Jewelry Industry Report
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JewelryStoreindustry.pdf
WWW.IBISWORLD.COM Jewelry Stores in the US October 2019 1
IBISWorld Industry Report 44831 Jewelry Stores in the US October 2019 Jacqueline Hiner
Silver lining: Rising disposable income is expected to revive demand for high-end jewelry
2 About this Industry 2 Industry Definition
2 Main Activities
2 Similar Industries
2 Additional Resources
3 Industry at a Glance
4 Industry Performance 4 Executive Summary
4 Key External Drivers
6 Current Performance
8 Industry Outlook
10 Industry Life Cycle
12 Products and Markets 12 Supply Chain
12 Products and Services
14 Demand Determinants
15 Major Markets
16 International Trade
17 Business Locations
19 Competitive Landscape 19 Market Share Concentration
19 Key Success Factors
19 Cost Structure Benchmarks
21 Basis of Competition
22 Barriers to Entry
23 Industry Globalization
24 Major Companies 24 Signet Jewelers Ltd.
25 Tiffany & Co.
26 Berkshire Hathaway Inc.
27 Compagnie Financiere Richemont SA
28 Operating Conditions 28 Capital Intensity
29 Technology and Systems
29 Revenue Volatility
30 Regulation and Policy
30 Industry Assistance
31 Key Statistics 31 Industry Data
31 Annual Change
31 Key Ratios
32 Industry Financial Ratios
33 Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | [email protected]
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Operators in this industry sell new jewelry, timepieces and sterling and plated silverware. Companies that vend these products in combination with engraving or repair services are also included in the industry. Operators do not cut and set
gemstones or sell costume jewelry or antiques. They also do not sell used goods or provide repair services without also selling new jewelry products. Moreover, this industry does not include internet, mail order or direct sales retailers.
The primary activities of this industry are
Selling new jewelry (except costume jewelry)
Selling new sterling and plated silverware
Selling new watches and clocks
33991 Jewelry Manufacturing in the US Operators in this industry cut and set gemstones.
42394 Jewelry & Watch Wholesaling in the US Operators in this industry wholesale jewelry and watches.
45331 Used Goods Stores in the US Operators in this industry retail antiques or used jewelry, silverware and watches and clocks.
44833 Handbag, Luggage & Accessory Stores in the US Operators in this industry retail costume jewelry.
Industry Definition
Main Activities
Similar Industries
Additional Resources
About this Industry
For additional information on this industry
www.mjsa.org Manufacturing Jewelers & Suppliers of America
www.nationaljeweler.com National Jeweler
www.gold.org World Gold Council
The major products and services in this industry are
Diamond jewelry
Gold jewelry
Watches
Pearl and other gemstone jewelry
Other merchandise
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% c
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4
-4
-2
0
2
2614 16 18 20 22 24Year
Per capita disposable income
SOURCE: WWW.IBISWORLD.COM
% c
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e
12
-8
-4
0
4
8
2511 13 15 17 19 21 23Year
Revenue Employment
Revenue vs. employment growth
Products and services segmentation (2019)
42.0% Diamond jewelry
20.7% Other merchandise
14.9% Watches
12.8% Pearl and other gemstone jewelry
9.6% Gold jewelry
Key Statistics Snapshot
Industry at a Glance Jewelry Stores in 2019
Industry Structure Life Cycle Stage Mature Revenue Volatility Low
Capital Intensity Low
Industry Assistance Low
Concentration Level Low
Regulation Level Light
Technology Change Low
Barriers to Entry Low
Industry Globalization Low
Competition Level High
Revenue
$30.2bn Profit
$1.1bn Wages
$4.2bn Businesses
55,736
Annual Growth 19–24
-3.7% Annual Growth 14–19
-2.4%
Key External Drivers Marriage rate Per capita disposable income Households earning more than $100,000 World price of gold
Market Share Signet Jewelers Ltd. 14.5%
Tiffany & Co. 5.6%
p. 24
p. 4
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31
SOURCE: WWW.IBISWORLD.COM
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Key External Drivers Households earning more than $100,000 Households with higher incomes are more likely to purchase expensive nonessential goods such as jewelry and watches. Therefore, as the number of high-income households increases, so does consumption of jewelry products. The number of households earning more than $100,000 is expected to increase in 2019, representing a potential opportunity for the industry.
World price of gold The world price of gold (recorded in dollars per troy ounces, but often referred to as dollars per ounce) affects a retailer’s input costs. These costs, in turn, influence product prices, profit and industry revenue. When the price of gold increases, operators may be reluctant to pass these prices onto consumers. When the price of gold falls, operators benefit from lower input costs, and consumer spending on
Executive Summary The Jewelry Stores industry sells jewelry, timepieces and sterling and plated silverware from brick-and-mortar establishments. Demand for industry products has remained strong over the five years to 2019, as a result of increased consumer spending during the current period. Furthermore, given that the majority of demand is driven by consumers earning more than $100,000 before taxes, accounting for 75.8% of revenue, the industry has benefited from the growing number of households in this income segment. Nonetheless, industry revenue is expected to decline over the
five years to 2019, falling at an annualized rate of 2.4% to $30.2 billion. This includes an expected decrease of 2.2% in 2019 alone. The industry’s overall lack of growth is primarily the result of steep external competition from online retailers.
Historically, bridal products, including engagement rings and wedding bands, have made up a large proportion of industry revenue. However, sales of these products have been affected by a declining marriage rate. Consumer concerns about the ethical sourcing of diamonds have also
contributed to declining sales, shifting purchases to lab-made diamonds. Conversely, the impact of these declines has been offset by millennials’ purchasing habits. Millennials tend to assign value to high-quality, luxury jewelry products and are more likely to purchase these items for themselves than previous generations. Additionally, rising gold and silver prices have increased purchasing costs for industry operators, lowering industry profit.
The industry is projected to continue declining over the five years to 2024. IBISWorld estimates that industry revenue will decrease at an annualized rate of 3.7% to $25.0 billion during the outlook period. While consumer spending is expected to continue to increase over the five years to 2019, heightened competition from mass retailers and warehouse clubs, such as Walmart Inc. and Costco Wholesale Corporation, in addition to several large online retailers, is expected to drive out smaller industry operators over the next five years. Online retailers with minimal overhead are able to offer lower prices than brick-and-mortar jewelry retailers. Consequently, industry operators are expected to place greater emphasis on e-commerce and omnichannel sales. Revenue generated from these sales is not considered industry-relevant and inhibits industry growth.
Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
Consumer concerns about the ethical sourcing of diamonds have contributed to declining sales
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Industry Performance
Key External Drivers continued
jewelry typically increases. The price of world gold is expected to increase in 2019, posing a potential threat to the industry.
Marriage rate The marriage rate influences demand for wedding jewelry, which makes up a sizable portion of the industry’s diamond and gold jewelry product sales. The marriage rate is expected to remain stagnant in 2019.
Per capita disposable income Fluctuations in per capita disposable income affect consumer demand for products offered by the Jewelry Stores industry. When per capita disposable income increases, consumers have more money to purchase discretionary items, such as diamond jewelry and watches. Per capita disposable income is expected to increase in 2019.
%
32
22
24
26
28
30
2511 13 15 17 19 21 23Year
Households earning more than $100,000
SOURCE: WWW.IBISWORLD.COM
% c
ha ng
e
4
-4
-2
0
2
2614 16 18 20 22 24Year
Per capita disposable income
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Industry Performance
Current Performance
The Jewelry Stores industry, which sells jewelry, timepieces and sterling and plated silverware, is composed of traditional brick-and-mortar shops and does not include internet, mail-order or direct-sale retailers. Over the five years to 2019, rising consumer confidence and falling unemployment have encouraged consumers to spend on discretionary goods, such as jewelry and watches. With consumers earning over $100,000 before taxes comprising 75.8% of industry revenue in 2019, the industry benefited from an increase in the number of households earning more than $100,000 over the five years to 2019. However, despite these positive indicators, industry revenue is expected to decline. During the current period, industry revenue is
anticipated to fall an annualized 2.4% to $30.2 billion, including a 2.2% decrease in 2019 alone.
