While income levels are the key indicator of a consumer’s likelihood to purchase jewelry, there are other factors that also have a strong correlation with jewelry purchasers. In general, though, when these factors are examined closely, income is usually the key underlying factor which explains the high correlation of those demographic factors.

 

The following are highlights from the government’s recently published 2008 Consumer Expenditure Survey. Along with the publication of the 2008 data, information from prior years were revised and adjusted; hence, the numbers shown in this report may differ slightly from prior years’ summaries of data published by IDEX Online Research.

 

Age: Makes Very Little Difference

For years, analysts theorized that Baby Boomers – those consumers with an insatiable appetite for things – would fuel unprecedented demand for jewelry in the current decade. Unfortunately, Baby Boomers have disappointed both the analysts and jewelers.

 

The simple over-riding fact is this: a consumer’s age is not a reliable predictor of jewelry demand.

 

All ages buy jewelry. In any given year, there is significant variation in jewelry expenditures by age group; this is due to sampling aberrations. When jewelry purchases by age are averaged for the past five years, it is clear that consumers of all ages buy jewelry.

 

However, as recently as twenty years ago, consumers age 50 and over were the heaviest buyers of jewelry. However, because young consumers, especially in the 25-to-34 age group, earn more than ever – and have high levels of discretionary income – they are also heavy jewelry purchasers. Middle-aged consumers – in the range of 35-to-44 years old – also buy more jewelry than their predecessors. In part, this is because they waited later to have children, and they were able to accumulate some significant wealth before marrying and starting a family. When consumers feel wealthy, they spend more heavily on luxury goods such as jewelry.  

 

The graph below summarizes 2008 jewelry spending data by age group.  

Source: CES

The following graph compares 2008 jewelry expenditures by age with the average jewelry expenditures for those ages over the past five years. It is clear that the averages smooth out the yearly aberrations which seem to occur in this important demographic measure.

 

Source: CES

 

Why is “age” not a good indicator of a shopper’s ability to buy jewelry? The answer is simple: all ages have discretionary income, often more than meets the eye.

 

The graph below summarizes after-tax personal income levels for major age groups, based on 2007 and 2008 data. Data averages for a five-year period tend to confirm these same trends: almost all ages have significant levels of after-tax income.

 

Here’s what is most interesting about this graph: despite media reports to the contrary, personal income levels not only did not dip substantially in 2008 versus 2007. By age group, they remained relatively stable.

 

Source: CES

 

What’s the bottom line analysis of the jewelry expenditure data related to the age of jewelry shoppers? The answer is simple (and exactly what we said in prior years): age is not a reliable indicator of a consumer’s willingness to buy jewelry. Income remains the best predictor of jewelry purchasing propensity.

 

Household Size: Multiple Person Households Appealing

For jewelers, a household with two people or more people holds significant potential for buying jewelry. These households are most likely to represent the traditional family with a husband and wife, and may include children. There is likely a familial relationship with an emotional bond that helps drive an emotional purchase – jewelry.

 

In a two-person (or larger household), it is likely that both spouses work full time. As the size of the household increases, the total household income rises sharply. As the number of people in the household increases and they begin to share relatively fixed expenses (mortgage payment, utilities, food), the amount of discretionary income per member of the household rises sharply. This kind of expense leverage is similar to business leverage: growth helps spread fixed expenses over a broader base, potentially increasing profitability.

 

Jewelry expenditures by household size over the past five years follow the same trends as shown on the graph below. The graph summarizes jewelry expenditures in 2008 by household size.

 

Source: CES

 

For the first time, we have more detailed data about jewelry expenditures per household. While broad data shows that a two-person household has the highest jewelry expenditures per household, when we drill down into the data, we find that households with children (any number) age six through seventeen actually have the highest per-household spending for jewelry. For a variety of reasons, these households have dramatically higher income levels than other households.

 

The graph below summarizes more detailed data about per-household jewelry expenditures by composition of the household.

 

Source: CES

 

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 2008 Consumer Expenditure Survey. 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. The graph below illustrates this difference.

 

Source: CES

 

The explanation of the trends illustrated in the graph (above) becomes clear when income levels are compared. Homeowners with a mortgage typically earn 59 percent more than homeowners without a mortgage.

 

Urban & Suburban Shoppers: More Likely To Buy Jewelry

Urban and suburban shoppers’ jewelry expenditures are almost double the jewelry expenditures of rural consumers. Urban and suburban 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.

 

The graph below summarizes spending differences for jewelry among urban, suburban and rural consumers in America in 2008. These trends are little changed from average shopping patterns over the past five years.

 

Source: CES

 

Historically, many residents of America’s center cities were impoverished, with little discretionary income. However, wealthy empty-nesters are moving back into the city’s downtown area. 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 many consumers 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.

 

Region: Makes Some Difference

At the end of the day, it appears that “old money” wins. In 2008, consumers in the Northeast – the long-time home of America’s wealthiest – spent more on jewelry than consumers in other regions of the country. However, it is important to note that 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 the South, 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. 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. In 2007, Westerners spent above the national average on jewelry, but for the first time in recent history they were out-spent by consumers in the Northeast, a trend that held throughout 2008.  

