By Shawna Kulpa
As 2017 comes to a close, the overall feeling in the industry these days seems to be downright optimistic. And there’s good reason for it.
The U.S. economy continues to grow. According to the U.S. Department of Commerce, the real gross domestic product (GDP) increased an annual rate of 3 percent in the third quarter of 2017, after expanding at a 3.1 percent pace in the second quarter.
With the U.S. economy doing well, it’s no surprise to find that consumer sentiment has risen. According to the Conference Board’s Consumer Confidence Index, the index in October stood at 125.9—“its highest level in almost 17 years,” according to Director of Economic Indicators Lynn Franco. She noted that “consumers’ assessment of current conditions improved, boosted by the job market, which had not received such favorable ratings since the summer of 2001. Consumers were also considerably more upbeat about the short-term outlook...and their expectations suggest the economy will continue expanding at a solid pace for the remainder of the year.”
Jack Kleinhenz, the chief economist for the National Retail Federation (NRF), agreed. “The combination of job creation, improved wages, tame inflation, and an increase in net worth all provide the capacity and the confidence to spend,” he said in a press release that accompanied the NRF’s annual holiday spending forecast.
The even better news?
The U.S. jewelry industry has seen sales grow this year.
“If you look at this year, the entire industry is up almost 6 percent, with jewelry stores up about 4.5 percent,” says Harold Dupuy, FGA, vice president, strategic analysis of Stuller Inc. in Lafayette, Louisiana, citing year-to-date statistics through August from the U.S. Department of Commerce. “I think we’ll see 3 to 5 percent growth next year.”
However, not all of the numbers pointed up: The industry continued to see some contraction this year. According to the Jewelers Board of Trade’s Q3 report, new business listings in the U.S. declined 49 percent over last year. In addition, total listings for the U.S. jewelry industry were down 4.5 percent from last year, falling from 27,479 to 26,246. That decrease breaks down to a 4.1 percent decline in retailers and a 5.7 percent decline in wholesalers/manufacturers.
However, the report further revealed that business discontinuances (including bankruptcies, which remained flat at 24 to date) declined a dramatic 41 percent this year, falling from 1,256 to 741.
“Some industry contraction is still going to happen, but it’s occurring at a slower rate,” says Dupuy. He adds that despite the continued slow contraction, “the survivors are better off. With year-over-year growth seen in the past few years and the contraction of business, the pie is getting larger and there are fewer players.”
This optimistic view holds for the coming year: No one interviewed for this article anticipates any major changes in 2018. However, that doesn’t mean that companies should rest on their laurels: There are still emerging technologies and trends of which they need to be aware. We’ve identified several on the following pages to help you prepare now and position your company for growth.
Whether consumers are browsing your website, scrolling through your social media posts, shopping on their phones, or coming into your store to make a purchase, they need to experience your offerings in a consistent way. And this doesn’t mean just being consistent with fonts and colors; it’s making sure “you’re delivering the same message, a relevant message…across all the mediums,” says Mark Hanna, chief marketing officer of Richline Group Inc. in New York City.
It’s called omni-channel (or unified) marketing, and it’s not a matter of if you want to do this but when, because e-commerce sales are only going to continue to grow. Consider the following statistics:
• A December 2016 survey by Pew Research Center found that 79 percent of Americans shop online, with 51 percent having made a purchase on their smartphones and 15 percent having made a purchase by following a link from a social media site.
• According to the U.S. Department of Commerce’s quarterly retail e-commerce sales report, online sales for the second quarter of 2017 totaled $105.1 billion, an increase of 6.9 percent from the first quarter of 2017 and a 16.3 percent increase from the same time last year. The report also found that e-commerce sales in the second quarter accounted for 8.2 percent of total retail sales.
But even for those consumers making in-store purchases, a company’s online presence is still critical. In a consumer study that the online publication Retail Dive (retaildive.com) conducted earlier this year, 67 percent of respondents said they research products online before shopping for them in a store.
This holds true for consumers specifically shopping for jewelry and watches, as shown in a survey conducted by PricewaterhouseCoopers (PwC) earlier this year. The professional services firm found that 43 percent of global shoppers prefer to research jewelry and watches online, while 33 percent prefer to do research in a store. When it comes to actually making purchases, the majority of global shoppers still prefer to purchase jewelry and watches in stores—but 32 percent prefer to do so online. And since PwC noted that the growing dominance of Amazon (used by 9 out of 10 global shoppers) is changing consumers’ relationship with retail stores, you can’t help but wonder how high that online number will eventually climb.
