-person households spend the least on jewelry, they spend the most on a per-person basis. There is a perfect inverse correlation between per-person spending on jewelry by household size and the number of people in the household, as graph 10 shows. 

 

Region: Makes A Notable Difference

At the end of the day, “old money” wins. In 2007, consumers in the Northeast – the long-time home of America’s wealthiest – spent more on jewelry than consumers in other regions. However, jewelry expenditures by shoppers in the Northeast are not significantly enough higher than spending by consumers in other parts of the country to justify closing your stores in middle America, the area with the lower per-capita jewelry expenditures, and moving to the crowded Atlantic seaboard.

 

Further, there were some interesting shifts in regional spending between 2004, 2005, 2006 and 2007. In 2004, Western consumers far outspent consumers located in the South of the U.S. We were unable to decisively explain this regional difference. In 2005, jewelry expenditure patterns were more in line with our expectations: regional spending differences really aren’t very meaningful. Then, in 2006, consumers in the Western part of the U.S. stepped up their jewelry expenditures dramatically. Again, we can’t fully explain this trend. In 2007, Westerners spent an above average amount on jewelry, but they were out-spent by consumers in the Northeast.

 

Graph 11 illustrates per-household jewelry expenditures on jewelry in 2007. The regional differences – or lack of differences, depending on your point of view – are clear.

 

Over the past four years, there have been some shifts between jewelry expenditures by region, though they probably are not meaningful. In general, consumers in the Midwest and the South spend less than consumers on each coast, as graph 12 illustrates.

 

Graph 13 illustrates the relative importance of each region’s jewelry expenditures versus the total population in that region.

 

With only 19 percent of the total U.S. households, expenditures for jewelry among shoppers in the Northeast represented 26 percent of total U.S. jewelry expenditures.

 

Money Reigns

When we attempt to explain the regional spending differences for jewelry in 2007, the answer is easy: it’s all about money. Consumers’ after tax income levels (on average $60,858) are the highest in the Northeast ($67,440), followed by the West ($66,250), the Midwest ($57,514) and the South (66,250).

 

Homeowners: More Likely To Buy Jewelry

A home-owning consumer will spend double the amount on jewelry versus a consumer who is renting, based on data from the 2007 CES ($655 versus $324). This is a substantially greater difference than in prior years, and one that jewelers should use as an opportunity. When sales associates are making “small talk” with a potential customer, they might ask where the customer lives. Most towns and cities have clearly delineated areas where renters and homeowners are likely to live. Further, when filling out the credit application, the sales associate should perk up at the magic word “homeowner.” That means this customer probably has significant credit potential and should be up-sold.

 

Homeowners With A Mortgage Spend More On Jewelry

It may come as a surprise to learn that homeowners with a mortgage spend more on jewelry than those without a mortgage. While homeowners spend an average of $655, those with a mortgage spend $774 while those without a mortgage spend just $434.

 

The explanation for the discrepancy becomes clear when income levels are compared. Homeowners with a mortgage typically earn 56 percent more than those without a mortgage ($87,915 compared to $56,323). There are many retired individuals who own homes with no mortgages; they typically have low income levels.

 

Ethnicity: It’s A Lily White World

Some people would argue that it is not politically correct to profile consumers on the basis of race or ethnicity. That may be so, but the U.S. government profiles spending patterns of Americans on the basis of their ethnicity in great detail. Further, they use terms such as “Black” to describe what some people call “Afro-American” or “people of color.” As a researcher, we’re not going to get into the game of political correctness; rather, we are simply going to analyze and summarize research findings by ethnicity using our government’s terms.

 

While American households are growing more ethnically diverse, it is still a lily white world. Using the government’s three major categories of ethnicity – white, black and Asian – just over 84 percent of all U.S. households classify themselves as white. It is very important to note that consumers classify themselves – the census workers do not attempt to second-guess the box that a particular head-of-household checks. Mostly, this isn’t a problem. However, it appears that Hispanics don’t agree on their race: many believe they are white, while a significant number of them believe they are black. The government gives them the opportunity to check the box marked “Hispanic”, but they also must check a box for race, since “Hispanic” represents ethnicity rather than race. In addition, it is important to note that the Census Bureau also classifies “native Americans” (colloquially known as “Indians”) as white. Other “white” races include native Hawaiian, Pacific Islander and Alaska Native. Further, about 1.2 percent of the population reports more than one race.