% c
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e
12
-8
-4
0
4
8
2511 13 15 17 19 21 23Year
Industry revenue
SOURCE: WWW.IBISWORLD.COM
Consumer trends Several consumer trends and behaviors have influenced industry performance during the current period. The marriage rate, for example, decreased at an annualized rate of 0.9% over the five years to 2019. Given that bridal products such as engagement rings and wedding bands make up the greatest share of industry revenue, fewer annual marriages have caused industry-wide declines. To mitigate these effects, industry operators have begun marketing to same-sex couples, enabling them to capture greater shares of the bridal market. However, operators have begun diversifying their product offerings to attract new types of consumers, millennials in particular.
Contrary to popular belief, millennials are buying diamonds and other fine jewelry. According to a research report released by the De Beers Group, millennials and Gen Z make up 45.0% of all diamond purchases across important global markets. This group is known for its allegiance to luxury brands, as witnessed by the popularity of Cartier International AG’s “Love” bracelet among
younger consumers. As a result, high-end jewelers have begun marketing their entry-level pieces to millennials, who are more likely than older generations to engage in self-purchasing or self-gifting habits. Currently, self-gifting makes up 26.0% of all diamond purchases. However, this number is expected increase as individuals, particularly women, buy more jewelry for themselves rather than others. Wearing diamonds on a casual day-to-day basis has also become more commonplace among this age group. Consequently, there is heightened competition among jewelers and designers to create items that match this new wave of consumer preferences.
Millennials also tend to be socially conscious consumers. Individuals in this group are typically concerned about ethical business practices and monitor the supply chains of the products they purchase. As a result, millennials and individuals in the wider US demographic are increasingly aware of unfair diamond and gold mining practices. Several consumer groups
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Industry Performance
Competition and profit
The industry’s decline, though minimal, is not the result of lowered demand. Several macroeconomic factors, such as growing per capita disposable income and declining unemployment, hint at growing demand for industry products. The problem lies not so much in lack of demand for industry products, but rather the channels by which people obtain them. External competition has become increasingly fierce for this industry, with department stores, supercenters and online retailers eclipsing industry operators in jewelry and watch sales. In 2018, the National Jeweler Group released a list of the largest jewelry retailers by value. Although major player Signet Jewelers Ltd. topped the list, it was followed by Walmart Inc., Costco Wholesale Corporation and Macy’s Inc., none of which operate in the industry. In fact, very few traditional brick-and- mortar enterprises made the list.
Also flooding the National Jeweler Group’s Supersellers list were online retailers such as Amazon.com Inc. Online retailers present a significant threat to industry operators as these groups typically have low overhead costs, which enable them to charge lower prices than traditional jewelry stores. Furthermore, more industry operators have also been aiming to grow their e-commerce platforms and make digital sales a greater share of total revenue. In 2018, industry operator Tiffany & Co.
stated that 7.0% of the company’s sales came from online platforms (latest data available). Total e-commerce sales increased at an annualized rate of 20.8% across all industries over the past five years, stifling industry growth.
Consequently, industry profit, measured as earnings before interest and taxes, declined from 4.9% of revenue in 2014 to 3.8% in 2019. In addition to higher gold and silver prices reduced purchasing costs for operators, profit remains low as a result of heightened competition. Low profit has caused many operators to exit the industry, resulting in lower overall industry establishments. Furthermore, as industry operators focus their efforts on omnichannel and digital sales, traditional brick-and-mortar establishments are negatively affected. As a result, the number of industry establishments is expected to decline at an annualized rate of 2.2% to 61,235 locations over the five years to 2019. Growing digital sales also reduces personnel needs. As a result, the number of industry employees has decreased at annualized rate of 1.6% to 157,750 workers during the same period.
The industry’s decline, though minimal, is not the result of lowered demand
have begun boycotting jewelry stores that purchase their diamonds from sources that use human trafficking or child labor to obtain these goods. Many even prefer lab-made diamonds for this reason, as they cannot be obtained through unethical practices. Industry operators have responded to consumer concerns by adopting more transparent
sourcing methods and providing detailed information about their supply chains. Furthermore, industry operators have increased their synthetic and man-made diamond selection to meet consumer trends. These products cost up to 40.0% less than traditional diamond jewelry and have the potential to lower sales revenue.
Consumer trends continued
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Industry Performance
Conditions and competition
While the industry as a whole is expected to decline during the outlook period, there may be opportunities for those operating in the luxury division. The number of households earning more than $100,000 is expected to increase at annualized rate of 0.1% over the five years to 2024. Individuals in this group are more likely to make luxury purchases and prefer patronizing brick-and-mortar establishments when they do. As a result, luxury sales are expected to mitigate the effects of aggressive external competition. Consumers spending large amounts on luxury products benefit from the expertise and personal attention provided by industry retailers. Employees at jewelry establishments are typically well-trained and able to provide extensive insight on product quality. Comparatively, most of the workers employed by alternative retailers, such as supercenters, are given basic training and are often unable to provide thorough assistance. Elite jewelry stores offer many services that supercenters and online sales operations do not, such as in-store gemologists that provide expert advice for high-priced purchases and a guarantee of quality. Furthermore, industry operators are better able to accommodate a consumer’s preferences
and foster personal connections, making for a value-added shopping experience.
Even still, external competition is likely to remain high. Economy-wide e-commerce sales are expected to increase at an annualized rate of 20.1% over the five years to 2024. This proves particularly troublesome for smaller, regional operators that do not have the means to compete with internet retailers the way larger enterprises do. As a result, many are anticipated to exit the industry or merge with larger jewelry store operators. Therefore, the number of enterprises is expected to decline at an annualized rate of 2.5% to 49,038 companies over the next five years. Furthermore, the trend of larger operators attempting to increase their online sales’ percentage of total revenue will likely intensify during the outlook period. This will reduce labor costs for industry operators. Over the five years to 2024, wage spending is expected to decrease at an annualized rate of 3.3% to $3.6 billion.
Industry Outlook
Over the five years to 2024, the Jewelry Stores industry is projected to decline at a faster rate compared with the five-year period to 2019. IBISWorld projects that industry revenue will decline at an annualized rate of 3.7% to $25.0 billion during the outlook period. Consumer spending is expected to grow at a slower rate over the next five years compared with growth over the past five years. More importantly, the national unemployment rate is expected to increase at an annualized rate of 5.2% during the outlook period. Industry demand will likely
contract significantly over the next five years, given that jewelry and watches are discretionary goods people forgo during economic hardships. Also playing a role in the industry’s decline is the decreasing marriage rate. Over the five years to 2024, the marriage rate is expected to decrease at an annualized rate of 0.3%. Bridal products, typically engagement rings and wedding bands, make up a significant portion of industry revenue. Industry operators will likely be forced to venture into new markets when demand for these goods shrinks.
Elite jewelry stores offer many services that supercenters do not
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Industry Performance
Profit and consumer trends
Profit is expected to decrease minimally over the next five years. In 2024, industry profit, measured as earnings before interest and taxes, is anticipated to account for 3.4% of revenue, down from 3.8% in 2019. The benefits of lower purchasing and wage costs are offset by high external competition from online retailers. Online establishments can undercut traditional jewelry stores on account of having lower overhead costs. Industry operators attempting to expand their online presence will likely incur different types of costs, specifically costs associated with marketing and maintaining online platforms. Another factor inhibiting profitability is shifting consumer preferences. More consumers
have expressed an interest in substitutes to traditional diamond jewelry. Some are turning to lab-made diamonds, which are less expensive and nearly indistinguishable from mined diamonds. Others are opting for different types of gemstones, such as rubies and even cubic zirconia. These substitutes are typically less expensive than diamond jewelry. Lower value sales are expected to have staggering effects on industry profit.
Lower value sales are expected to have staggering effects on industry profit
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Industry Performance The industry is consolidating
Jewelry products are not expected to dramatically change in the near future
Technological change for the industry is minimal
Life Cycle Stage
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Industry Performance
Industry Life Cycle The Jewelry Stores industry is in the mature phase of its life cycle. IBISWorld expects industry value added (IVA), which measures an industry’s contribution to the overall economy, to decline at an annualized rate of 3.4% over the 10 years to 2024. Comparatively, US GDP is expected to expand at an annualized rate of 2.1% during the same period. While IVA growth that is significantly lower than GDP growth generally marks an industry as declining, the Jewelry Stores industry is mature due to wholehearted market acceptance of industry products.
