Sustaining the Glitter of Jewelry Retail by Ajay Mathur

Today, the retail jewelry industry is suffering – to say the least.

There are efforts in the short term to promote jewelry and incentivizing consumers for their purchases. However, the jewelry retail sector needs an entirely new approach.

Nobody can dispute the fact that the pandemic has fast-tracked the reduction in the overall size of the jewelry consumption potential by reducing purchasing power on the one hand (loss of jobs, lower income levels, etc.) and reducing the number of potential consumers due to the sentiment (consumers don’t “feel like” buying jewelry with so much gloom all around). Not to mention the shift of “investment minded” jewelry purchases to other avenues such as ETF’s, Exchanges, and other instruments. Add to these the changing trends in the younger generation who prefer other fancy items to jewelry (branded clothes, perfumes, watches, electronic gadgets, vacations, etc.). These factors had already started working against the jewelry industry well before the pandemic arrived, and the recipe for disaster was already at work!

Should the jewelry retail industry just accept the “fait accompli” and merely “hope & pray” that the business continues as before, or is there anything that the industry can do?

Surely, there are several action points that can help the jewelry retail industry. The intent should be to attract and retain as many consumers into buying jewelry as possible. What will help in this regard are a few simple, and other not-so-simple, efforts as spelt out below.

Creating and demonstrating a clear need (Versatility is the Key)

In many parts of the world, the need for jewelry is not clearly understood by potential consumers, whereas in many other parts, the need is getting redefined. For example, a woman in North America may not consider buying gold jewelry as it is not in her culture, so a need / justification must be created to attract her into being a potential customer.

These markets are witnessing a boom in the LGBTQ movement, so a need could be created for this segment of the population. Also, these markets unfortunately have a very high divorce rate, as well as those who remain single or live as unmarried partners. Could a jewelry line be created that would appeal to this segment specifically?

On the other hand, Asian markets such as India, China, Singapore, and Thailand have been traditionally big on jewelry buying. The most important driving force for jewelry purchases in these historically “under-developed” countries has been an investment and safe-haven mind-set that jewelry could be cashed-out to either make profits, or in case of need.

However, changing trends, investment alternatives and industry malpractices (lower quality; high making charges that are completely lost when selling back, etc.) are reducing gold jewelry demand in Asian markets year over year. These markets need a different approach or “justification” for people to keep buying jewelry. For example, why should a 25-year old educated girl in India with a decent income buy gold jewelry? She has various investment and fashion alternatives available to her and is not “wedded” to gold jewelry. Even in rural India, girls are now better educated and have a similar reduced interest in gold jewelry.

Does it mean that there is a negative correlation between the level of women’s education and demand for gold jewelry? At least this is what the trend is indicating – Western women have historically been more educated than those in under-developed countries, so always had a very low jewelry demand; and as Indian women are becoming better educated, their appetite for jewelry is reducing.

Is this a sign to worry about? Certainly not. It just requires a new narrative that appeals to the woman of today so that she feels confident enough to (continue to) buy jewelry. And what would aid this confidence is a new narrative that the industry will have to come up with, combined with other factors mentioned further in this article.

Making jewelry visibly attractive (Looks, Design, Desire)

This is the core of jewelry designing. To create jewelry pieces that a woman (and man, and others) would be attracted to – not just for a view, but for purchasing it.

As mentioned above, today’s women (and men, and others) need to feel confident about buying jewelry. For them, jewelry is not just a few pieces that they would wear at their wedding and therefore it could just be culturally amenable to be able to sell. They could, and do, wear jewelry to work, official events, social gatherings (do not under-estimate kitty parties, graduation ceremonies or theatrical events), dates, vacations, birthday parties and many more, in addition to engagements, wedding ceremonies and receptions.

All the occasions above require a different attire, and jewelry could therefore be designed to compliment each of them. There is so much more that a jewelry designer could play with – the occasion, the theme, the color, the culture, the mood, the setting, the social context, and so on.

