Specialty Jewelry - The Long Decline
October 22, 20
Few jewelers have escaped unscathed from the coronavirus pandemic. When times are hard, as they unquestionably are now, the very rich can still afford their Argyle pinks and the very poor will still spend a few bucks on cheap and cheerful costume jewelry. But the sector that suffers most is the squeezed middle - or the US specialty stores that sell high-end watches and rings, necklaces, bracelets and earrings made of precious gems and metals. Not so many years ago, back in 1987, there were just over 30,000 specialty jewelry stores. Today there are just 18,353, according to the latest figures from the JBT (Jewelers Board of Trade).
There's been a long, slow decline, as the specialty retailers lose out to retail consolidation, and online disrupts bricks and mortar norms, but the pandemic means more stores are closing and fewer new ones are opening. Let's look at some of the figures - mostly the JBT Vital Statistics and Trend Data for the second quarter of 2020. In the last 12 months 723 stores have stopped trading - that's an average of 14 a week. In the year to date 58 new retailers have opened in the US, a reduction of 44 per cent on the previous year.
Dig a little deeper and the data reveals that the number of specialty jewelers who have closed their stores in the US market is up by nearly 57 per cent in the first half of 2020 versus the first half of 2019 - suggesting coronavirus has had a significant impact.
Historically the rate of decline in the specialty sector over the last 33 years has averaged 1.5 per cent. Over the last year, to June 2020, it's more than doubled to 3.8 per cent.
Looking more broadly at the industry, the number of US jewelry wholesalers has fallen by 4.0 per cent in the same period, compared with an average annual decline since 2000 of 1.1 per cent. The number of manufacturers dropped by 4.7 per cent, compared with an average annual decline since 2000 of 2.6 per cent.
The whole of the US supply chain has been contracting gradually over the last couple of decades but that trend has been speeding up in recent months, to the point where it now eclipses that of the Great Recession of 2007-10.
Is there a silver lining to this very grey cloud? Well, the number of collection claims recorded by the JBT for all US jewelers is substantially down - by 56 per cent year-on-year - but having said that the average size of the claim is up 17 per cent to $9,754.
Long-term stats suggest that despite a decline in the number of stores, overall revenue has increased. Total sales rose from $12.9bn in 1987 to $32.2bn in 2019, an average increase of about 3.0 percent annually, which outstrips inflation. But they mask the impact of a sudden and unpredictable global pandemic.
Those stores that have survived have seen revenue increase by 4.6 per cent annually. The average specialty jeweler makes sales of almost $1.8m a year, helping them absorb their relatively fixed overhead costs more efficiently, and grow their profits. As a rule of thumb, a US specialty jeweler needs to generate $1.5m to $2.0m in sales to be solidly profitable.
Watches and jewelry sales have been increasing steadily in recent months (June 3.9 per cent; July 7.5 per cent; August 9.3 per cent) after an unprecedented crash of more than 50 per cent in April according to figures released by the US Department of Trade. But it hasn't provided any data specifically about specialty jewelers since January, so it's hard to say how they're faring.
What about the bigger picture, (hopefully) beyond the global pandemic? Jewelry stores have lagged behind most other retail sectors in terms of retail consolidation. Zale was acquired by Signet, Whitehall is gone and Friedman's is gone. But more will go, as jewelers undergo the kind of consolidation first seen in other sectors half a century ago. The mom and pop stores are dying out and the majors are getting bigger. Prediction for the future - more of the same, but more so. Whatever's happened so far will carry on, but faster.
Have a fabulous weekend.