The technology used in this industry has not changed significantly over the five years to 2019, and is not expected to
experience any substantial growth over the five years to 2024, which is indicative of a mature industry. IBISWorld anticipates that technological changes will be limited to marketing and advertising over the next five years, as online marketing becomes increasingly crucial to industry success. Likewise, product innovation has not been noteworthy and is not expected to accelerate over the next five years. Precious metals have been around longer than the Jewelry Stores industry, further indicating this industry’s maturity. While the industry’s specific product mix may change with fashion trends and consumer preferences, the overall makeup of industry products is not anticipated to change.
This industry is Mature
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Products and Services Diamond jewelry Diamond jewelry is estimated to account for 42.0% of revenue for the Jewelry Stores industry in 2019. This segment includes rings, necklaces, bracelets and other items in which diamonds constitute 50.0% or more of the value of the finished piece. Nearly all engagement jewelry is part of this product segment and, therefore, demand for diamond jewelry is highly dependent on the US marriage rate. Diamonds have somewhat contracted as a share of overall industry revenue over the five years to 2019, as the marriage rate has dipped.
In recent years, there has been a surge in lab-made diamonds as opposed to mined diamonds. These stones are made
by placing a carbon seed into a microwave plasma oven and exposed to superheated natural gases. The result is a stone that looks incredibly similar to a mined diamond and costs between 30.0% and 40.0% less. According to a report produced by Morgan Stanley, lab-grown diamonds could comprise a 7.5% market share by 2020. Additionally, in a survey of 1,000 consumers, 70.0% said they would consider buying lab diamonds. In addition to their comparative affordability, lab made diamonds ensure ethical sourcing. Those concerned about unethical diamond mining practices can take comfort in lab made alternatives. Currently, smaller retailers have a greater selection of lab made diamonds than large ones.
Products & Markets Supply Chain | Products and Services | Demand Determinants Major Markets | International Trade | Business Locations
KEY BUYING INDUSTRIES
61131a Colleges & Universities in the US This industry often purchases jewelry in the form of class rings and other school jewelry.
81341 Civic, Social & Youth Organizations in the US This industry often purchases jewelry to represent their organization, such as fraternity rings and leadership pins.
99 Consumers in the US Consumers purchase jewelry from jewelry stores.
NN006 Wedding Services in the US The Wedding Services industry often purchases bridal jewelry and other industry products.
KEY SELLING INDUSTRIES
21222 Gold & Silver Ore Mining in the US Jewelry stores that manufacture their own products will often purchase raw inputs from the Gold & Silver Ore Mining industry.
32721 Glass Product Manufacturing in the US Manufacturers in this industry produce a variety of glass products that are used in some jewelry products.
32799 Mineral Product Manufacturing in the US Manufacturers in the industry produce various precious and semiprecious stones used in many jewelry products.
33991 Jewelry Manufacturing in the US Manufacturers directly supply new jewelry, sterling and plated silverware, precious stones and new watches and clocks to retailers.
42394 Jewelry & Watch Wholesaling in the US Wholesalers supply new jewelry, sterling and plated silverware, precious stones and new watches and clocks to industry operators.
Supply Chain
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Products & Markets
Products and Services continued
Watches Watches, wristbands and parts, which account for an estimated 14.9% of industry revenue in 2019, represent a significant source of industry revenue. Watches come in various forms and cater to different markets, including mass- market, fashion, premium, luxury and exclusive watches. However, in recent years traditional watches sold at jewelry stores have come under stiff competition from smartwatches, including the Fitbit and the Apple Watch. In fact, Apple Inc. recently revealed that the company sells more watches than the entire Swiss watch industry combined. In the digital age, people have less use for analog watches than ever before. Despite this shift in consumer trends, many now turn to the mechanical watch to make a fashion statement. Traditional watches and luxury watches in particular remain an important industry product. Their aesthetic value and, depending on the brand, ability to serve as a status symbol guarantees their continued share of industry revenue.
Gold jewelry Gold jewelry is estimated to account for 9.6% of industry revenue in 2019.
Consumers may purchase gold for long-term or short-term purposes. Apart from being used as decorative jewelry, some forms of gold jewelry are purchased as inflation-protection vehicles and for stored wealth in periods of uncertainty. This segment includes all gold jewelry items in which diamonds, colored stones or pearls constitute less than 50.0% of jewelry value. Neckwear, which includes gold chains, dominates the product category. This segment’s share of industry revenue has slightly expanded over the past five years, as the world price of gold has stabilized, making it a more affordable investment for consumers.
Pearl and other gemstone jewelry Pearl and other gemstone jewelry sales are estimated to comprise 12.8% of industry revenue in 2019. This segment includes all jewelry items in which pearl or nondiamond gemstones constitute more than 50.0% of jewelry value. This segment has grown increasingly popular as consumers opt for unique gemstones and jewelry settings. Furthermore, nondiamond gemstones have become more socially accepted in engagement rings, which has increased this segment’s share of overall industry revenue.
Products and services segmentation (2019)
Total $30.2bn
42.0% Diamond jewelry
20.7% Other merchandise
14.9% Watches
12.8% Pearl and other gemstone jewelry
9.6% Gold jewelry
SOURCE: WWW.IBISWORLD.COM
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Products & Markets
Demand Determinants
Consumer and economic trends Given that jewelry is highly discretionary good, demand for the Jewelry Stores industry is driven by economic prosperity. The higher a consumer’s income the more likely he or she is to purchase jewelry. In the United States, households with the greatest income buy the majority of jewelry store products. Therefore, as the number of number of households earning more than $100,000 increases, the industry prospers. Macroeconomic factors, such as the per capita disposable income, can also forecast demand. As consumer confidence increases, so too does demand for industry products. The Consumer Confidence Index measures the average consumer’s expectations about their ability to maintain their current income level. By contrast, increased unemployment has adverse effects on demand. During recessions when unemployment tends to be high, industry demand contracts significantly. However, most of this demand is offset by skyrocketing e-commerce sales, which inhibits sales made in industry-relevant brick-and-mortar jewelry stores.
Consumer trends and habits, particularly the propensity to marry, affect industry demand. Large jewelry retailers often report generating half their revenue from bridal sales, typically engagement rings. In recent years, the marriage rate has been declining, affecting demand. However, seasonality also comes into play. Jewelry retailers typically report higher sales during the fourth quarter as the holiday season
approaches. Demand also grows around Valentine’s Day and Mother’s Day.
Lastly, demand will fluctuate with style and culture trends. Industry operators pay close attention to what consumers and fashion experts consider in vogue to generate demand. Consumer trends and tastes vary over time and affect the type of jewelry purchased. For example, the advent of digital watches reduced demand for analog watches. However, as cell phones have replaced the need for time-telling devices, analog watches have returned as style pieces.
Ethical practices Historically, consumers have been conscious of the ethical standards associated with their jewelry. In the early 2000’s, when the term “blood diamonds” was popularized, consumers threatened to boycott diamonds used to fund conflict and perpetuate violence in some African countries. This led to the creation of the Kimberly Process, which enabled consumers to verify that their diamonds were “conflict free.” However, a new set of ethical issues arise in the modern era. Customers are increasingly aware of the human rights violations, including slavery and forced child labor, involved with diamond sourcing. Reports of children being used to retrieve diamonds from small spaces and getting injured in mines led to another wave of consumer skepticism.
The Human Rights Watch has criticized major retailers, including Cartier, Rolex, Tiffany & Co. and Pandora, for their diamond and gold sourcing practices. Among those accused
Products and Services continued
Other merchandise Other products sold by this industry include other jewelry types, such as estate and platinum jewelry, in addition to loose gemstones and nonjewelry items. Moreover, a small share of revenue is
generated from services such as custom fittings, cleanings and engravings. This segment has remained relatively stable as a share of revenue, accounting for 20.7% of revenue in 2019, due to the various products and services offered.
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Products & Markets
Major Markets
Consumers earning less than $100,000 Consumers earning less than $100,000 in income are expected to account for 24.1% of revenue for the Jewelry Stores industry in 2019. Most of the shoppers in this consumer segment have lower disposable income, restricting their ability to purchase products retailed at
industry establishments, thus only purchasing jewelry when necessary (i.e. getting engaged or married). Shoppers in this segment are more likely to purchase jewelry from big-box retailers that offer similar products at a lower price point or buy costume jewelry. Over the five years to 2019, this income segment has slightly
Demand Determinants continued
of unfair practices, only Tiffany & Co. could provide information about its supply chain, verifying its use of ethical gold. Others have taken steps to increase responsible sourcing, but still fail to meet the Human Rights Watch’s standards. Transparency and ethical sourcing will be important as consumer awareness increases. Ethics do inform demands, as seen by the increasing popularity of lab made diamonds, which cannot be the product of unethical sourcing.
