Jewelers who have been targeting the bridal market have not only been well-rewarded with exceptional growth, but they have also benefited from the sale of wedding rings, which carry the highest average retail price of any of the major gold jewelry categories.

The graph below summarizes the average ticket for gold jewelry by item, based on recently released data from the World Gold Council (WGC).

 

The average retail price of gold jewelry neckwear in 2005 was $111.70 Source:  World Gold Council

 

 

Bridal Jewelry Prices Stable

There is even better news for jewelers who target the bridal market: gold wedding band have been stable since 1993, when the WGC began keeping statistics in the current format. Unfortunately, most other categories of gold jewelry have experienced some retail price erosion. Only charms and “all other” gold jewelry have shown a retail price increase. Charms, with an average ticket of less than $40, are a fad item and usually aren’t a material contributor to a jeweler’s sales or gross profit.

The graph below summarizes the change in the average retail price of gold jewelry, by item, between 1993 and 2005.

 

The average retail price of gold jewelry declined by 15% from 1993 to 2005 Source:  World Gold Council

 

Outlook for Wedding Jewelry Bright

Gold wedding rings are just the proverbial “tip of the iceberg” for jewelers. IDEX Online Research is projecting that the bridal market will grow by at least 30 percent over the next decade as a new population bubble – the children of the Baby Boomers, called Millennials – get married. Forecasts call for the number of annual weddings in the U.S. to rise to nearly 3 million annually from a run-rate of about 2.2 million for the past several years.

 

The graph below summarizes IDEX Online Research’s forecast for weddings in the U.S. market.

 

Source: Census Bureau, Center for Health Statistics

 

Postscript: All That Glitters May Not Be Gold

There Is Less Gold in Jewelry

Since the beginning of the decade, the tonnage of gold flowing into the U.S. in jewelry has declined every year except for 2005, when it was about flat with 2004, according to the WGC. In the same period, the number of units of gold jewelry sold in the U.S. has climbed by about 23 percent. This leads to two conclusions:

 

1. The total gold content in gold jewelry sold in the U.S. is declining.
2. The karat purity of gold jewelry sold in the U.S. is likely declining.

There’s No Margin Squeeze in Gold Jewelry

In addition, jewelers would probably like to put some of the blame for the long term retail price decline on increasingly squeezed margins. But that’s not so. In 1997 (the oldest data available for gross margin by product), jewelers reported a gross margin of 51.8 percent for gold jewelry. By 2004 (the latest data available), the gross margin for karat gold jewelry had climbed to 53.7 percent, according to the Jewelers of America Cost of Doing Business Survey.

 

Within the past few months, there is no question that sharply rising gold prices have put pressure on every link in the gold jewelry distribution pipeline. However, this is a recent event, and does not correlate with long term gold jewelry margin trends.

 

Gold Jewelry Suppliers: Take Note of Average Retail Prices for Gold Jewelry

IDEX Online Research believes that it is especially important for gold jewelry suppliers to understand the dynamics of gold jewelry pricing at retail. While some of the trends may not be favorable for gold jewelry suppliers – for example, consumers are paying less for gold jewelry – they reflect the realities of the market.

 

The grid below summarizes the average retail gold jewelry price point 1) by merchant; and 2) by item for 2005. Here’s what gold jewelry suppliers must understand: the prices shown by item by merchant on this table reflect retail prices, including the retailer’s profit. Typically, gold jewelry generates a better-than-average profit for jewelers. According to Jewelers of America data, the typical gross margin for gold jewelry is over 50 percent. Thus, taking as an example the typical retail price for gold jewelry neckwear sold by specialty jewelers – $157.99 – suppliers must produce this product and land it in a jeweler’s store for less than $79. Most retail jewelers would like to pay only $70 or $75 for neckwear that they will sell at retail for either $149 or $159.

 

With the current environment of high gold prices coupled with Americans’ habit of shopping down for gold jewelry, suppliers must be able to take some of the cost out of gold jewelry, if they plan to maintain market share. Alternatively, the WGC could consider stepping up its marketing campaigns to reinforce the value of gold jewelry for consumers.

 

Source:  World Gold Council