Jewelry market assessment: Tiffany is down, and new brands are stealing Gen Y shoppers.
Based on recent reports concerning the malaise and slumping sales projections for the jewelry establishment — Tiffany in particular — it’s easy to come away thinking that twenty- and thirty-something shoppers simply aren’t buying jewelry anymore (or, worse, just aren’t interested). But that would be a false assumption based on incomplete information. As is the case across many luxury categories, young shoppers are still buying jewelry — they’re just not spending at the old names as much as their parents and grandparents might have.
Tiffany, to take the most obvious example, still has pedigree, there’s no disputing that. But its pull is nowhere near as strong among [today’s] young professional set: Quite simply, brands like Tiffany simply aren’t speaking to the young shopper. They haven’t adapted well to a newer, open market where brand prestige matters less to consumers, and in their malaise has sprung an influx of new firms, most arriving within the last three to four years (and mostly on the women’s side). And while the Tiffanys of the world may not be seeing as many young customers coming through their doors, this new class of competition is certainly seeing them fill up their online shopping carts and passing through their Soho and Hamptons pop-ups and stores.
Two key facts to describe the jewelry market proper in 2017:
- It’s static right now. According to Euromonitor, in North America, the jewelry market sits at $68 billion in 2016, up only 2.8% from the previous year; meanwhile, in Western Europe, the market is only $28 billion, down 0.3% year-on-year.
- It’s also suffering from relying too much on China in recent years. The Middle Kingdom—where the jewelry market has excelled up until recently— has, in the past, buoyed brands like Tiffany. However, amidst anti-corruption campaigns and changing consumer psychology, China too is beginning to stagnate. Although the Chinese market previously grew 22% year-on-year from 2009-15, Euromonitor forecasts only a 7% compound annual growth rate from 2015-20.
Gen Y is still buying (they’re just not buying at Tiffany). The global market is wobbly, yes. But to believe that Gen Y shoppers are avoiding jewelry altogether would be misguided. The proof is in the research. According to De Beer’s 2016 Diamond Insight Report, Gen Y spent nearly $26 billion on diamond jewelry alone the previous year. Meanwhile, Swarovski’s Gem Vision Trend Directions report for 2017 claims that young shoppers are actually driving the trends of the marketplace. The concern — at least for existing brands like Tiffany — is that today’s young shoppers are buying from different brands, and in different ways, compared to their baby boomer parents who were more loyal to prestige players.
The rise of modern luxury outsiders (a new generation of jewelry brands for a new generation of consumer.) In the fine jewelry market, outsiders have established themselves in the more accessible price segments below the likes of Tiffany, Cartier, and Bulgari — and they’ve found immense success with Gen Y. Who are they?
The new jewelry brands on Lean Luxe’s radar:
Minimalist | AUrate
AUrate New York
Think: The Warby Parker of women’s jewelry
Founders: Sophie Kahn, Bouchra Ezzahraoui
Launch Date: 2015
Location: New York
Total Funding: $575K Seed
Architectural | AGMES
AGMES
Think: Sculptural, slightly ’80s, and for the Barney’s crowd
Founders: Sisters Morgan and Jaclyn Solomon
Launch Date: 2016
Location: New York
Total Funding: Unknown
Timeless | Vita Fede
Vita Fede
Think: “Timeless luxury with a modern, feminine twist”, and Italian-made
Founder: Cynthia K. Sakai
Launch Date: 2009
Location: New York
Total Funding: Unknown
Gen Y industrial | The Boyscouts
The Boyscouts
Think: European, slightly industrial, skews younger
Founder: Zelda Beauchampet
Launch Date: 2016
Location: Rotterdam, Netherlands
Total Funding: Unknown
These brands are winning hearts and minds due to several key factors:
- A savvier, value-focused consumer. In an email to Lean Luxe, Fflur Roberts, head of luxury goods at Euromonitor, explained that young shoppers are wiser and savvier than they were just ten to fifteen years ago, and behave quite differently to boot. “[Today’s young shoppers care about] authenticity, green issues, and heritage,” she said. “They would strongly question the value and the impact of buying a diamonds ring for example from a luxury retailer like Tiffany. They are also less likely to conform in terms of jewelry, and may be adverse to traditions like giving engagement ring or other jewelry as traditional gifts.”Likewise, here’s AUrate’s Marketing & Digital Media Specialist, Isabel Sanoja, explaining their customers’ expectations: “Our customers understand [also] that traditional jewelry brands have overly inflated mark-ups completely disconnected from reality and that these mark-ups do not necessarily reflect quality.” This is a common refrain for many modern luxury companies (MLCs) across all categories. The jewelry market is no different.