Global supply Global fluctuations in the price of diamonds, gold and other precious and semiprecious metals and stones affect industry revenue and profit. Fluctuations of raw input prices can positively affect industry revenue if price changes are passed on to consumers. However, more
expensive jewelry will ultimately reduce industry demand by limiting the number of individuals that can afford industry products. Similarly, an increase in the availability of low-cost jewelry items will likely lower product prices, making jewelry more appealing to a wider income-earning spectrum and boosting industry demand.
The Diamond Trading Company (formerly called the Central Selling Organization), which is the marketing arm of DeBeers Consolidated Mines Ltd. of South Africa, significantly influences the supply and price of diamonds. The Diamond Trading Company traditionally controls the marketing of most of the world’s supply of diamonds. It also sells rough diamonds to worldwide diamond site holders from its London office in quantities and prices determined at its discretion.
Major market segmentation (2019)
Total $30.2bn
52.9% Consumers earning more than
$150,000 before taxes
18.4% Consumers earning between $70,000
and $99,999 before taxes
13.5% Consumers earning between $120,000
and $149,999 before taxes
9.5% Consumers earning between $100,000
and $119,999 before taxes
5.7% Consumers earning less than
$70,000 before taxes
SOURCE: WWW.IBISWORLD.COM
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Products & Markets
International Trade The Jewelry Stores industry, by nature, does not engage in international trade. The industry does, however, predominantly sell imported goods.
Import and export figures for jewelry are accounted for as part of the Jewelry Manufacturing industry (IBISWorld report 33991).
Major Markets continued
increased a share of demand, as growing levels of per capita disposable income have enabled more consumers to afford the industry’s goods.
Consumers earning between $100,000 and $150,000 Consumers earning between $100,000 and $150,000 before taxes spend considerably more on jewelry items than lower income cohorts, accounting for 23.0% of industry revenue in 2019. While these shoppers do not regularly buy jewelry from industry establishments, they are able to spend more per purchase than lower income consumers. Demand from these consumers has slightly
expanded as a share of revenue during the current period.
Consumers earning more than $150,000 Consumers earning more than $150,000 before taxes are expected to account for a considerable 52.9% of industry revenue in 2019. This segment’s share of revenue reflects the segment’s high level of disposable income. Such consumers are able to purchase price-premium, discretionary jewelry and consequently comprise more than one-third of industry revenue. This consumer segment has contracted during the five-year period, due to expanding incomes enabling other income segments to better afford industry goods.
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Products & Markets
Business Locations 2019
MO 1.4
West
West
West
Rocky Mountains Plains
Southwest
Southeast
New England
VT 0.2
MA 2.7
RI 0.4
NJ 4.0
DE 0.4
NH 0.5
CT 1.2
MD 1.8
DC 0.2
1
5
3
7
2
6
4
8 9
Additional States (as marked on map)
AZ 1.8
CA 12.3
NV 1.0
OR 1.2
WA 1.8
MT 0.4
NE 0.4
MN 1.4
IA 0.9
OH 3.1 VA
2.6
FL 9.0
KS 0.8
CO 1.4
UT 0.7
ID 0.4
TX 6.8
OK 0.7
NC 2.6
AK 0.3
WY 0.2
TN 1.5
KY 1.0
GA 2.9
IL 3.8
ME 0.4
ND 0.2
WI 1.5 MI
2.9 PA4.1
WV 0.4
SD 0.2
NM 0.8
AR 0.7
MS 0.6
AL 1.2
SC 1.3
LA 1.3
HI 1.4
IN 1.6
NY 9.9 5
6 7
8
3 21
4
9
SOURCE: WWW.IBISWORLD.COM
Mid- Atlantic
Establishments (%)
Less than 3% 3% to less than 10% 10% to less than 20% 20% or more
Great Lakes
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Products & Markets
Business Locations Establishments in the Jewelry Stores industry are concentrated in the Southeast and Mid-Atlantic regions of the United States. Together, these regions account for close to one-half of industry establishments. High per capita income and large population densities are responsible for the elevated level of concentration of industry establishments in these two regions.
The Southeast region, which comprises 25.7% of the US population, accounts for an estimated 25.0% of industry establishments. Most notably, the state of Florida is home to 9.0% of industry establishments. Florida’s high concentration of adults over the age of 65 contributes to the state’s large share of industry establishments. Jewelry as a gift holds strong levels of sentimental value for most elderly individuals and contributes to the purchase of industry goods. Additionally, beach culture in Florida, specifically in Miami, strongly encourages the purchase of jewelry among all age groups.
The Mid-Atlantic region accounts for an estimated 20.3% of industry establishments and 15.2% of the US population. This region includes the state of New York, which accounts for 9.9% of
all jewelry stores in the country. New York City is home to the Tiffany & Co.’s flagship store, which attracts a substantial amount of tourist attention and spending. Furthermore, the diamond district in New York City is a popular hub for jewelry stores. The average annual income of New York residents is also higher than the national average, increasing demand for industry products in New York City, in particular.
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SOURCE: WWW.IBISWORLD.COM
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Cost Structure Benchmarks
Factors such as company size and reputation, in addition to the type of jewelry a company sells, greatly affect purchase costs and profit for individual operators in the Jewelry Stores industry. Consequently, these cost structure benchmarks represent the average breakdown for industry operators.
Wages Wages are anticipated to account for 14.0% of industry revenue in 2019. Major operators such as Tiffany & Co. pride
themselves on the customer service provided in their stores. Customers greatly value sales associates and in-store gemologists for their expert advice on high-priced purchases. Wages as a share of revenue have risen slightly during the five-year period. Operators have leveraged high-skilled employees against the convenience of online shopping.
Purchases In 2019, purchase costs make up the largest share of industry revenue at
Key Success Factors Ability to control stock on hand Due to the high cost and low volume of stock on hand, successful operators must ensure that they are not overstocked or understocked.
Production of goods currently favored by the market Successful operators must stay up to date on fashion trends and adapt their products to suit them.
Establishment of brand names To capture the market’s attention, retailers must establish their own well-
known brand name or stock brand names that already have a favorable reputation among customers.
Having a good technical knowledge of the product Operators need to have knowledgeable staff, since customers seek design and stone property advice as part of their jewelry shopping experience.
Proximity to key markets Industry establishments located in highly visible areas that contain a large pool of high-income individuals will fare well.
Market Share Concentration
The Jewelry Stores industry exhibits a low level of market share concentration, with the four largest companies representing 25.7% of total industry revenue in 2019. Over the five years to 2019, industry concentration has increased as major players have used their brand names to sustain and expand their respective market share. Merger and acquisition activity by the industry’s primary player, Signet Jewelers Ltd. (Signet), has also been particularly prominent. For example, in May 2014, Signet acquired Zale Corporation for $1.4 billion. The
acquisition increased the company’s market share significantly from 11.1% in 2013, just prior to the current period, to an estimated 14.0% in 2019.
Nevertheless, the industry is highly competitive, with many small companies competing for an insignificant share of the domestic industry. Based on data from the US Census Bureau, IBISWorld estimates that nearly 70.0% of industry players operate as nonemployers. The specialized nature of the work and relatively low start-up costs drive nonemployers and smaller companies to dominate the industry.
Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
Level Concentration in this industry is Low
IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
WWW.IBISWORLD.COM Jewelry Stores in the US October 2019 20
Competitive Landscape
Cost Structure Benchmarks continued
60.9%. Industry operators purchase diamonds, gold and other non-precious metals, in addition to finished jewelry products and watches. Lead industry operator, Signet Jewelers Ltd., cited diamond and gold as its greatest costs, representing 52.0% and 14.0% of the cost of merchandise sold, respectively. The price of these materials fluctuates based on supply and demand, geopolitical events and the activity of major diamond producers. In the early 2000’s, the De Beers Group, through their affiliate the Diamond Trading Company, controlled the price and supply of world diamonds through its quasi monopoly. Now, with a greater breadth of diamond producers, world diamond prices are less volatile, stabilizing purchasing costs for retailers.
