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Israeli Diamond Portal Reports: How has the Economic Crisis Affected Jewelry Consumption Habits?
By Israeli Diamond Portal Dated: May 11, 2009
The market for luxury items is usually the first to suffer during times of financial crisis, mainly due to belt-tightening by consumers, especially wealthy ones. Drop in Demand for Luxury Items
A recent study conducted by the American Affluence Research Center indicates a historic low in demand for luxury items, at a time when more than two-thirds of the target audience in the US said they do not plan to invest in even one of the eight central categories in this segment. In addition, those surveyed said they do not expect an improvement in their financial situation this year. This position of wealthy consumers – who serve as an indicator for economic conditions – is disconcerting, mainly because they emphasize retention of capital and not growth.
Similar findings can be found in a study conducted by the JCOC. The study showed that the average American will not spend any money in the near future on fine jewelry. Fifty-five percent of those polled, said that they do not know when they will again buy non-essential goods and services, and only 10% said they will do so within six months. Only 5% of them said that fine jewelry will be the first item they will buy once they do return to purchasing luxury items – another discouraging sign for the industry.
New Trend: Almost New Jewelry
One of the most significant trends during hard economic times is the steep rise in the second-hand jewelry trade. The auction website eBay recently reported that in the past three months there was a rise of 200% in the sales of "almost new" engagement rings on the website. The average price of an engagement ring is estimated at about 31 British Pounds, thus the allure for young couples.
A large number of jewelry retailers are experiencing this trend. Many of them are reporting that their costumers are asking for more and more second-hand rings and jewels, and not only due to the price. Many believe that old jewelry offers better value for the money.
But this is not an entirely new trend. Already five months ago it was reported that the financial crisis brought to record demand for secondhand diamond rings. This is also due to the fact that women these days
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are more willing to sell engagement rings and wedding bands. If in the past they would upgrade old engagement rings to pendants or bracelets, today they simply prefer to pawn them. In addition, the fact that the prices in secondhand websites are generally better than the prices jewelers or wholesalers got in the past and the nature of the trade (the supply and mostly the demand) all contribute to the expansion of this trend.
Selling Gold Jewelry
The value of gold has risen sharply these days as many investors are seeking a hedge against inflation. A recent report by the independent research agency GFSM forecasted that the price of gold could reach $1,000 and even $1,100 for an ounce of gold, a fact that increases the precious metal’s attraction.
The rise in the price of gold has also awakened the interest of consumers, as many of them choose to take advantage and sell gold jewelry in their possession. The sellers are likely to receive 65%-70% of the value of the molten gold, thus raising cash in order to cope with the economic crisis.
Jewelry Trade-in
The recent consumer tendency to sell old jewelry, coupled with their wish to save during purchases, has not gone unnoticed by expert jewelers. A first hint of this can be seen in the recent announcement that H. Stern will allow customers to pay up to 20% of the cost of their purchase of the company's new watches with old gold jewelry. This is a first step on the part of the luxury jewelry industry seeking to take advantage of the consumers' willingness to part with old jewelry. The company will pay up to 25% more than the market value for the old jewelry, and will simultaneously display new jewelry in an effort to increase its sales.
Gold Parties
A more bizarre trend taking place in the United States these days is "gold parties." These gatherings are similar to the old Tupperware parties, but with one difference; the participants sell their unwanted gold instead of plastic containers. The participants arrive at the "party" with their unwanted gold and jewelry, and try to sell them. The demand for secondhand jewelry and the wish to trade-in useless items for cash have made this trend increasingly popular. However, this trend is not without risk. These events are conducted without a license to sell secondhand precious metals and the participants cannot be sure they received the "real thing."
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Reasons for Optimism
During an exclusive interview with the IDI Portal, De Beers’ Executive Director Stephen Lussier said that a report by the group indicates that spending patterns of consumers have become more sophisticated. According to Lussier: "These include increased scrutiny of product quality, authenticity and value for money; a greater appreciation of artisanship and fine craftsmanship; renewed calls for exclusivity and deeper brand experiences; and finally a heightened awareness of social and environmental responsibility.” Lussier believes that these factors will affect the luxury jewelry market in the future and will present new opportunities for the brand names because of the luxury consumers' tendency to "gravitate toward quality, toward fewer but better products that represent genuine value, and deliver on a promise that endures over a lifetime." Lussier said that "diamonds occupy a unique role in this new reality."
A recent study by Idex-Onlline also arouses optimism. The study indicates signs of improvement in the U.S. market, and states that diamond and jewelry sales during January-February 2009 were generally around 90% of the sales figures recorded in the previous year. Although these figures are not completely encouraging, they are not the doomsday stories often reported in the media.
During the past two months, there has been steady growth in demand for jewelry in the US both at specialty retailers and in other stores. The total of all jewelry sales – in retail stores, discount stores, specialty jewelers, and all sales points – stands at around 97%-99% of sales figures during the previous year. For specialty jewelers, the trend is similar: Sales have steadied after the dramatic plunges during the 2008 holiday season.
Consumers of luxury items have reacted in several ways to the worsening financial conditions. As we have seen, the most prominent trends are a rise in popularity of second-hand jewelry, a willingness to sell old gold jewelry, and the possibility of trading-in old jewelry. New consumers and the shift in their consumption patterns are evident in the jewelry market and it would seem that those who embrace these changes sooner rather than later may well stay ahead of the game and take advantage of the situation to their own advantage, both today and in the future.
By: Uri Haviv and Avida Landau ### The Israeli Diamond Industry organizations Behind the Israeli Diamond Industry are a group of vital and dynamic institutions. Each one is responsible for a different aspect of the industry’s activities.
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Category Tags Email Phone Address State/Province Country
Business diamond, israeli diamond Click to email author 972306126485 ramat gan israel Tel Aviv Israel
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