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Here comes the future

Jan Brassem

Here comes the future

Jan Brassem

Here comes the future

Jan Brassem

Jan Brassem is a senior partner at MainBrace Global Partners, a global jewelry advisory and M&A firm. You can e-mail him at

It came as no surprise that the ‘08 recession caused consumer confidence to plummet and significantly curbed their appetite for jewelry. The industry lost much of its luster during those years and, due to slipping sales, hundreds of stores closed by consolidation or liquidation.

Things, it goes without saying, have changed. Linda Dauriz, an expert on retail trends for McKinsey & Co., one of the world’s foremost retail advisory firms, writes that, “the industry will be dynamic and fast-growing.”

“Consequential changes are underway,” she goes on, “in both consumer behaviors, as well as in the industry itself… The industry appears to have recovered and seems poised for a glittering future. We anticipate that jewelry sales should grow at a healthy 5 to 6 percent through 2020.”

However, jewelry executives should not pop the cork just yet. Industry trends and developments are occurring quickly. Competitors who are better financed and staffed with an agile management teams will leave those that do not adapt quickly in the dust.

What are the signs the sagacious jewelry executive should be on the look out for?

We have selected three advances that shadow a closely related industry, namely the apparel business. Over the past 30 years the apparel industry has grown exponentially and it is now evident that the jewelry industry will follow the same growth trajectory but at a much faster pace.

The three expansion opportunities that accelerated the apparel industry and should lead the jewelry industry are: a) internationalization and consolidation, b) growth of branded products and c) global product sourcing. It should be mentioned, of course, that there are more than just three-- cultural segmentation, new product offerings, (e.g., wearable technology) and innovative distribution channels are others--but the reader can see the potential.

Before we detail these positive trends, it is vitally important that the jewelry executive develop a strategic plan that will guide his organization towards the action(s) to take--and what direction to proceed--once his firm’s opportunities are identified. While there are many sources he could use to design a strategy, the Harvard Business School Publishing Corporation prints a variety of guides, utilizing a consulting firm specializing in the complexities of the jewelry industry is an even better resource for small to mid-sized jewelry firms.


Internationalization and consolidation

The U.S. jewelry industry is still primarily local, with the 10 biggest firms capturing a mere 12 percent of the worldwide market. Only two, Cartier and Tiffany & Co., ranked in the top 100 global brands. Some local U.S. brands will become global due to the industry’s acquisition strategy. Industry observers project that the 10 largest U.S. jewelry companies will double their domestic market share by 2020, primarily by acquiring local chains and independents.

The average acquisition (M&A) value in apparel ($10 billion) is more than 12 times greater than in jewelry ($800 million). But the average deal value in jewelry M&A has been rising by a compound annual growth rate of 9 percent between 1997 and 2012 (the latest numbers available), compared to 5 percent for apparel.

Recent cross-border deals making headlines have included Signet Jewelers Ltd.’s 2012 acquisition of U.S.-based retailer Ultra Diamonds, and the Swiss Swatch Group’s acquisition of Harry Winston in January 2013. The recent Hong Kong-based jewelry chain Chow Tai Fook’s acquisition of Boston-based Hearts On Fire is an indication that the global acquisition trend is heating up. More acquisition activity from other Chinese, European and Indian firms will soon make the trend even hotter.


Growth of branded jewelry

Brand name watches already account for nearly 60 percent of overall watch sales, while branded jewelry currently accounts for an average 20 percent overall in the U.S. market today, doubling its share since 2003. Branded jewelry will claim a higher market share of sales by 2020, but views differ on how quickly this will occur. Many view brands accounting for 30 to 40 percent of market share by 2020.

In the September 2012 issue of Harvard Business Review, an article by A.G. Lafley et al, identified three types of consumers who drive the demand for branded jewelry:


Most of the growth in the past for U.S. branded jewelry came with the expansion of the established firms such as Cartier and Tiffany & Co. and additional stores and boutiques within better retailers. New brands also began to emerge such as David Yurman, Pandora and Swatch.

Each jewelry company should seek out differentiation through unique and innovative brands and designs, including the impending consumer demand for tech-oriented products. Although acquiring high-visibility brands will be a struggle for smaller companies that do not have the financial ability or marketing muscle of the larger firms, they do have options. One option would be to seek newly emerging designers, or seek distribution ventures with smaller, global “elite” manufacturers.


Supply chain process speeding up

Apparel firms have dramatically shortened time to market: new products can go from concept in Asia to shelf in a month. Stores receive a continuous stream of fresh merchandise, as many as 12 themes each year.

“Fast fashion” started in the affordable clothing segment in the mid-1990s, led by the likes of H&M. It has recently spread to higher-end brands: Coach and Diesel, to name a few, have introduced “flash programs” and a greater number of collections per year. “Fine jewelry has so far been immune to the effects of fast fashion,” says our Lyle Rose, a MainBrace jewelry retail chain store specialist.

In the innovative “fast world,” flexible companies with adaptive business systems reap top-heavy rewards. Innovative jewelry executives could emulate fast-fashion apparel companies: reacting to trends quickly, reducing their product development cycle. Doing so will require close coordination with partners along the entire sourcing chain, from designers to manufacturers to showcase. The evolution of the apparel industry provides an interesting example of how the jewelry industry could develop. To what degree the two industries will emulate each other remains to be seen, but it seems likely that the jewelry market of 2020 will be highly dynamic, truly globalized and intensely competitive.

And, as McKinsey’s Dauriz put it, “Those jewelry companies that can best anticipate and capitalize on industry-changing trends, particularly the three described above, will shine brighter than the rest.”