The glittering future of luxury jewelry
Arunava Mukherjee- 18th Jun 2020
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An industry is defined by the revenue it generates. And the opportunity in the market for the industry is measured by the growth the industry can secure. A high year on year growth not only gives a healthy sign of the things to come but also signals that the industry is tapping into new markets and opportunities are in abundance. Fast growth can have consequences as well. A good consequence is attracting investors as profits skyrocket. A bad consequence is that once most of the market is covered and there are enough big players in the market, the industry becomes saturated and reaches a state of equilibrium due to perfect competition. Let’s take a look at the Luxury Jewellery market to understand where it stands today and try to understand the threats and opportunities it currently offers to the players.
Market & Growth
As of 2018, the luxury jewelry industry was estimated at USD 39.33 billion with a forecasted CAGR of 7.6% from 2019 to 2025. This estimate was given by a market analysis report by Grand View Research in May 2019.
At the time of this report, the market was going strong and manufacturers were pushing new products and designs to fulfill consumer demands. Hence the forecast never imagined the revenue to plateau, let alone drop. However, no research can consider something as drastic as a pandemic. And COVID has had a large-scale impact on every industry and market. Hence, the above figure cannot give a realistic view of the market. However, it is necessary to note the kind of faith analysts had in the market potential. Now let’s look at the actual figure of how the industry is doing in terms of the revenue. Statista.com, in its analysis of luxury jewelry, has estimated revenue of USD 22.932 million in 2020, a 17.8% drop year-on-year. Now the situation is primarily attributed to the pandemic. But unfortunately, it is not the only culprit. Sure, the pandemic has disrupted regular business and sale, but it has also exposed many deep-buried skeletons of inefficiencies. The revenue growth figure below shows that even after the pandemic there will be a drop in revenue growth.
Credits: Statista.com
Growth of branded jewelry
According to a report by McKinsey, “Branded items already account for 60 percent of sales in the watch market. While branded jewelry accounts for only 20 percent of the overall jewelry market today, its share has doubled since 2003. Branded jewelry will claim a higher share of the market by 2020, but their views differ on how quickly this shift will occur. Most expect that the branded segment will account for 30 to 40 percent of the market in 2020.”
McKinsey in its report mentions three types of consumers driving the growth of luxury branded jewelry.
- “new money” consumers who wear branded jewelry to show off their newly acquired wealth (in contrast to “old money” consumers, who prefer heirlooms or estate jewelry)
- emerging-market consumers, for whom established brands inspire trust and the sense of an upgraded lifestyle
- young consumers who turn to brands as a means of self-expression and self-realization
Market Trends
Despite the downturn in revenue in the current year, Luxury Jewellery is what analyst term as a Niche segment. And such segments always have buyers because of the appeal the commodity has to them. The prime attributable cause of the slump in revenue growth is undoubtedly the COVID-19 pandemic. But there is always more to it. The niche segment has a characteristic hunger for customizability. And this is no different. It will be a driver of growth once the market resumes operations post lockdown. Players will try to take the stage and sell off their inventory as early as they can to recover their working capital. But in doing so, no compromise can be made in listening to the needs of the demand side. The supply chain is going to be a defining factor to take the growth train out of the puddle and back on track. Overall, as bleak the current scenario may seem for the Luxury Jewellery industry, there is still a vast opportunity to grow for players. The saturation is still a far way off and with the right measures there are values to be added and there is money to be made.
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