Jewelry Category

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JEWELRY-RETAIL
AN INDUSTRY STUDY

JEWELRY-RETAIL

JEWELRY-RETAIL

Industry Overview The U.S. retail jewelry industry is comprised of five main segments: bridal jewelry (30%), fashion jewelry (22%), watches (18%), precious stones (15%) and precious metals (15%). Bridal jewelry, the only “necessary” component of jewelry retail, is less influenced by economic conditions than fashion jewelry, which is considered a luxury good. The category of watches generally includes clocks as well as most jewelry repairs. Precious metals include gold, silver, platinum and palladium. Precious stones come in over 130 varieties, around 50 of which are commonly sold by retail jewelers. The retail jewelry industry is highly fragmented, with the top ten jewelry chains comprising less than 25 percent of the market. No retailer claims more than 6 percent market share. Chains are prevalent in the industry, though independent retailers are firmly rooted throughout. Annual jewelry store sales run about $27 billion; wholesalers and manufacturers account for an additional $27 billion in sales. There are nearly 50,000 stores engaged in jewelry retail, and the industry employs approximately 200,000 individuals. Wal-Mart is the largest retailer in the country. Next is Zale, the biggest specialty jeweler with over 2,000 stores and kiosks. U.S. retailers account for 15 percent of worldwide sales in the industry. Competitive Landscape The demand for jewelry is largely determined by the disposable income of consumers. The increasing amount of affluent individuals, working women, double-income households and fashion-conscious men has kept jewelry sales strong through 2005. When raw material prices fall, jewelry becomes more affordable, and consumer demand rises. Renewed confidence in the economy has also played a significant role. Sales costs are both high and fixed, so profitability depends upon volume of sales. Gross margins, at 50 percent, are unusually high. Mass merchants have won market share by controlling costs and cutting prices. A 10 percent luxury tax levied on sales exceeding $10,000 has raised concern among retailers, and environmental regulations have imparted extra costs to manufacturers. These costs are passed on to wholesalers and retailers, and affect profitability as well. Over the past decade, online jewelry sales have risen steadily. This development has forced retail merchants to adapt and many have moved some component of their operations online. Increasing numbers of manufacturers and wholesalers are also conducting business online. Because jewelry is seldom branded, product differentiation is a key point of competition among retailers. Good designers are valued. Jewelry sales are highest during the Christmas season and during the weeks proceeding Valentine’s Day. Mother’s Day sees a spike in sales as well.

JEWELRY-RETAIL

Products, Operations & Technology Jewelry is expensive and difficult for consumers to evaluate. It is seldom branded and varies widely in design and quality. Purchases require professional expertise. Because of this, consumers tend to buy jewelry from merchants they perceive to be trustworthy. Large retailers such as Wal-Mart and Tiffany benefit from this industry peculiarity; local jewelers with community roots and good reputations benefit as well. Retailers generally purchase finished jewelry from manufacturers and wholesalers, though some retailers create pieces from unfinished or unmounted materials. In smaller retail stores, jewelers may be involved in all aspects of the work. Retailers may hold proprietary agreements with designers, who sell their designs exclusively through the company. Some retailers hold agreements with manufacturers to sell merchandise on consignment. Marketing products and training sales staff are also important aspects of retail jewelry. Company buyers must be attuned to fashion trends, as well as technically savvy. Repair services are not standard, though many...
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