 

Why does ethnicity matter? Once again, it comes back to money. Those with the gold buy jewelry. Table 5 illustrates income disparity between the three major races. In short, blacks earn about 70 percent of the average wage of an average American. They don’t have the discretionary levels of income that other races have.

 

On average, white consumers spend $582 a year on jewelry, Asian consumers $462 and black consumers $311. Based on table 5, it is clear why white consumers spend significantly more on jewelry than black consumers.

 

Interestingly, Asian consumers, who earn significantly more than the average American, apparently did not spend heavily on jewelry in 2007. In prior years, their spending was stronger, as graph 14 illustrates.

 

Which Market Matters?

When aggregate jewelry spending is analyzed, white consumers account for 90 percent of all jewelry expenditures in America ($59.1 billion) compared to $2 billion by Asian consumers and $4.5 billion by black consumers.

 

Hispanic Market Remains Small

While the U.S. Government’s Department of Commerce Census Bureau classifies the U.S. population according to several racial and ethnic categories, including white, black, American Indian, Alaskan native, Asian, Native Hawaiian, Pacific Islander and “two or more races,” it has traditionally produced the CES based on three races: white, black and Asian.

Last year for the first time, data on Hispanic (Latino) jewelry expenditures was released in a separate table; it was released again with the 2007 data. The government notes that Hispanics are not considered to be a race, but are simply an “ethnic group.” Further, the government notes that Hispanics may be any race; the choice of “race” is left up to the individual filling out the census form.

 

We’ve included data on Hispanics’ jewelry expenditures, with the caveat that this data should be viewed in a larger context. Here’s what the data tells us:

 

• Hispanic consumers don’t spend much on jewelry. Their per-household expenditures are at the same level as blacks.

• The aggregate market for jewelry among Hispanic consumers is just under $4 billion, about the same size as the total market for blacks and Asians. Thus, it is a tiny market.

• In 2006, Hispanic households represented about 11 percent of all households. Hispanics are estimated to represent about 15 percent of the total U.S. population. Hispanic households tend to be larger than average.

• If an estimate of Hispanic consumers is removed from the universe of “white and other” consumers (most Hispanics consider themselves to be “white”), the per-household jewelry spending of white consumers rises sharply to $607 per household, from a “blended” white+Hispanic+other household jewelry expenditure level of $582.
   
• Jewelers have found that the market for Hispanic jewelry is different from other markets. Hispanics tend to like gold jewelry, especially with a religious theme. Hispanic customers tend to use credit at a greater rate than the average jewelry customer. 

Graph 15 summarizes estimates of Hispanics’ spending on jewelry versus other ethnic and racial groups. 

 

Urban Shoppers: More Likely To Buy Jewelry

Urban shoppers’ jewelry expenditure is almost double that of rural consumers. Urban shoppers include consumers who live in America’s rich suburbs; they are about 91 percent of the total U.S. households. In contrast, rural consumers represent only about 9 percent of all U.S. households. And, by the definition of “rural”, those rural consumers are scattered across the country in low-density population areas. In other words, they are difficult to reach. We don’t want to write them off, but marketing efficiencies exist with urban consumers that simply are not available when targeting rural shoppers.

 

In 2007, urban consumers spent an average of $565 compared to the $304 spent by rural consumers.

 

Consumers Important in Both City Center and Suburban Locations

Historically, many residents of America’s center cities were impoverished, and had little discretionary income. However, wealthy empty-nesters are moving back into the country’s downtowns. In part, it is due in part to escape the high energy costs and long commutes from the suburbs. In part, it is due to a lifestyle change which consumers of all ages seem to be embracing.

 

Jewelers should be targeting consumers both in their city’s center as well as its suburbs. Rural consumers buy jewelry, but the effort to reach them may not yield a satisfactory return on investment.

 

Graph 16 illustrates the differences in jewelry expenditures by household location of consumers.