- Trending towards transparency. “As we move forward it will become more important for brands to be completely transparent about their ethical stances and show that they care about the planet and mankind,” said Roberts. “More consumers will reassess their values and priorities with a clear desire for authenticity and wellbeing—this is even more true for millennials.” In this vein, some modern luxury jewelers have established a charitable angle — in the form of donating books to children for every purchase, for instance — in an effort to appeal to the ‘good citizen.’
- Big on e-commerce. Being digitally native, the newcomers also all operate direct-to-consumer e-commerce stores. In comparison, Tiffany only began taking e-commerce seriously after partnering with Net-a-Porter in April of last year. Before the partnership, Tiffany’s e-commerce presence was only limited to 13 countries, accounting for merely 6% of sales from 2013-2016 according to their 2016 reports.
- A modern aesthetic approach. Compared to Tiffany and their ilk, these brands embrace a quieter, minimalist interpretation of good taste in jewelry. There’s a distinctly anti-fashion ethos that ties these brands together, in the sense that these companies, through branding visuals, messaging, and product design, reference contemporary design or architecture more than they do celebrity, avant garde runway shows, or the ornate feel you tend to get with traditional luxury jewelers. This is in keeping with the wants and desires of their core young shopper, who gravitate towards subdued minimalism over flashy bling.
MLC jewelry upstarts have been quick to respond to these new marketplace pressures and expectations. This has been a big reason why they now find themselves in the driver’s seat. Yet as online-first jewelry companies mature, their growth is sure to plateau. As the research figures indicate, the current state of the market is bleak at best, without much room for significant growth in the immediate future. This, on top of greater competition, puts the modern luxury jewelry market in a (relatively) precarious place.
Some questions to keep in mind going forward:
- Is it time to get physical? “While e-commerce works great and is the core of what we do, it’s also a strong added brand asset to have a retail flagship where you can really showcase the jewelry and express your brand,” said Sanoja of AUrate. For these MLCs, physical stores are becoming increasingly attractive. Like Warby Parker and Everlane, many modern luxury jewelry brands are establishing physical outposts, looking for omnichannel growth.
- Does China play a part at all for this category of brands? China is still a little rocky, but it still presents a potentially valuable source of growth. Modern luxury jewelers, however, have yet to penetrate the region, and even if they do break through, immense competition awaits. Last year, Cartier launched a storefront on WeChat, marking their entry into the Chinese e-commerce jewelry space, gaining immediate access to around 850M users. And the more accessibly-priced Pandora, which targets 25- to 35-year-olds, has already begun establishing outposts in the country, and now boasts 100 outlets and a significant presence on Alibaba’s Tmall.
- What about the Amazon threat? At home in the West, the competition is heating up, especially from Amazon. In an interview with the FT last year, Julian Exposito-Bader, Amazon UK’s head of buying for watches and jewelry, spoke about Amazon’s successful foray into jewelry. This can partly be attributed to the fact that, unlike other retailers, Amazon has enough cash to buy the goods sold through the site upfront from manufacturers, thereby presenting an especially attractive option to younger brands. Just like in other categories, Amazon’s growth in this stagnant market could prove troublesome for many in the modern luxury jewelry space.
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