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Jewelry Makes Holiday Sales Sparkle

While holiday sales were generally below expectations, jewelry was the one bright spot.

By Brian Bossetta

If there is a silver lining in the cloud of lackluster 2013 holiday sales, then it just might be laced with diamonds and gems. Jewelry sales during November, the official kickoff of the holiday season, were 9 percent above November 2012, according to the U.S. Department of Commerce Bureau of Economic Analysis. Watch sales during the season, according to the government figures, rose even more at 11.3 percent year to year.
   MasterCard Advisors SpendingPulse also cited jewelry as a top performer in its November 1 through December 24 report. Sarah Quinlan, senior vice president of market insights for MasterCard Advisors, believes consumers see “something permanent” in a jewelry purchase as opposed to apparel, which Quinlan said was down this year due, in part, to the rise in jewelry’s popularity.
   Dr. Jim Taylor, vice chairman of Harrison Group, a YouGov company headquartered in Waterbury, Connecticut, said the spike in jewelry sales might be related to a shift in consumer focus to “more meaningful gifts” — a trend he believes has been developing since the recession. “Consumers have become more resourceful, more self-reliant, more financially responsible,” Taylor said. “They’re giving fewer gifts but of greater meaning.”
   As early as November, when IBISWorld was projecting 3.1 percent growth in overall gift giving for the 2013 holiday season, the global research company singled out jewelry as one of the top gift categories, forecasting a 7 percent rise from 2012 levels. Significantly, the jewelry sales increase was expected to be greater than the increase in electronics, which has eroded jewelry’s share of the overall gifting category in recent years. The company predicted electronics sales would rise by 6.6 percent in the holiday period.
   “Americans are returning to the heart of the holidays, spending time and money on family, friends and loved ones that matter most,” IBISWorld said in a release announcing its projections. Noting that consumers are purchasing gifts for a smaller network of people, the company said that “The people they do buy gifts for are likely to get more high-value gifts like electronics and jewelry.”

The Big Picture
   Although the final sales totals for the season won’t be available until early February, indications suggest retailers had another foggy Christmas, albeit a better one than 2012. Overall, preliminary projections are that holiday sales will post gains of 2.3 percent to 3.5 percent from 2012, a year that itself fell short of expectations.
   Throughout the shopping season, retailers reported that more consumers were shopping but they were spending less. The sales totals may reflect the fact that Americans are simply more mindful about shelling out cash these days, even for gifts, or perhaps they have become more particular about what they buy and for whom. But the totals may also reflect the fact that retailers started widespread discounting of prices from the opening days of the shopping season — much earlier than usual — and consumers may have ended up spending less simply because retailers were charging less.
   On the lower end of the forecasts, MasterCard Advisors SpendingPulse projected November 1 to December 24 sales grew 2.3 percent compared with .7 percent a year ago, an increase Quinlan said was a “tiny bit” below what she was expecting. She noted that the slight improvement from holiday 2012 reflected an uptick in consumer confidence she began noticing in October when gas prices fell. “That gave people extra discretionary income and they began to spend,” she said.

Erratic Spending
   There was uneven spending throughout the holiday period. Some of the declines could be attributed to the fact that consumers had six fewer shopping days this year and also to the inclement weather across most of the country that kept shoppers out of the stores during several critical shopping weekends.
   According to the National Retail Federation (NRF), sales dipped during Black Friday weekend in November although more shoppers were in stores. Speaking to the disconnect of consumers shopping but not spending, Matthew Shay, NRF president and chief executive officer (CEO), said many Americans still face economic challenges despite the wealth effect from the housing and stock markets and many remain more conservative in their spending.
   Lindsey Piegza, chief economist for the private brokerage firm Sterne Agee, noted the same pattern. “As preliminary data showed, consumers were out spending in the weeks after Thanksgiving, but not spending quite as much as last year.”

Last-Minute push
   Momentum in the weeks leading up to Christmas appears to have picked up and that could spill over into post-Christmas sales. For the week ending December 21, retail sales rose 1.4 percent and for the prior week, sales were up by 4.8 percent, according to the International Council of Shopping Centers (ICSC) and Goldman Sachs Weekly Chain Store Sales Index.
   Last-minute shoppers contributed to this surge in sales, according to ICSC Vice President of Research and Chief Economist Michael Niemira. The percentage of consumers who reported in the ICSC-GS survey having completed their holiday shopping by December 22, the Sunday before Christmas, was 83.5 percent — close to last year’s 84 percent at a comparable time, according to Niemira.
   ShopperTrak reported that retail sales for the week that ended on December 22 dropped 3 percent from the same week in 2012 and that sales for “Super Saturday” — the Saturday before Christmas — were down .7 percent, with foot traffic decreasing by 21 percent.

Online Sales Disappointing
   Even shoppers who opted to browse and buy online instead of in stores didn’t spend as much as expected. Online Christmas shopping rose only 10 percent for the period of November 1 through December 22, according to comScore, 4 points below the company’s projected 14 percent increase over 2012.
   Gian Fulgoni, comScore chairman, said he had expected high online sales later in the season to compensate for the shortened period between Thanksgiving and Christmas. “Unfortunately, that was not in the cards, as the final online shopping week saw considerably softer sales than anticipated,” Fulgoni said.

A Cup Of Cheer
   Quinlan said the recent budget deal in Congress was a “true gift” to retailers. “It took the worry out of consumers’ minds,” she said, adding that a significant factor in 2012’s dismal numbers was the looming fiscal cliff. “Consumers are still conservative in their spending, but they’re a little more confident,” she said.
   Taylor said he also sees a changing pattern in where and how consumers shop. “It’s not just about department stores anymore,” he said, adding that consumers are finding alternate channels for shopping such as eBay and auction houses. “Not everybody needs another sweater. People want to know what a gift means, what it says about them.”
   With consumer spending accounting for 70 percent of the U.S. economy, the coming months will tell if the slight improvement in 2013 holiday sales was just a gust or the gathering of more encouraging — and sustained — economic winds.

Heart of the Matter
   In Quinlan’s view, we’re headed in the right direction. “The budget deal rolled back many of the sequestration cuts. That’s positive going forward because with that money now back, it will go into the economy in the form of consumer spending,” she said.
   Quinlan added that she will be looking — and hoping — for businesses to catch up with the momentum of consumer confidence and spending and to begin hiring more and increasing wages. “It’s important to not just have a job, but to feel like you’re not going to lose that job,” Quinlan said. “And to have the expectation that you’re going to have more income.”
   Taylor said he believes the recession has changed most Americans for good — and in his view, the change is for the better. “This recession has deep roots. At the beginning of the crash, we did a survey and found that 60 percent of people thought they were going to lose their jobs,” Taylor said. “That fear factor has led to a rethinking of material goods and there’s no going back. Consumers today are not going to put themselves at financial risk on Christmas spending.
   “People are not shopping to become happy, they are shopping because they are happy,” Taylor concluded. “That’s very reassuring.” 

Article from the Rapaport Magazine - January 2014. To subscribe click here.

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