“If retailers don’t want to do this [omni-channel marketing], they’re going to be rendered obsolete,” says Andrea Hill of StrategyWerx in Chicago. “It’s okay for someone close to retirement to not think about, but if you want your business to last more than five years, you need a digital environment to compete.”
Omni-channel marketing is more than just delivering the same message, though; it’s about delivering the same experience, which requires knowing about each customer’s preferences and buying habits. That’s why the software that you use to collect and categorize customer information is at the heart of omni-channel marketing. Luckily, updating and incorporating these systems into your business can be done in stages, as few companies could afford to overhaul their entire systems all at once. Instead, focus on taking the steps one at a time.
It starts with modernizing the system that’s running the front of your business. Ideally, you want a Point of Sale (POS) system that has strong customer relationship management (CRM) tools or that can be linked to an automated CRM system.
“Some of the POS systems used in the industry give you a few features for tracking some specific customer information, but you need a more sophisticated system that will do more,” says Hill. If you have a fairly modern POS system in place, it may not need to be changed, provided it can be linked to an automated CRM system.
When it comes to that CRM system, you want a sophisticated system that tracks more than just customer birthdays and wish lists. Your CRM software should be able to track customer purchase behaviors, social media affinities, personal preferences, website interactions, and more.
Then, once your updated POS and CRM systems are talking with one another, it’s time to update your website so it can join the conversation. “When you update your website, all of your marketing gets more flexible,” says Hill.
She uses the example of a company website she recently visited. Although she never registered with the website, it recognized her when she returned to it, remembered what she had viewed earlier, and sent her a message about the item she had looked at.
“This is the beginning of omni-channel,” says Hill. “No matter how a customer is contacting you, it recognizes them, whether it’s on their phone, through social media, on the website, or in a store. Consumers are coming to expect this.”
As a business owner, Hill cites the importance of being able to track this data. “We have a woman on our mailing list, but she has never called us,” she says. “I can go into her profile [in our database] and see what she was looking at on our social media pages, and then target her with what’s important to her.”
And it’s something that can help even the playing field for retailers. “Little companies like us can’t compete with spending on technology [with] bigger companies, but we can make our customers feel like we know who they are,” says John Green, president and CEO of Lux, Bond & Green in West Hartford, Connecticut. “We need to be experimenting with omni-channel marketing. It’s evolving, and if my competition is doing it, I have to, too.”
If some of this sounds a little Big Brotherish, remember that this is what customers are coming to expect.
“For Baby Boomers, this can seem like a huge violation of their privacy, but Millennials don’t care,” says Hill. “They’re willing to trade privacy for convenience.”
Hanna agrees. “The younger the consumers, the less they’re concerned with Big Brother. They have grown up with computers, entering passwords and being marketed to on information they’ve shared.” However, he also points out that how you use the information you obtain is key: “It always needs to feel like a human-to-human interaction.” Consumers, especially Millennials, crave personalization and want to be heard and understood on a human level. They expect companies to anticipate their needs.
Finally, companies should remember to be mindful of privacy. “Be prudent with the way you work with customers,” warns Hill. It’s important not to be too intrusive, and always enable customers to opt out of any communication.
Lest you think this is a problem that only retailers selling to consumers need to worry about, think again. According to Statista’s 2017 B2B Ecommerce Report, “B2B business is now dwarfing that of the B2C business”—to the tune of a whopping 234.78 percent difference in market size. This proves that manufacturers and suppliers need to pay as close attention to their online presence and ordering platforms as retailers do.
“When it comes to B2B buying, it’s important to remember that how we act—and are able to act—as consumers, drives what we expect when buying for our businesses,” says Hill. “So the more responsive and multi-channel that consumer sellers become, the more flexibility business buyers will expect when making business purchases as well. Business buyers right now report that they expect their B2B suppliers to have sophisticated online tools for business purchases similar to what the consumer suppliers provide.
“Experiences should be tailored to the customer,” she continues. “For instance, customers who buy smaller equipment and tools do not expect to be shown products that work for massive manufacturing environments. Customers who buy only fine silver do not expect to be marketed to regularly about gold.”
Manmade diamonds are here and they aren’t going anywhere.
“We see it growing steadily,” says Dupuy. “While it is still a small segment of the market, we think it is going to continue to grow. Growth is surpassing other categories, and I think they’re here to stay. It’s a business opportunity, and ignoring it is a bad strategy.”
Marty Hurwitz, CEO of MVI Marketing in Austin, Texas, agrees, noting that the growing interest among consumers isn’t going unnoticed by the industry. “We estimate that 25 percent of independents are either carrying or considering carrying lab-grown diamonds,” he says. “It was probably closer to 15 percent this time last year.”