Nonetheless, the cost of precious metals skyrocketed in 2011, with the world price of gold surging double digits as Americans flocked to the precious
metal as a safe hold of value. As a result, jewelers experienced much higher input costs; however, prices have contracted considerably from 2013 onward. Companies that vertically integrate operations and manufacture their own jewelry benefit from reduced purchase costs because they do not incur the same markups as traditional retailers. Other retailers enter into forward contracts with suppliers to stabilize costs.
Profit Over the five years to 2019, industry profit has been declining. Profit, measured as earnings before interest and taxes, is expected to account for 3.8% of industry revenue in 2019, representing a decrease from 4.9% in 2014. Commodity prices significantly influence industry profitability. For example, as the price of gold increases, jewelry becomes more expensive to manufacture. Retailers must
Sector vs. Industry Costs
n Profi t n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other
Average Costs of all Industries in sector (2019)
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WWW.IBISWORLD.COM Jewelry Stores in the US October 2019 21
Competitive Landscape
Basis of Competition Internal competition Operators in the Jewelry Stores industry primarily compete on the bases of location, selection, reputation and price. Retailers aim to open locations that will expose them to heavy foot traffic, especially in areas where high-income earners reside because they represent a key demographic for jewelry stores. Operators must also supply
either a wide selection or specialized and unique products to successfully compete with other retailers. Having extensive product offerings, or at least a specialized product line, gives jewelry retailers a competitive edge.
A recognizable name or trademark, such as Tiffany & Co.’s blue box, is important in this competitive industry.
Cost Structure Benchmarks continued
pay more for the pieces they buy from jewelry manufacturers. However, due to high internal and external competition, industry retailers are reluctant to pass along these costs to consumers, resulting in low profitability. When retailers do increase their prices, they experience a drop-in demand from consumers. Over the five years to 2019, the world price of gold has grown marginally and is expected to continue slow growth over the five years to 2024. As a result, profit is expected to decrease slightly. Increased competition, especially from online retailers, will likely contribute to inhibiting profit growth.
Depreciation Depreciation is estimated to account for 0.9% of industry revenue in 2019. This figure has remained relatively steady over the past five years due to the low amount of capital used in this industry. Depreciable assets required by industry operators include displays, cases, decorations, cash registers and computers. Most of the depreciable assets purchased by industry operators are bought at the companies’ inception, which keeps depreciation costs relatively consistent.
Marketing Industry marketing and advertising costs account for 3.1% of total revenue in 2019; however, such expenditures vary widely. To differentiate themselves from their competition, jewelry stores employ
advertising campaigns that target their key demographics. Tiffany & Co. mainly uses print media in newspapers and magazines to attract customers, while Signet Jewelers Ltd. uses TV commercials to promote its Kay and Jared stores.
Rent Jewelry stores are often located in exclusive retail areas with greater access to high net-worth individuals. Many operators also have stand-alone stores, which are substantial in size. Consequently, the average rent cost for jewelry stores is higher than the retail sector average. Rental costs are anticipated to account for 8.7% of industry revenue in 2019.
Utilities Utilities are expected to make up 1.1% of industry revenue. Operators contend with standard expenses associated with heating, cooling and powering their respective establishments. Utility costs vary depending on the size and location of an establishment.
Other Other costs include general administrative expenses and costs associated with research and development. Some jewelry stores incur additional costs to track the raw materials used in their products to ensure that they are ethically sourced. In 2019, other costs are anticipated to comprise 7.5% of total industry revenue.
Level & Trend Competition in this industry is High and the trend is Increasing
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Competitive Landscape
Barriers to Entry Overall, the Jewelry Stores industry’s barriers to entry are low. Success within the industry, however, may prove difficult for potential entrants. Establishing a brand, investing in capital and contracting suppliers are all obstacles to potential entrants. The industry’s larger players hold a competitive advantage over new entrants due to their well- entrenched brand recognition, which could discourage new entrants. For
Basis of Competition continued
The establishment of a brand that defines a company or product line enables operators to capture the consumer’s interest. Operators can achieve brand recognition by providing quality products over time and through exclusive advertising exposure. Jewelry brands also develop recognition based on customer service, gem quality and available selection of products.
Industry operators also compete on price. Given the number of retailers that sell jewelry, having an attractive price sets a store apart from its competition. Promotional activity also enhances a retailer’s ability to compete on price by offering the consumer a limited-time low price without changing the company’s overall structure or image.
External competition The Jewelry Stores industry also competes with nonjewelry retailers for consumer dollars. Many operators in the Department Stores industry (IBISWorld report 45211) and the Warehouse Clubs and Supercenters industry (IBISWorld report 45291) also offer jewelry. These retailers are attractive to consumers who may be more limited in time and income. The format offers a one-stop-shop for the busy customer, while low price points from big-box retailers attract lower- income consumers. According to a 2018 report by National Jeweler Group,
Walmart Inc. (Walmart) had the second- greatest retail jewelry sales in 2017. Still behind Signet Jewelers Ltd., the group sold $3.2 billion worth of watches and jewelry. Following Walmart was Costco Wholesale Corporation (Costco); the warehouse club reported jewelry and watch sales of $1.5 billion. Very few industry operators made the top 10 of the National Jeweler Group’s lists. Besides Walmart and Costco, large department stores such as Macy’s Inc. and online retailers such as Amazon.com Inc. reigned supreme.
Online jewelry retailers have presented a significant threat to the industry over the past five years and will continue to do so as they increase in popularity. Internet-only stores offer many of the same pieces as brick-and-mortar retailers, but they provide the added convenience of shopping from home. Consumers can also quickly compare prices online, ensuring that they get the best deal possible. Furthermore, online- based jewelry retailers can often offer lower prices than brick-and-mortar stores due to their lower overhead costs. Larger industry operators, such as Signet Jewelers Ltd. and Tiffany & Co., have been able to take advantage of online sales to promote and sell their products. However, rising internet sales have negatively affected many smaller, single- establishment retailers.
Level & Trend Barriers to Entry in this industry are Low and Steady
Barriers to Entry checklist
Competition High Concentration Low Life Cycle Stage Mature Capital Intensity Low Technology Change Low Regulation and Policy Light Industry Assistance Low
SOURCE: WWW.IBISWORLD.COM
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Competitive Landscape
Industry Globalization
The level of foreign ownership within the Jewelry Stores industry is low, but increasing. International trade is conventionally recorded at the manufacturing level, but jewelry imports affect this industry’s pricing as well. In the upstream Jewelry Manufacturing
industry (IBISWorld report 33991), imports meet 100.0% of domestic demand. This means that domestic jewelry stores are highly affected by fluctuating exchange rates, political conditions in source countries and international supply contracts.
Barriers to Entry continued
example, Tiffany & Co. is synonymous with exclusive jewelry in the United States. These top operators have strong brands and widely accepted images that some independent and locally owned jewelry stores do not possess.
While rent and depreciation costs are low compared with other cost categories within the industry, potential entrants must invest a relatively high amount up front to properly establish their operations. Aspiring jewelry retailers may
be hindered in their ability to find suitably sized premises or even funding for such ventures. Over time, large industry players develop strong relationships with wholesale distributors, ensuring they receive the most competitive prices on gems. They are then able to pass these prices on to customers, helping them maintain and expand their market share. New retailers entering the industry may not find favorable prices outside of an established distribution network.
Level & Trend Globalization in this industry is Low and the trend is Increasing
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Player Performance Formerly known as the Ratner Group, Signet Jewelers Ltd. (Signet) operates as one of the world’s largest specialty jewelry retailers with stores across the United States, Canada and the United Kingdom. The company, which was founded in 1949, is now headquartered in Hamilton, Bermuda, and recorded $6.2 billion in total company revenue in fiscal 2018 (year-end February, latest data available). Signet’s May 2014 acquisition of former major player Zale Corporation (Zales) nearly doubled the company’s total store count and strongly increased the company’s total sales. The company now operates 3,334 stores worldwide and employs 22,989 workers.
