The jewelry industry seems poised for a glittering future. Annual global sales of €148 billion are expected to grow at a healthy clip of 5 to 6 percent each year, totaling €250 billion by 2020. Consumer appetite for jewelry, which was dampened by the global recession, now appears more voracious than ever.
But the industry is as dynamic as it is fast growing. Consequential changes are under way, both in consumer behavior as well as in the industry itself. Jewelry players can’t simply do business as usual and expect to thrive; they must be alert and responsive to important trends and developments or else risk being left behind by more agile competitors.
To chart the most likely course of the jewelry sector, we analyzed publicly available data, studied companies’ annual reports, and interviewed 20 executives at global fine-jewelry and fashion-jewelry companies and industry associations. Our research indicates that five trends that shaped an adjacent industry—apparel—over the past 30 years are becoming evident in the jewelry industry as well, and at a much faster pace: internationalization and consolidation, the growth of branded products, a reconfigured channel landscape, “hybrid” consumption, and fast fashion. In this article, we discuss how these trends could affect the future of jewelry and what jewelry companies should do to prepare.
Internationalization of brands and industry consolidation
In the 1980s, national apparel brands were the clear leaders in their respective markets: C&A in Germany, for example, and Marks & Spencer in the United Kingdom. Today, many national brands have been outpaced by international brands such as Zara and H&M. Others have built or expanded their international presence. Hugo Boss’s sales outside Germany, for example, grew from 50 percent of its total sales in 1990 to more than 80 percent today. Apparel has become a truly global business.
We expect jewelry to follow a similar path. Today, the jewelry industry is still primarily local. The ten biggest jewelry groups capture a mere 12 percent of the worldwide market, and only two—Cartier and Tiffany & Co.—are in Interbrand’s ranking of the top 100 global brands. The rest of the market consists of strong national retail brands, such as Christ in Germany or Chow Tai Fook in China, and small or midsize enterprises that operate single-branch stores.
Our interviewees expect that a handful of thriving national or regional jewelry brands will join the ranks of top global brands by 2020—Swarovski is an oft-cited example. In addition, some local brands will almost certainly become known globally as a result of industry consolidation: international retail groups will acquire small, local jewelers. Some industry observers project that the ten largest jewelry houses will double their market share by 2020, primarily by acquiring local players. And if the apparel industry does indeed hold any lessons for the jewelry industry, incumbent jewelry houses will soon be fighting bidding wars against private-equity players with deep pockets.
The apparel industry is about ten times the size of the jewelry industry as measured in annual sales, but the average M&A deal value in apparel (€12 billion) is almost 20 times that in jewelry (€700 million). That said, average deal value in jewelry has been rising—by a compound annual growth rate of 9 percent between 1997 and 2012, compared with 5 percent in apparel. Recent deals include British company Signet Jewelers’s 2012 acquisition of US-based retailer Ultra Diamonds and the Swatch Group’s acquisition of Harry Winston in January 2013.
Growth of branded jewelry
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 (Exhibit 1). All executives we interviewed believe 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.