 

The graph below illustrates per-household jewelry expenditures on jewelry in 2008. The regional differences – or lack of differences, depending on your point of view – are clear.

 

Source: CES

 

When we attempt to explain the regional spending differences for jewelry in 2008, the answer is easy: it’s all about money. Consumers’ after tax income levels are the highest in the Northeast, followed by the West, the Midwest and lastly, the South.

 

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 those who 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, especially for jewelers. Using the government’s three major categories of ethnicity – White, Black, and Asian – just over 83 percent of all U.S. households classify themselves as White. It is very important to note that consumers classify themselves – the census counters 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, perhaps reflecting their mixed-race heritage.  

 

The following graph summarizes jewelry expenditures by ethnicity. Based on the table above, it is clear why White consumers spend significantly more on jewelry than Black consumers.

 

Source: CES

 

Why does ethnicity matter? Once again, it comes back to “money.” Those higher incomes buy jewelry. White consumers earn about 50 percent more than Black consumers. The same disparity holds for Hispanic households. However, Asian households have the highest level of personal income: they earn 15 percent more than the typical White household and they earn almost 20 percent more than the U.S. average household (all ethnicities).

 

The largest problem facing jewelers relates to the size of the Asian market: it is tiny. The graph below summarizes the percentage of population that each ethnicity represents and the relative size of the market, based on total jewelry expenditures. Clearly, the consumer group comprised of White shoppers represents the vast majority of total U.S. market.

 

Source: CES

 

Education: Better-Educated Consumers Buy More Jewelry

It sounds like a double-speak to say “better-educated consumers buy more jewelry” because this statement is correct in two ways:

 

• Consumers who have a better understanding of jewelry – the 4 Cs of diamonds, for example – are more likely to purchase jewelry than those who have very little product knowledge. Put simply: these consumers are better-educated.

• Consumers with a higher level of education – college graduates, for example – spend more on jewelry than shoppers who finished only high school.

Education plays an important role in consumer affluence: a college degree yields significantly higher incomes.

 

• College graduates, who represent about 29 percent of all American households, earn about $94,000 per year, after taxes. They spend over $800 per year on jewelry.

• High school graduates – including those who never finished high school to those with some college but who never graduated – represent about 71 percent of all American households. They earn an average of almost $49,000 per year, or about half of the earnings of a college graduate. Their average jewelry expenditures are just over $360 per household annually, or less than half the amount that college graduates spend on jewelry.

The following graph summarizes jewelry expenditures by education level for U.S. consumers during 2008.

 

Source: CES

 

Occupation: Makes a Big Difference

A consumer’s occupation has a major impact on their expenditures on jewelry. 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 typically spend more on jewelry than workers in other categories.

 

As noted earlier, however, there were some significant shifts in jewelry expenditures by occupation during 2008 as the recession took its toll on various segments of the American labor force. Self-employed workers – usually the most free-spenders on jewelry – cut back substantially in 2008. Consumers who classify themselves as “technical” workers also cut back, as did “laborers.”

 

On the other hand, retirees and construction workers spent proportionally more on jewelry than in prior years.

 

The graph below illustrates jewelry spending by major workforce occupations in the U.S. market during 2008.

 

Source: CES

 

The differences in jewelry expenditures can be explained by income levels of each occupation. In general, higher income levels mean greater jewelry spending, as the graph below illustrates.

 

Source: CES

 

Who Spends on Jewelry: Income Levels Are Key

While averages can be deceiving when trying to describe the total universe of American households, they can be much more meaningful when analysts drill down into the data for a particular product category, such as jewelry.

 

With sophisticated mathematical analysis, researchers can determine which demographic factors are key in determining the likelihood that a consumer is going to purchase jewelry. Some demographic factors are extremely important, while other demographic factors have very little impact on a consumer’s propensity to purchase jewelry.

 

When we examine the demographic factors that are most likely to predict which consumers will purchase jewelry, it becomes clear that there is one over-riding factor that greatly increases their propensity to buy jewelry: income levels.

 

• As income levels rise, the likelihood of jewelry purchases rises much faster. For example, households with annual incomes of $150,000 – six times the level of the base household with just $25,000 annual income – will typically spend about eleven times as much annually on jewelry as that base $25,000 household. (For the mathematically inclined, here’s what happens: as incomes rise linearly, jewelry spending rises exponentially.)

In addition to income levels which are a very strong predictor of potential jewelry expenditures, there are two other demographic factors which also are “markers” of potential high spending on jewelry: education and occupation.

 

• Better educated consumers are much more likely to spend heavily on jewelry. Better educated consumers are also much more likely to have significantly greater earnings that less-well educated consumers.

• White collar professionals are much more likely to spend heavily on jewelry. White collar professional jobs are among the highest paying jobs in the market.

Therefore, it could be argued – strongly, we note – that the single key factor driving the likelihood of consumers to spend on jewelry is their income level. The other two factors – education levels and occupation – simply help identify those consumers with higher-than-average income levels.