The company operates under several different Jewelry Stores industry-relevant brands, including Kay Jewelers and Jared the Galleria of Jewelry. Kay Jewelers is a mall-based division of Signet that targets households with average annual incomes
ranging between $35,000 and $100,000. Signet operates other mall stores, usually located in the same space as its Kay Jewelers’ locations, which cater to more value-conscious consumers. Jared the Galleria of Jewelry, the company’s higher- end retail counterpart to Kay Jewelers, targets households with incomes ranging between $50,000 and $150,000. These stores are off-mall retailers that sell jewelry typically priced above $700.00. The company’s main strategy is to provide high-quality customer service, complete with knowledgeable staff and on-site design and repair centers. In 2018, the company generated 48.0% of its sales in the Bridal department (latest data available); this includes products such as engagement rings, wedding bands and anniversary gifts. Fashion jewelry and, to a lesser extent, watches made up a significant portion of the group’s sales as well.
Major Companies Signet Jewelers Ltd. | Tiffany & Co. | Other Companies
79.9% Other
Signet Jewelers Ltd. 14.5%
Tiffany & Co. 5.6%
SOURCE: WWW.IBISWORLD.COM
Major Players (Market Share)
Signet Jewelers Ltd. Market Share: 14.5% Industry Brand Names Kay Jewelers Jared the Galleria of Jewelry Zale Jewelers Ultra Diamonds Piercing Pagoda
Signet Jewelers Ltd. (US industry-specifi c segment) - fi nancial performance*
Year** Revenue
($ million) (% change) Operating Income
($ million) (% change)
2014-15 4,367.3 N/C 439.0 N/C
2015-16 4,967.8 13.7 533.7 21.6
2016-17 4,897.6 -1.4 583.3 9.3
2017-18 4,701.7 -4.0 436.0 -25.3
2018-19 4,554.9 -3.1 -557.5 -227.9
2019-20 4,388.5 -3.7 196.1 -135.2
*Estimates; **Year-end February SOURCE: ANNUAL REPORT AND IBISWORLD
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Major Companies
Player Performance Founded in 1837 by Charles Lewis Tiffany and headquartered in New York City, Tiffany and Co. (Tiffany) is a manufacturer and retailer of fine jewels, including diamonds, timepieces and sterling silver products. The company has operations across North America, South America, Europe and Asia, with 321 retail locations total. Tiffany’s online store reaches customers worldwide; however, its US retail stores account for the majority of sales. In 2018, the company employed 14,200 full-time and part-time workers and reported $4.4 billion in total company revenue (latest data available).
In 2018, Tiffany spent 8.9%% of its total revenue on advertising and marketing costs, placing prominent ads in print publications, sales websites, in-store and window displays and at marketing events (latest data available). Tiffany, branded as sophisticated and elegant, gained much of its notoriety by being featured in the 1961 film Breakfast at Tiffany’s starring Audrey Hepburn. All Tiffany jewelry is packaged in the distinctive Tiffany Blue Box, which has been a part of the company’s trademark since its inception. Moreover, the company’s marketing strategy includes
Player Performance continued
Signet also participates in the online retail sector though its acquisition of R2Net, the parent company of jewelry retailer JamesAllen.com and Segoma Imaging Technologies. The company has invested heavily in its omnichannel capabilities and hopes to increase digital sales as a percentage of total revenue to 15.0% by 2021. In 2018, digital sales attributed 10.9% to company revenue (latest data available).
Financial performance Over the five years to fiscal year 2020, Signet’s industry-relevant revenue is
expected to grow at an annualized rate of 0.1% to total $4.4 billion. Such growth is largely attributable to the acquisition of Zales. Signet’s US sales have been declining slowly, with industry-relevant revenue steadily growing. The company cites its branded and exclusive jewelry lines, including its Neil Lane Bridal collection and Charmed Memories line, as drivers of this increase. Revenue is expected to grow as Signet plans to open new stores and remodel existing ones in an effort to further enhance revenue and profit.
Tiffany & Co. Market Share: 5.6%
Tiffany & Co. (US industry-specifi c segment) - fi nancial performance*
Year Revenue
($ million) (% change) Operating Income
($ million) (% change)
2014 1,758.6 N/C 377.2 N/C
2015 1,669.8 -5.0 325.1 -13.8
2016 1,573.0 -5.8 293.4 -9.8
2017 1,617.3 2.8 313.9 7.0
2018 1,708.9 5.7 304.0 -3.2
2019 1,699.7 -0.5 301.4 -0.9
*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
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Major Companies
Other Company Performance
Generating $247.8 billion in revenue in 2018 (latest data available), Berkshire Hathaway Inc. (Berkshire) operates as a diverse holding company with subsidiaries ranging from insurance to transport and retail. Industry-specific subsidiaries include Ben Bridge Jeweler, Borsheims Fine Jewelry and Helzberg Diamonds. The company also owns Richline Group, a leading jewelry manufacturer that helps its industry-specific companies to secure favorable product pricing. Founded in 1912, Ben Bridge Jeweler employs 920 workers through its Seattle headquarters in addition to its 95 stores across the United States and Canada. In 2017, Ben Bridge Jewelers’ jewelry and watch sales
totaled $294 million (latest data available). Borsheims, founded in 1948 and headquartered in Omaha, NE, employs 154 people and operates only one location. Established in 1915 and based in Kansas City, MO, Helzberg Diamonds boasts 2,117 employees and operates 217 stores nationwide that specialize in diamonds. In 2019, IBISWorld estimates that revenue from the holding company’s industry-specific stores will total $1.1 billion. Sales are primarily driven by Helzberg Diamonds, which reported $910.0 million in jewelry and watch sales in 2017, making it one of the largest jewelry retailers in North America (latest data available).
Player Performance continued
occasionally hosting promotional events for its products. Tiffany manufactures the majority of its jewelry within its own facilities to ensure high quality and will typically outsource only nonjewelry items.
Today, Tiffany is one of the only companies that meets the Human Rights Watch’s standards for ethical sourcing of materials. The company is able to provide a detailed record of where it purchases its diamonds and gold, and thus prove the ethical standards with which these goods were obtained. Tiffany’s commitment to supplying cruelty-free jewelry will likely benefit the company as consumers become increasingly aware of the human rights violations associated with diamond and gold sourcing.
Financial performance While Tiffany has exhibited strong overall financial performance over the five years
to 2019, IBISWorld estimates that the company’s industry-specific revenue will decline at an annualized rate of 0.7% to $1.7 billion due to shrinking US presence. However, the company revamped several of its key retail locations. At Tiffany’s flagship store in New York City, customers can now enjoy a meal at The Blue Box Café, making breakfast at Tiffany’s a reality. In addition to the publicity gained from store renovations, the company’s new product offerings have counterbalanced declines in sales of engagement jewelry. The introduction the Tiffany HardWear jewelry collection and the Metro watch collection are expected to boost sales. The company has also introduced a signature fragrance and a Home and Accessories collection. Moving forward, Tiffany plans to focus on its online sales by enhancing its internet platforms, which would further diminish its presence in the industry.
Berkshire Hathaway Inc. Market Share: 3.7% Industry Brand Names Borsheims Fine Jewelry Ben Bridge Jeweler Helzberg Diamonds
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Major Companies
Other Company Performance
Founded in 1988 and headquartered in Geneva, Switzerland, Compagnie Financière Richemont SA (Richemont) operates in every major region and employs over 35,000 individuals. Richemont serves as a holding company for some of the world’s leading luxury goods companies, referred to by the group as Maisons. The company is broken down into four business segments: Jewellery Maisons, which comprises the Cartier and Van Cleef & Arpels brands; Specialty Watchmakers, which includes brands such as Piaget, Baume and Mercier, IWC Schaffhausen and many others; Online
Distributors; and Other, which includes retail brands such as Chloe and Montblanc. In March 2018, the group acquired YOOX NET-A-PORTER GROUP, a leading online luxury retailer, of which it previously owned 49.0% of shares. Through this acquisition, the group hopes to expand its omnichannel activities. Nonetheless, brick-and-mortar sales remain the group’s dominant source of revenue. The group operates in the industry through its Jewellery Maisons and Specialty Watchmakers areas. In fiscal 2020, IBISWorld projects Richemont’s industry- relevant revenue to reach $1.1 billion.
