The global coronavirus pandemic that shut down US businesses in March has caused massive unemployment and hurled the country into a recession. Specific numbers for the jewelry industry are difficult to obtain at this time, but luxury retail sales fell anywhere from 70% to more than 90% during the height of the business closings. Swiss watch exports to North America, for example, dropped 87% by value in April and 77% in May.
The few published forecasts for the global luxury sector predict that 2020 will end in steep sales declines. Bain
& Company estimates that sales of personal luxury goods will contract by 20% to 35% for the full year, while McKinsey & Company put the number
at 35% to 39% in its recent “The State
of Fashion” update.
However, there is a bright spot for the jewelry industry: the bridal market. Even though wedding ceremonies are being delayed and downsized, engagements are still happening, and couples continue to declare their love with diamonds. The diamond engagement ring is the backbone of the US jewelry industry, and it may be its saving grace during these difficult times.
Up, down and up again
“Even though the pandemic postponed weddings everywhere — mine included — people still want to celebrate love,” says Jackie LeBental of Barri Luxury Consulting, which serves the jewelry sector.
Bridal jewelry sales were positive early in the year, according to retailers and manufacturers. When the country started shutting down in March because of the coronavirus, sales slowed to a halt for many, but surged again when businesses began reopening in June.
“Bridal sales till March 15 were very strong, while the period from mid-March till mid-May was dismal. Then, from mid-May till June 1, business began a strong pickup, and June was robust,” says Samuel Sandberg, chairman of New York-based bridal jewelry manufacturer A.Jaffe.
Fellow jewelry manufacturer Gabriel & Co. in New York had a similar experience. “Sales were strong through March, dipped in April, and we started to see an upturn throughout the month of May going into June,” reports Jack Gabriel, who cofounded the company with his brother, Dominick. “Our customer service department is seeing daily increases in call volume from our retailer customers.”
This account matches preliminary data from De Beers, which shows “strong sales growth pre-Covid-19,” according to Stephen Lussier, CEO of the company’s Forevermark diamond brand. The growth ranged from the low to high single digits, he adds. Then, from mid-March until at least early May, jewelers experienced “unprecedented” declines of more than 70% before things improved again in June.
“For those stores that are now back open, we are seeing early signs that sales are actually running above June 2019 levels,” he continues. “Anecdotally, we believe that diamond engagement rings are leading this trend and are the strongest category in the market.”
In touch with clients
To combat the effects of the shutdown, jewelry retailers have become particularly innovative in ensuring couples have access to engagement rings and related services. Their methods range from digital media to old-fashioned legwork.
“I feel that as more people see retailers and designers having the ability to provide engagement rings, whether it’s through their on-hand stock, [or] selling in the form of image texting or video meetings, people are still moving forward with getting engaged,” LeBental says.
At Royal Jewelers in Andover, Massachusetts, sales staff personally delivered engagement rings, a move that helped keep the store’s bridal business going throughout the shutdown, according to company president Giao Nguyen.
“I would say for bridal, we were still very steady before the shutdown, during the shutdown and even now,” she says. “Couples still want to be happy, healthy and able to celebrate. We were reaching out by phone during the initial shutdown. They didn’t want to wait months.... Before we were able to reopen, we delivered to the doorstep. We have that kind of strong relationship with a lot of our clients.”
Shane Co. in Denver, Colorado — the largest privately owned jeweler in the United States — used a number of methods to keep in touch with clients during the lockdown, according to a store spokesperson, including virtual appointments and a chat feature on its e-commerce site.
“We’ve been able to offer our customers new ways to shop,” says the spokesperson. “Once our stores began opening up again, we also introduced our safe and easy ‘No-Contact Curbside Service,’ as well as in-store one-on-one appointments.”
Customer relationships were also a primary reason bridal sales remained strong for the Wempe watch and jewelry store in New York. “During the pandemic’s height, when our Fifth Avenue flagship boutique was closed, we conducted numerous virtual bridal appointments,” relates Michaela Kesselman, head of jewelry at Wempe US. “Since our reopening, we have witnessed a strong surge in bridal and diamond sales overall.”
LeBental says retailers have also increased their use of social media during the lockdown to ensure they can connect with their community. “I am seeing retailers share their customers’ engagements more and more through their social media. Since everyone has been home, for the most part, individuals are glued to their phones.”
Even manufacturers found ways to continue catering to their retail customers. Gabriel & Co., for instance, never closed, even when lockdown measures were in place.
“We are blessed to have a robust supply chain that we built over many years. We were able to keep our retailers’ inventory replenished so they could continue to do business with their customers during these challenging times,” says Dominick Gabriel. “For additional support, we did not take back repairs that would have been time-consuming during these times, and instead opted to send new pieces so that our retailers could keep up with their customers’ requests.”
The consumer mind-set
De Beers has been producing monthly “Diamond Insight Flash Reports” on consumer behavior during the pandemic. Some things haven’t changed; for example, while shoppers are doing their research online, 62% of those surveyed still want to make the final purchase in the store. What has changed is that clients and retailers are interacting more through digital media, whether it’s email or one-on-one virtual consultations.