Although there is no one entity pushing these stones on a national level, consumers are learning about them through word of mouth or social media. “The category is potentially explosive,” says Hurwitz. “If I was a retailer, I would be looking long and hard at it.” While he admits that he’s not aware of any majors carrying them, he expects them to begin doing so soon. “I suspect that by next year, we’ll start to see some major retailers carrying them.”
With interest in these stones only expected to grow in the coming year, it’s critical that all jewelry operations have screening equipment onsite to screen for man-made diamonds, regardless of whether or not they carry them.
“Contamination exists in the marketplace, particularly with melee,” admits Dupuy. “I encourage everyone to have some type of screening equipment in their business. Even for those who don’t carry or work with lab-grown diamonds—if you’re in the business, you’re exposed. All it takes is one sale to ruin a good reputation.”
This year has seen a wide range of new diamond screening equipment hit the market, much of it capable of testing both loose and mounted stones. Small units capable of screening individual stones can be purchased for several hundred dollars, while larger units capable of screening thousands of stones per hour will run into the thousands of dollars.
However, it’s important to understand that none of these machines is foolproof. That’s because they don’t specifically identify lab-grown diamonds. Rather, they detect the type of diamond being tested.
The two techniques for creating manmade diamonds both produce Type IIa stones, which contain little to no nitrogen. But because this type of stone can also occur naturally (although they account for only about 2 percent of natural diamonds), having a screening instrument identify a stone as a Type IIa does not automatically mean the stone is lab-grown. Instead, stones that are flagged by screening instruments should be sent to gem labs for further testing. “Even labs have to use multiple instruments,” Dupuy says.
Although it’s not yet a household term, blockchain technology has the possibility to transform the jewelry industry. Primarily known for being used to trade cryptocurrencies such as bitcoin, blockchain technology works by using a network of computers to store and move information. The information being held in this way then exists as a shared (and constantly updated) database. In this network, the information isn’t being stored in any one location, so that it is always public and can be easily verified. And because there’s no centralized version of it, it’s nearly impossible to corrupt or hack.
So why is this important?
The current thinking is that this technology could revolutionize supply chain management, and it’s already being adopted by companies in the food industry. A recent Vice News report highlighted a Taiwanese company, OwlTing, which has developed a system using blockchain technology to trace the origin of its products. Now, a customer in a grocery store can scan a sticker on a ham and see everything about it—from the pig’s date of birth and medical history to the time of its slaughter and processing.
The technology is not completely foolproof, as it relies on someone to manually input the information into the system. But because the information can’t be manipulated after it’s in the system, it has the potential to help the jewelry industry better track materials, something that’s becoming increasingly important as more and more consumers demand fair trade and responsibly sourced materials.
“I think blockchain will apply to us in the future,” says Tiffany Stevens, president and CEO of the Jewelers Vigilance Committee. “Some people have proposed that it might be possible to track a stone from rough to a showcase. We’re not there yet, but it’s happening in other industries and only going to get bigger.”
According to the Vice News report, the food traceability market is predicted to be worth $14 billion by 2019, and that large corporations, such as Walmart, Unilever, and Nestle, are already rapidly working to develop blockchain systems that will handle the information flows for their products.
While this technology is not yet being used in the jewelry industry, it’s worth monitoring for future potential use. Being able to not only show a customer when and where her diamond was mined, but the names of the people who mined it and then cut it, along with the whole route the stone took to get to that store, could be a great selling point and give the customer a good story to tell about her new ring.
Unfortunately, no one has a crystal ball to accurately predict what will happen in the precious metal markets in the coming year. Fortunately, all of the current forecasts for next year have prices staying fairly stable.
According to the World Bank’s recent Commodity Markets Outlook, “Gold prices are expected to drop 1 percent as anticipated U.S. interest rate hikes materialize. Silver prices are forecast to ease, in line with investment demand for gold. Platinum prices are seen climbing 4 percent on increasing catalyst demand and tightening mine supply.”
Harold Dupuy, FGA, vice president, strategic analysis of Stuller Inc. in Lafayette, Louisiana, makes a similar prediction. Dupuy compiles his own forecasts based on information from a variety of sources, and he doesn’t expect any wild fluctuations in metals prices in the coming year. Currently, he’s forecasting gold to average $1,292, silver to average $18.30, palladium to average $930, and platinum to average $1,050. “I think the market is going to stay fairly stable year to year,” he says. “And that’s good for the industry.”
Click here to read about the 2018 jewelry trends.