IDEX Online Research: Jewelry Demand Outstrips Luxury Demand
June 14, 07In 2006, jewelry sales gains were 7.1 percent in the U.S. market while luxury sales were up 6.3 percent. That means jewelry took market share from other luxury goods. The graph below illustrates sales trends for luxury goods sales and jewelry sales in 2006 in the American market. Our source of “luxury goods sales” comes from the International Council of Shopping Centers which measures sales of luxury goods retailers such as Saks in shopping centers across the U.S.
Luxury brand stores which are not in shopping centers are not included in this measure. Our source for jewelry sales comes from the U.S. Department of Commerce’s Census Bureau’s Consumer Expenditure Survey.
Jewelry vs Luxury Goods Sales - 2006 |
We are quick to note, however, that luxury goods did take market share from jewelry in 2003, 2004 and 2005, the most recent years for which we have reliable, defensible data. The graph below summarizes luxury goods sales versus jewelry sales in the U.S. market for the past four years.
Luxury Sales vs Jewelry Sales |
Specialty jewelers held their ground against luxury goods in 2006. Their sales rose by 6.4 percent while luxury goods sales rose by 6.3 percent. However, like “total jewelry sales”, specialty jewelers lost market share to luxury goods in 2003 through 2005, as the graph below illustrates.
Luxury Sales vs Specialty Jewelers' Sales |
Some Jewelry Categories Lose, Some Gain Market Share from Luxury Goods
Last year was not a good year for diamond and gold jewelry. Both categories underperformed. Not only were watch and “other” jewelry sales gains much stronger than diamond and gold jewelry, but diamonds and gold lost market share to other luxury goods retailers.
The graph below summarizes sales gains of luxury goods in 2006 versus other categories of jewelry as well as retail sales. There are two categories of retail sales: “all retail sales” and “retail sales excluding autos and food.”
The first includes sales of automobiles and food. We believe that food is a mostly non-discretionary purchase, and that its sales do not reflect true underlying consumer demand and spending trends. Thus, we exclude it from our usual comparisons. Automobile demand correlates to Detroit’s latest price-based promotion, and, thus, it does not reflect underlying consumer demand and spending trends. Therefore, we also exclude it from our usual sales comparisons. Retail sales ex-auto and food represent about 70 percent of total retail sales, with the balance of 30 percent related to food and automobile sales.
We’ve also included a category called “all consumer spending.” This reflects consumer spending on goods and services; retail goods account for about 40 percent of all consumer expenditures in the U.S. while services account for about 60 percent of all consumer spending. (Are you surprised that services account for 60 percent of all consumer spending? This category includes housing, utilities, transportation, medical, recreation, legal, education, travel and other miscellaneous service-type expenditures.)
2006 Sales by Category |
The Key Question: Is Jewelry A Luxury Product?
The jewelry industry has always claimed that jewelry is a luxury product. But with an average ticket of just $350 at the mass market level, it can hardly be classified as a “luxury product.”
Luxury is in the eye of the beholder. Webster’s defines “luxury” as something that provides pleasure or comfort, but is not absolutely necessary. Arguably, jewelry fits that definition. But that definition could also include a whole host of other lower-priced goods such as consumer electronics equipment and apparel as well as services such as spa treatments and other consumer expenditures that are discretionary (some people may not view them as discretionary, but if you can live without them, they are discretionary expenditures).
Most of the items we’ve just listed are probably not “luxury” items in most peoples’ mind (except some very low income households).
Jewelry priced above a certain level – perhaps $1,000 – could reasonably be classified as a luxury product. But for those 15 percent of all American families with household incomes above $100,000, a $1,000 purchase of jewelry is probably not a luxury. For them, a Lexus or business class travel is arguably a luxury.
What about Prada? Gucci? Jimmy Cho? Are they luxury products? Or fashion accessories? Or both? Why or why not?
In today’s American society, we believe that jewelry is more of a fashion accessory than a true luxury purchase.
Even De Beers’ “A Diamond Is Forever” promotion does not position a diamond as a luxury purchase; it positions a diamond as an emotional purchase, tugging at the heart strings.
Thus, for the sake of argument, we’ll take the position that most jewelry is not a luxury purchase, but a discretionary fashion purchase. As a result, we should not measure it against the sale of other luxury goods.
Care to debate this issue? Join the discussion in the news forum.