Compagnie Financiere Richemont SA Market Share: 3.4% Industry Brand Names Cartier Van Cleef & Arpels Baume & Mercier IWC Schaffhausen Piaget Vacheron Constantin Roger Dubuis
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Capital Intensity The Jewelry Stores industry has a low level of capital intensity. IBISWorld estimates that for every dollar spent on labor, $0.06 is allocated to capital costs. This industry has very low capital costs due to the little equipment and technology required to operate jewelry stores. The small amount of capital investment in the industry is largely accounted for by store construction and decoration. Depreciable asset purchases include displays, cash registers, glass cases, safes, security cameras and computers.
Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Capital Intensity
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SOURCE: WWW.IBISWORLD.COM Dotted line shows a high level of capital intensity
Capital units per labor unit
Jewelry StoresRetail TradeEconomy
Level The level of capital intensity is Low
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Operating Conditions
Revenue Volatility The Jewelry Stores industry has exhibited low revenue volatility over the five years to 2019. Overall economic conditions, such as per capita disposable income and consumer sentiment, significantly affect
industry revenue because they dictate the level of discretionary spending a consumer can put toward jewelry purchases. In recent years, growth in disposable income, coupled with price competition from
Technology and Systems
There is little technological change that directly pertains to the Jewelry Stores industry. As many industry operators repair jewelry in addition to selling it, advancements in laser welding have had a slight effect on industry activities. Laser welding makes more technical and detailed repairs possible by welding metals in much smaller spaces than was previously possible. Laser repairs have made repairs less noticeable, neater and stronger.
Technological advancements within the retail sector have also affected industry operations. Notable changes include the introduction of electronic data interchange (EDI) and the ongoing shift to internet sales. EDI is the electronic exchange of information between stores in the industry and between operators at different stages of the supply chain. This technology has improved efficiency for retailers and reduced the need for human labor. At the wholesale level, the introduction of
computerized inventory management systems has enabled jewelry retailers to minimize their carrying stock. This factor reduces their insurance and security expenses.
The expansion of the internet has hurt the industry by increasing the scope of internet-only retailers. Consumers can now purchase jewelry online, from the comfort of their own home or office, which poses a threat to traditional brick-and-mortar establishments. Large companies, such as Tiffany & Co. and Signet Jewelers Ltd., can take advantage of the internet to sell their products online. However, smaller, single- establishment operators do not profit as strongly by selling their products online, and consequently have been largely hurt by the advance of online sales. At the manufacturing level, little technological innovation has occurred over the past five years that has significantly affected the Jewelry Stores industry.
Level The level of technology change is Low
Level The level of volatility is Low
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Operating Conditions
Industry Assistance Operators in the Jewelry Stores industry do not receive any government subsidies or grants. However, tariffs imposed on jewelry raise the price of imported goods, which can make them more expensive to the retailer. Furthermore, several associations aim to assist the industry as well. For example, the Responsible Jewellery Council (RJC) is a nonprofit organization established with the purpose of upholding ethical jewelry
practices along the supply chain to reinforce consumer confidence in jewelry. The association has a certification system, which requires participating members to be audited by third-party auditors to ensure their compliance with RJC standards. To pass RJC standards, every member business that operates with the industry store must be examined, from mine to transport to retail.
Regulation and Policy The Jewelry Stores industry experiences light regulation. The Responsible Jewellery Council (RJC) implemented a Chain of Custody (CoC) Certification in March 2012. The CoC is used to support responsible mining practices, identify the provenance of jewelry materials and enhance a jewelry retailer’s reputation through responsible sourcing. While CoC Certification is not required, it helps give customers assurance that their jewelry is conflict-free and helps retailers comply with the Dodd-Frank Act. Section 1502 of the Dodd-Frank Act requires public retailers to provide disclosures about the use of specified conflict minerals.
Section 352 of the revised Patriot Act is designed to assist US financial institutions, including dealers of precious metals, stones and jewels, in detecting and preventing the funding of terrorism and criminal activities through money laundering. A dealer is an individual who purchases more than
$50,000 in goods or receives more than $50,000 in gross proceeds from selling in any given year. That category includes retailers, wholesalers, traders, manufacturers, refiners and suppliers. The only items not included under the product definition of precious gems or metals are tanzanite and 10-karat gold.
Zale Corporation, prior to its acquisition, was a defendant in three class action lawsuits in 2013 regarding the violation of wage and labor laws, reflecting the importance of adherence to local, state and federal labor laws. Federal and state laws that impose requirements on credit accounts and limitations on finance charges affect the Jewelry Stores industry. In addition, federal and state laws that influence marketing practices also affect the industry. Lastly, industry players are also subject to the jurisdiction of federal, state and other taxing authorities.
Revenue Volatility continued
alternative jewelry outlets and online stores, has caused revenue to decline at a slow annualized rate over the five years to
2019. During the current period, revenue grew as much as 0.6% in 2017 and declined as much as 5.3% in 2016.
Level & Trend The level of Regulation is Light and the trend is Steady
Level & Trend The level of Industry Assistance is Low and the trend is Steady
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Key Statistics Revenue
($m)
Industry Value Added
($m) Establish-
ments Enterprises Employment Exports Imports Wages ($m)
Domestic Demand
World price of gold
($ per troy ounce) 2010 30,441.1 6,112.7 67,832 61,096 166,249 -- -- 4,408.0 N/A 1225.5 2011 33,433.3 6,925.1 67,054 60,517 166,072 -- -- 4,517.9 N/A 1569.6 2012 33,721.1 6,976.2 67,427 60,861 167,534 -- -- 4,649.4 N/A 1668.5 2013 33,793.1 6,880.3 66,917 60,373 170,126 -- -- 4,582.4 N/A 1410.8 2014 33,994.5 6,566.8 68,301 61,850 170,819 -- -- 4,629.1 N/A 1266.3 2015 33,903.1 6,574.4 66,908 60,475 167,476 -- -- 4,675.8 N/A 1160.6 2016 33,140.9 6,371.7 63,846 57,999 162,920 -- -- 4,548.9 N/A 1248.2 2017 32,560.5 6,043.3 63,150 57,406 161,786 -- -- 4,480.4 N/A 1257.8 2018 30,828.9 5,753.4 62,165 56,551 160,624 -- -- 4,303.7 N/A 1270.9 2019 30,164.1 5,622.9 61,235 55,736 157,750 -- -- 4,223.5 N/A 1286.9 2020 29,188.1 5,441.4 59,946 54,611 153,593 -- -- 4,107.1 N/A 1301.6 2021 27,966.1 5,206.4 58,388 53,257 148,333 -- -- 3,960.2 N/A 1319.4 2022 26,832.3 4,985.8 56,667 51,731 143,105 -- -- 3,816.4 N/A 1342.2 2023 25,895.7 4,805.4 55,080 50,314 138,524 -- -- 3,692.0 N/A 1326.6 2024 25,025.4 4,637.1 53,650 49,038 134,235 -- -- 3,575.8 N/A 1312.1 Sector Rank 30/63 28/63 14/63 10/63 31/63 N/A N/A 27/63 N/A N/A Economy Rank 307/694 381/694 117/694 112/694 204/694 N/A N/A 319/694 N/A N/A
IVA/Revenue (%)
Imports/ Demand
(%)
Exports/ Revenue
(%)
Revenue per Employee
($’000) Wages/Revenue
(%) Employees
per Est. Average Wage
($)
Share of the Economy
(%) 2010 20.08 N/A N/A 183.11 14.48 2.45 26,514.45 0.04 2011 20.71 N/A N/A 201.32 13.51 2.48 27,204.47 0.04 2012 20.69 N/A N/A 201.28 13.79 2.48 27,751.98 0.04 2013 20.36 N/A N/A 198.64 13.56 2.54 26,935.33 0.04 2014 19.32 N/A N/A 199.01 13.62 2.50 27,099.44 0.04 2015 19.39 N/A N/A 202.44 13.79 2.50 27,919.22 0.04 2016 19.23 N/A N/A 203.42 13.73 2.55 27,921.07 0.04 2017 18.56 N/A N/A 201.26 13.76 2.56 27,693.37 0.03 2018 18.66 N/A N/A 191.93 13.96 2.58 26,793.63 0.03 2019 18.64 N/A N/A 191.21 14.00 2.58 26,773.38 0.03 2020 18.64 N/A N/A 190.04 14.07 2.56 26,740.15 0.03 2021 18.62 N/A N/A 188.54 14.16 2.54 26,698.04 0.03 2022 18.58 N/A N/A 187.50 14.22 2.53 26,668.53 0.02 2023 18.56 N/A N/A 186.94 14.26 2.51 26,652.42 0.02 2024 18.53 N/A N/A 186.43 14.29 2.50 26,638.36 0.02 Sector Rank 27/63 N/A N/A 28/63 21/63 49/63 24/63 28/63 Economy Rank 529/694 N/A N/A 439/694 420/694 585/694 571/694 381/694
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data.
