If jewelry retailers didn’t have enough to worry about in the weeks leading up to their biggest season, they can now add price increases at both the retail and wholesale levels to their list of concerns. The impact of tariffs placed on imported goods from China will hit the retail sector before the financial repercussions appear, thanks to additional economic stressors such as a potential recession and the countdown to another national election.
Fortunately, fine-jewelry consumers remain largely unconcerned — at least for now, and at least according to store owners. Any major effects from the tariffs seem likely to be cumulative rather than isolated, and not substantially evident until after the new year.
A taxing issue
Most retailers said their customers were not talking about tariffs at all, nor were they thinking about the price impacts. “They’re either going to have $500 to spend or $1,000 to spend, and we’re going to find [them] $500 diamond earrings or $1,000 earrings,” said Eric Wagner, co-owner of Showcase Jewelers, which has two stores in Kansas. For mid- and budget-priced jewelry customers, he asserted,
it’s more about price point than the size of the stone. “The customer is not going to notice that the stone is smaller because of the tariffs.”
Higher-end consumers don’t worry as much about price, Wagner continued. “For the rich guys, it won’t matter. They don’t care if something costs an extra $1,500 on a $10,000 item. It will affect Walmart more than us.”
Elsewhere, Judith Arnell, owner of Judith Arnell Jewelers, said none of her customers had mentioned tariffs. “Nobody has said a word,” reported Arnell, who has showrooms in Portland, Oregon, and Chicago, Illinois. “It’s not really [surprising], because my customers don’t think I would buy something from China that would affect them. I don’t buy things from China, because I keep my level of quality up.”
That said, she did double her order of boxes in advance of the increases, to take advantage of the current pricing.
Tariffs aren’t the only pricing concerns facing jewelers, however. Anna Sheffield, whose eponymous store has branches in New York and Los Angeles, California, said that while she produced most of her collections in New York and had never manufactured her fine jewelry in China, she was still bracing for a price crunch. “From an economic standpoint, the spike in the gold market has an impact on our cost of goods, [and] it would not matter where we make the jewelry,” she said. “If it continues to go up, we will have to address our retail prices, which will directly impact our customers.”
Sourcing and wholesale impact
For jewelry stores with wholesale components, there’s another aspect to the tariffs that some retailers may not see.
“We manufacture a small line in China that we import,” said Wagner. “So I guess I’m seeing both sides. The consumers wouldn’t see [the tariff effect] yet, but I doubt someone would pay more [at wholesale] for a pendant I sold them before. So I don’t know how that’s going to look. I assume that some people, like the bigger retailers, are going to switch and produce in India.”
Sheffield is concerned about how the tariffs might pile on to other bottom-line concerns. “I worry about what could be an eventual, cumulative increase to our overhead with the rising cost of goods for things we rely on to operate the business,” she said. She’s looking to manufacture her packaging domestically, she added, both for more competitive pricing and because it feels more responsible and sustainable.
Next year’s expectations
Like the other retailers, Sheffield reported having “no direct feedback from our consumers about the tariffs. From the steady revenue incline we’ve seen this year, the tariffs don’t seem to be impacting our customer base.”
She noted, however, that “we have a relatively evergreen category...with engagement rings and wedding bands.”
Still, she’s concerned about the future. “I would imagine [that] coupled with the fear of recession and going into an election year in the US, we might see more modest AOV [average order value] in the new year.”
Sources: National Retail Federation (NRF), US Census Bureau/Coresight Research, UBS, US Commerce DepartmentArticle from the Rapaport Magazine - November 2019. To subscribe click here.