Jewelry Sales Pep up the Luxury Market

As we head into the all-important Holiday Season, management consultant firm Bain & Co., in collaboration with the Italian goods manufacturers' industry foundation, Fondazione Altagamma, has released a report into the state of the global luxury goods market in 2015.

While the 14^th edition of the Luxury Goods Worldwide Market Monitor contained mixed news, one of the bright points was the performance of jewelry. The report made this point explicitly, “Jewels [are] ever more perceived as a safe investment in an uncertain economic and financial environment.” Bain considers the jewelry segment to be 2015’s best-performing category, rising 6 percent to €16 billion ($17.6 billion).

To prove how strong this sector is, it is worthwhile comparing it to the performance of watches, particularly in the Asian markets, which has been hit by a combination of a strong Swiss Franc and a problem of overstocking. This has had the effect that Asian retailers are now rebalancing product offerings at new store openings more towards jewelry than to watches.

Still with Asia, in mainland China, jewelry is performing well and although retailers are opening smaller stores, the focus is shifting toward the high-end.  

Other conclusions from the report show that luxury branded jewelry continued to outperform the overall market, demand for high-ticket items remains strong, the global demand for diamonds is still growing – albeit at a more modest pace – and  in uncertain economic times such as these, precious gems remain a preferred investment due to the value of the raw materials.

Overall, the luxury industry, which Bain defines as comprising 10 separate segments including personal goods, cars, hotels and wines and spirits, surpassed €1 trillion ($1.1 trillion) in retail sales value in 2015. That’s a lot of money. The value of personal luxury goods sales topped €250 billion ($280 billion), yet the growth forecast for this year is only 1 percent, down from Bain’s May prediction of a 2-4 percent increase. The report says that some of the market inflation is down to “hectic currencies,” i.e. global exchange rate fluctuations.

For example, some of the largest vertically integrated companies have been affected by China’s slowing economy, government anti-corruption drive and this summer’s stock market crash while US growth has been hampered by a strong dollar, which has inhibited purchases by locals and tourists alike, who have taken advantage of a weaker euro and yen to flock to Europe and Japan to make their luxury purchases.

The report also pointed out that the majority of those taking advantage of European tax-free shopping were Chinese and Americans; Russians were conspicuous by their absence, despite an increase in the average ticket price for their luxury goods.

While the luxury goods market is still western dominated, it is increasingly driven by Chinese consumers. Let’s hope they keep the jewelry tills ringing this fall and winter.