Revenue (%)
Industry Value Added
(%)
Establish- ments
(%) Enterprises
(%) Employment
(%) Exports
(%) Imports
(%) Wages
(%)
Domestic Demand
(%)
World price of gold
(%) 2011 9.8 13.3 -1.1 -0.9 -0.1 N/A N/A 2.5 N/A 28.1 2012 0.9 0.7 0.6 0.6 0.9 N/A N/A 2.9 N/A 6.3 2013 0.2 -1.4 -0.8 -0.8 1.5 N/A N/A -1.4 N/A -15.4 2014 0.6 -4.6 2.1 2.4 0.4 N/A N/A 1.0 N/A -10.2 2015 -0.3 0.1 -2.0 -2.2 -2.0 N/A N/A 1.0 N/A -8.4 2016 -2.2 -3.1 -4.6 -4.1 -2.7 N/A N/A -2.7 N/A 7.5 2017 -1.8 -5.2 -1.1 -1.0 -0.7 N/A N/A -1.5 N/A 0.8 2018 -5.3 -4.8 -1.6 -1.5 -0.7 N/A N/A -3.9 N/A 1.0 2019 -2.2 -2.3 -1.5 -1.4 -1.8 N/A N/A -1.9 N/A 1.3 2020 -3.2 -3.2 -2.1 -2.0 -2.6 N/A N/A -2.8 N/A 1.1 2021 -4.2 -4.3 -2.6 -2.5 -3.4 N/A N/A -3.6 N/A 1.4 2022 -4.1 -4.2 -2.9 -2.9 -3.5 N/A N/A -3.6 N/A 1.7 2023 -3.5 -3.6 -2.8 -2.7 -3.2 N/A N/A -3.3 N/A -1.2 2024 -3.4 -3.5 -2.6 -2.5 -3.1 N/A N/A -3.1 N/A -1.1 Sector Rank 53/63 55/63 52/63 52/63 50/63 N/A N/A 50/63 N/A N/A Economy Rank 643/694 637/694 618/694 612/694 630/694 N/A N/A 632/694 N/A N/A
Annual Change
Key Ratios
Industry Data
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Jewelry Stores in the US October 2019 32
Apr 2017 - Mar 2018 by company revenue Apr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium Large Mar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 2.0 2.3 2.1 2.1 2.2 1.8 2.3 Quick Ratio 0.2 0.3 0.2 0.3 0.3 0.2 0.3 Sales / Receivables (Trade Receivables Turnover) 254.4 131.6 163.5 182.2 n/c 99.5 51.0
Days’ Receivables 1.4 2.8 2.2 2.0 0.4 3.7 7.2 Cost of Sales / Inventory (Inventory Turnover) 1.3 1.3 1.4 1.4 1.3 1.5 1.6
Days’ Inventory 280.8 280.8 260.7 260.7 280.8 243.3 228.1 Cost of Sales / Payables (Payables Turnover) 6.6 6.2 6.9 7.0 7.2 6.5 6.7
Days’ Payables 55.3 58.9 52.9 52.1 50.7 56.2 54.5 Sales / Working Capital 4.2 3.8 3.9 4.0 3.6 5.3 3.7
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) / Interest 4.7 5.6 5.2 4.7 4.1 4.6 8.6
Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 3.2 1.8 2.5 2.6 n/a 2.5 n/a
Leverage Ratios
Fixed Assets / Net Worth 0.2 0.2 0.2 0.2 0.2 0.3 0.4 Debt / Net Worth 1.4 1.2 1.3 1.3 1.2 1.4 2.1 Tangible Net Worth 37.8 43.0 39.5 39.0 42.4 38.5 21.3
Operating Ratios
Profit before Taxes / Net Worth, % 13.9 10.1 10.5 10.1 9.8 9.9 13.5 Profit before Taxes / Total Assets, % 5.0 4.5 4.5 4.3 4.1 3.6 7.2 Sales / Net Fixed Assets 23.5 24.5 24.4 24.8 32.1 19.7 10.6 Sales / Total Assets (Asset Turnover) 1.6 1.6 1.6 1.6 1.5 1.8 1.6
Cash Flow & Debt Service Ratios (% of sales)
Cash from Trading 40.8 39.3 42.3 42.5 44.1 36.6 47.7 Cash after Operations 3.8 3.7 3.8 4.9 4.9 4.6 7.2 Net Cash after Operations 3.6 3.7 4.1 5.9 6.2 4.4 7.9 Cash after Debt Amortization 0.2 0.8 0.4 1.4 1.2 1.1 3.8 Debt Service P&I Coverage 2.0 2.2 1.8 2.3 2.4 2.0 8.1 Interest Coverage (Operating Cash) 3.4 3.3 3.6 5.6 4.8 5.3 10.2
Assets, %
Cash & Equivalents 8.8 9.3 9.4 10.2 11.8 7.7 6.3 Trade Receivables (net) 5.2 5.3 4.1 4.6 3.6 5.4 8.2 Inventory 64.8 66.0 67.7 64.3 64.9 66.9 55.3 All Other Current Assets 1.9 1.7 2.3 1.8 1.5 2.4 2.3 Total Current Assets 80.7 82.4 83.4 80.8 81.8 82.5 72.1 Fixed Assets (net) 11.2 10.6 10.2 10.5 9.2 10.8 17.1 Intangibles (net) 2.0 1.7 2.0 3.1 3.5 0.3 7.1 All Other Non-Current Assets 6.2 5.3 4.4 5.6 5.6 6.3 3.7 Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total Assets ($m) 3,400.7 3,140.6 4,258.7 3,349.2 322.9 656.7 2,369.7
Liabilities, %
Notes Payable-Short Term 11.5 8.9 10.4 9.8 9.3 10.8 10.4 Current Maturities L/T/D 2.4 1.3 1.8 1.9 2.0 1.5 1.8 Trade Payables 19.3 17.3 16.7 15.7 14.6 19.7 12.9 Income Taxes Payable 0.2 0.2 0.2 0.1 0.1 0.1 0.1 All Other Current Liabilities 9.7 11.3 12.6 11.8 10.9 14.3 12.1 Total Current Liabilities 43.0 38.9 41.6 39.2 36.9 46.4 37.2 Long Term Debt 9.3 8.4 10.7 10.9 9.0 7.7 28.3 Deferred Taxes 0.1 0.2 0.1 0.1 n/a 0.1 0.8 All Other Non-Current Liabilities 7.8 7.8 6.1 7.6 8.3 7.0 5.3 Net Worth 39.8 44.7 41.5 42.1 45.9 38.8 28.4 Total Liabilities & Net Worth ($m) 3,400.7 3,140.6 4,258.7 3,349.2 322.9 656.7 2,369.7
Maximum Number of Statements Used 244 261 246 214 137 52 25
Industry Financial Ratios
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online.
WWW.IBISWORLD.COM Jewelry Stores in the US October 2019 33
Jargon & Glossary
BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.
CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.
EXPORTS Total value of industry goods and services sold by US companies to customers abroad.
IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.
INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.
INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.
Industry Jargon
IBISWorld Glossary
ASPIRATIONAL SHOPPER A consumer who makes luxury purchases priced below $300 in order to satisfy their need for shopping on a tight budget.
BIG-BOX STORE A retail store that is differentiated by its sheer size and large range of products, including electronics, household goods and other consumer products.
BRICK AND MORTAR A store that has a physical presence and location, as opposed to an online retailer.
CUT The angles and proportions created in transforming a rough diamond into a polished diamond. A diamond that is well-cut is more valuable than a diamond that is not.
ELECTRONIC DATA INTERCHANGE (EDI) The transmission of data between businesses from one computer system to another.
GEMOLOGIST An expert in precious stones, who can often identify and evaluate types of gems.
KARAT A unit of measurement that describes the purity of gold.
WWW.IBISWORLD.COM Jewelry Stores in the US October 2019 34
Jargon & Glossary
NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.
PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.
VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.
IBISWorld Glossary continued
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