“During lockdown, when people couldn’t go into stores, retailers were using these tools to get 90% of the sales done. However, a majority of customers still want to go into stores, even in the midst of all this Covid,” Lussier says.
Using digital tools is much easier for most people than it was in February, when the coronavirus first began to make itself felt, he continues. Virtual services allow customers to spend less time in the shop so they can make their final purchases safely.
When they do come into the store, De Beers has found, their top concerns have to do with safety precautions: They want assurance that the retailer is limiting the number of customers at any one time, requiring people to sanitize their hands when entering, and having employees wear masks (68%, 66% and 64% respectively cite these as important). Other points customers care about include overall cleanliness, clear markings for social distancing, cleaning each piece of jewelry after it’s handled, and having screens at the counter to separate the salespeople from customers.
“People are a little more concerned about safety than [during] the last coronavirus wave a month ago,” Lussier says. “They are looking for independent retailers to demonstrate that their environments are safe.”
For its part, Royal Jewelers is cleaning its store with a disinfectant used in surgery theaters, Nguyen says. All customers and staff members are required to wear masks — though clients need to take theirs off and look into a security camera for identification before coming in through the locked door. The store has more than 5,000 square feet of selling space, so overcrowding hasn’t been an issue yet. “We’re pretty spread out in terms of traffic, and we are pretty careful,” she affirms. “We haven’t met our capacity.”
What’s selling
What are people buying during this time? It depends whom you ask.
“Ring styles seem to be mixed; however, the trend of the halo might be slowing down, and the single stone on a thin metal band with or without stones might be taking its place,” LeBental reports. “People are not afraid to show off their individual style through their engagement rings, opening the market to more fancy-shaped rings.”
Last year, 45% of those buying new engagement rings opted for custom designs, with 83% requesting diamonds, according to a study from The Knot website. Since the pandemic began, De Beers has found that consumers’ preference for “timeless classics” in their diamond ring designs has increased slightly, from 69% to 72%.
While the Gabriel brothers say “white gold is still king,” they are also seeing an increase in rose and yellow gold, as well as platinum. Customization and special orders have risen, adds Jack. “Our custom-order department is busier than ever, as more consumers want something unique that they can see virtually and still get in a short period of time.”
On the retail level, Wempe is “selling a variety of engagement rings, from traditional solitaires to unique rings with colored gemstones such as emeralds and sapphires,” says Kesselman. “From a shape standpoint, classic cuts such as the round brilliant and emerald remain the most popular. For a while, I saw an uptick in clients seeking micro pavé and halo settings; however, over the past year, the trend has gone back to more traditional, single-set stones. While most of our engagement rings are made with either platinum or white gold, we do receive requests for yellow and rose gold.”
Nguyen says the coronavirus has not changed diamond preferences for Royal Jewelers’ clients. “What they want is an ideal size and shape and quality,” she explains. On average, they’re asking for stones of 1 to 1.50 carats, and while round cuts are by far the most popular, those seeking something different tend to purchase Asscher and emerald cuts. G, SI1 diamonds top the color and clarity categories, as long as the stone is “clean to the eye,” she adds.
At Shane Co., “classic looks always stay in style,” says the spokesperson. “Solitaire rings with sparkling diamond center stones and halo settings remain very popular in the bridal industry. Colored center stones such as sapphires have also been gaining in popularity over recent years.”
Sandberg of A.Jaffe says platinum is a common choice, as are yellow gold and two-tone engagement rings. Round is the most sought-after shape, and diamond weight usually runs 1 to 2 carats. Ovals are often the preferred option for those who want center stones weighing 1 to 1.50 carats, while emerald cuts are strong for 2-carat and larger diamonds.
Love will triumph
Nearly all the jewelers interviewed for this article expect bridal sales to stay strong for the rest of the year. They have faith in the institution of marriage and the tradition of the diamond ring.
“I believe there will be a significant rise in engagements and a spike in diamond sales during what has been known as the traditional engagement season,” Kesselman says. “I think consumers are looking for reputable brands that can serve as a trusted resource during what is a monumental occasion in their life.”
Gabriel & Co. also expects to see growth. “Although there are postponed weddings, couples getting engaged continues. Celebrations of love will always triumph,” Dominick Gabriel declares.
The pandemic may actually be an opportunity for the diamond trade to gain on other industries that consumers have favored in recent years, particularly travel, adds De Beers’ Lussier. Gift-giving this year will focus on items that have meaning, and this bodes well for diamond jewelry.
“What our survey has shown is that...having gone through the Covid-19 experience has this effect of making people think of what’s important — which is first, my health, and second, my close relationship with family and friends,” he says. “Diamond jewelry as a gift…is meaningful and timeless.”
Kesselman concurs. “I believe people are cherishing their loved ones now more than ever and want to invest in a meaningful gesture that will last a lifetime.”
Article from the Rapaport Magazine - August 2020. To subscribe click here.