How High Can the Haute Jewelry Market Go?
New York Times, March 24, 2917
The luxury market, once considered immune to the twists and turns of the economy, has a weak spot, as the high-end watch industry knows all too well. With exports of Swiss timepieces having suffered in 2016 their steepest decline in seven years, all eyes are on China, where faltering demand has inspired no small amount of soul-searching among luxury executives.
But sales of haute joaillerie have proved more resilient. Loosely defined as jewels that sell for $100,000 or more (often much more), the category will come under scrutiny this week as members of the trade gather in Switzerland for the annual Baselworld luxury watch and jewelry fair.
The question has become: How high can the haute market go?
“The whole space, much like the watch space, has been through a reset in terms of demand over the last couple years, driven by the slowdown in Chinese consumption, driven by changes in tourism,” said Björn Timelin, a partner at the consulting firm McKinsey & Company in London. “Anecdotally, the number of my clients who have said they’ve had customers make commitments to spend $1 million plus — people willing to put down significant deposits on stones that have not yet been procured — all suggest we’ve begun to turn a corner.”
The latest figures bolster that assessment. In January, the Geneva-based luxury group Compagnie Financière Richemont — which owns 19 luxury brands including Cartier, Van Cleef & Arpels and Piaget — announced that sales at its jewelry maisons in the final quarter of 2016 had increased by 8 percent compared with the same period in 2015. And for LVMH Moët Hennessy Louis Vuitton, owner of Bulgari, Chaumet and De Beers Diamond Jewelers, sales of watches and jewelry grew by 5 percent in 2016.
Over all, the luxury jewelry market is expected to reach $37.8 billion in 2017, and grow by an average of 2.1 percent annually over the next four years, according to the market research firm Euromonitor International.
One key growth factor, Mr. Timelin said, is a projected surge in the number of millionaires to 56 million in 2025, from 25 million in 2015. “A large chunk will come in the U.S.,” he said.
As a result of the optimism fueled by such forecasts, the high-end jewelry business — which remains largely unorganized and therefore ripe for brand consolidation — is attracting newcomers enchanted with its potential.
The Mumbai-based Nirav Modi introduced his high-jewelry brand in 2010 and now has eight boutiques around the world, including stores on luxury main streets in New York, Hong Kong and London. In 2017, Mr. Modi said, he plans to open 10 more boutiques in markets where he sees promise, including India, greater China, the United States and Europe. He has vowed to have 100 stores by 2025.
Mr. Modi says that while sales of one-of-a-kind jewels are fueling his growth, so, too, are midprice jewels (which cost from $10,000 to $50,000), a point echoed by many of his peers in fine jewelry.
“The jewelry that is increasing its performance is the accessible jewelry, in terms of number of pieces but also in terms of sales,” said Karl-Friedrich Scheufele, co-president of Chopard, a luxury watch and jewelry brand based in Geneva. “Jewelry pieces are conceived not as once-in-a-lifetime investments or special-occasions gifts but more like expensive fashion accessories.”
To understand that phenomenon, consider two developments that have transformed the jewelry industry over the last decade.
The first is a replay of what happened to the fashion business 25 years ago, when brands began to dominate a landscape once ruled by a global coterie of mom-and-pop boutiques, said Thomas Tochtermann, an independent adviser to fashion and jewelry companies who is based in Hamburg, Germany.
“Clients are more global and are gradually moving from the family jeweler to global brands,” said Jean-Christophe Babin, chief executive of Bulgari. “Because you need trust, you need ethics. If you don’t know the jeweler around the corner, you don’t necessarily trust him.”
The second factor reflects the growing importance of design. Unlike in the 1980s, when buyers were “really concentrated on traditional diamonds and stones, and not so much on creativity,” recognizable design is making a comeback, said Nicolas Bos, chief executive of Van Cleef & Arpels.