IDEX Online Research: Specialty Jewelers Challenges - Industry Consolidation
June 05, 07
In the fifth and final analysis of this weekly series, IDEX Online Research analyst Ken Gassman examines the challenges industry consolidation poses to specialty jewelers in the U.S.
For the first half of the current decade, U.S. specialty jewelers have generally enjoyed good business conditions. The economy has been strong, gross margins have stabilized, and growth has come relatively easily.
As we move into the second half of the decade, the “big picture” fundamentals remain solid for the jewelry industry. Driven primarily by favorable demographics as well as a number of other positive factors, demand for luxury goods should be quite strong.
In 2006
| U.S. Specialty Jewelers |
|
Net Specialty Jeweler Openings & Closings by Year |
| Market Share of Top Eight U.S. Jewelers |
While the aggregate market share of the top eight jewelers remains well below the market share of the top competitors of other retail categories, it has been growing over the past decade. In short, the large competitors are becoming larger, pushing out the small independent jewelers.
| Net Change in Number of U.S. Jewelry Stores vs GDP Cycle |
After a sharp decline in the number of U.S. jewelers early in the decade, consolidation slowed in 2003 and 2004, primarily due to strong business conditions. As the graph above illustrates, there is a relatively high correlation between economic growth and the number of jewelers who exit the business.
| Industry Employment Trends |
Longer term, attracting good employees will become much more difficult.