Less Conspicuous Spending Could Still Boost Sales

At the June Financial Times Business of Luxury Summit in Monaco, Johann Rupert, CEO of Richemont warned the luxury sector that due to rising social inequality, the “haves” would be far more reticent about showing off their wealth.

Rupert was not the first billionaire to sound the alarm about the consequences of a growing wealth gap. He followed Paul Tudor Jones (founder of the Tudor Investment Corporation), Warren Buffett (chairman and CEO of Berkshire Hathaway), Jeff Greene (real-estate entrepreneur) and Stan Druckenmiller (chairman and president of Duquesne Capital) – each of whom has argued that a top-heavy economy, in which a small elite reaps most of the income and wealth gains, is inherently unstable. Rupert was, however, the first CEO of a luxury goods group to put his head above the parapet.

A recent report in The Daily Telegraph suggested that there is a growing trend for women (in the UK) in particular to purchase mid-price jewelry, what can also be termed  affordable luxury.

Such pieces are priced in such a way that they do no occupy the bottom rung of the jewelry chain – high fashion jewelry made more for the moment. Nor are the pieces the wildly expensive offerings that are available along London’s Bond Street.

The report states that pieces are usually made from sterling silver, gold-plated (vermeil) or 9- or 14-karat gold. Using such materials,, rather than 18-or 24-karat gold, means the price point is significantly lower. In addition, using small gemstones stones, including labradorite, quartz, topaz or pavé-set diamonds gives  starting price point might be around £100 ($150) for a pair of stud earrings. This is about the amount that a gift-giver may want to spend, but women who are treating themselves are often prepared to pay around $1,500 or more.

Asked why this price range was becoming so popular, Bec Clarke, founder of British luxury jewelry brand Astley Clarke said, “[Partly because]…women are now buying jewelry for themselves, and the price point – as it’s a self-purchase and it’s a regular thing – has to be quite different from a £5,000 ($7,500) gift from a husband.” Within this more modest price range of $150-$1,500 there is a sense that purchasers are getting value for money, with something long-lasting that will not easily tarnish, but at the same time will not break the bank.

People’s desire for good-looking, long-lasting and more affordable jewelry, has also acted as a catalyst for designers to come up with creative and innovative solutions for this new demand. And in a buying climate where consumers are ever more aware (and able to investigate) the workshop conditions in which jewelry is made, we are not talking about sweatshop labor either. Peter A Andersen, president of Pandora Western Europe said, “We have worked hard on building a vertically integrated chain, in which we have full visibility over not just our work environments and production processes, but our materials selection, too.”

Despite the pressure from more affordable luxury, those retailers offering more exclusive luxury must be careful. Reports in the media suggest that diamond jewelry may be discounted by as much as 70 percent on Amazon.com, Black Friday. Macy’s also announced that consumers could get up to a 30-percent reduction on the price of diamond engagement rings, during the Thanksgiving holiday.

If a customer is in the market for affordable luxury then the consumer understands and accepts the price point at which they are searching. Discounting diamond jewelry by so much could lead the consumer to ask him or herself, why they would ever want to pay the retailer’s price, if it is 70-percent more expensive than it could be bought for.

Retailers should take note. Women (and men) are still in the market for well-made elegant and competitively priced jewelry. This could be a huge opportunity to stock some affordable luxury items, allow consumers to become aware of your products and services, and who knows, perhaps they will upgrade to ‘real’ luxury in the near future.