And then the material – jewelry does not need to be only gold; it could be studded with diamonds (natural or lab-grown), precious/semi-precious stones (emeralds, sapphires, rubies, etc.). Again, gold could be 24 carat or 22 or 21 or 18 or 14-carat, or any other carat-age that a purchaser may like or be able to afford, with the color of gold again being a variable, such as yellow gold, white gold, pink gold etc. Yes, even pink gold is possible.

And yet, despite considering all the above, purchasers may not like what they see. Could you then customize a design for her – the way she likes it (minimalist designs?); in the budget she is willing to spend on it; of the quality she desires; and with a super-fast turnaround time?

Is it then time for jewelry retailers to employ new-age jewelry designers who are equipped with the latest design software to create unique pieces for each buyer, and supported by back-end manufacturing for a 360-degree customer experience? Could this then be a catalyst in the revival of jewelry demand and attracting more and more consumers into jewelry buying?

Keeping it affordable (pricing, weight, transparency)

Affordability in the context of jewelry is relative, but as one can see, there are so many variables (as mentioned above) to play around with. Add to that another element: the weight. Could jewelry pieces be relatively light weight without losing their essence and their elegance, and which can keep their prices lower? The light weight may also allow pieces to appear more sophisticated and therefore more desirable.

Other than the cost of material, a major element in the pricing of a piece of jewelry is the profit margin. Different markets worldwide have their own ways of pricing it. In Western markets, all pieces are sold at a fixed tag price, with buffer in pricing taking care of fluctuations in gold prices but increasing the overall cost of the item. Dubai created a new pricing structure way back in the 1980’s whereby gold jewelry is sold basis the prevailing gold price + making charges, the latter including the profit margin of a retailer as well. The transparency of this system benefits buyers. In India, both systems are available depending on where you are buying from. Other Asian markets like Singapore, Hong Kong, and Thailand, follow the western system of fixed tag price.

No matter what pricing system one follows, the transparency of pricing benefits everyone in the long term. This is especially true if jewelry retailers move towards customizing jewelry designs using designers in their retail stores.

The debate over hand-made and machine-made jewelry will continue, but the key here is the buyer preference. While Asian markets such as India have traditionally favored hand-made jewelry (to support livelihood of artisans and to avoid this artisanal art-form from getting endangered), but if the cost is prohibitive, it can be counter-productive. On the other hand, machines on which jewelry is made are manufactured in certain countries and the prohibitive costs of those machines could again be counter productive. Hence, a realistic balance needs to be attained as these costs reflect in the final price that a consumer must pay.

Certain pricing practices need a thorough review. For example, charging the customer the gold price for the full weight of the item despite that item containing other items such as wax or low-cost stones or other material may not be a good idea, and it also increases the cost of the item, thereby working against a potential sale.

Further, if the profit margin itself is kept very high on the basis that branded jewelry has such high profit margins, then it does not go down well with customers. Instead, the efforts should be to create your own brand and let the brand then justify those super high profit margins. Until then, keeping profit margins reasonable makes more sense.

Full disclosure is the name of the game today. So, if your pricing structure is gold price + making charges and the gold price itself has an additional built-in profit margin, then consumers may be made aware of this. Charging them discreetly can only leave a bad taste in consumers’ mouths. Changing the pricing structure to a fixed price tag could be an option, but not all markets would accept that due to prevailing practices and consumer awareness.

Pricing of jewelry items containing precious stones such as diamonds, sapphires, rubies, emeralds, pearls etc. again needs a thorough review. Consumers are fed-up of the gimmicks of 50 to 90 percent discounts as they are not confident whether the discounted price is still the fair price to pay for the item.

Ease of search, research, and purchases (E-Gold Souk / Jewelry on Rent)

This aspect is related to the digital and online ability for consumers to buy jewelry in this age of technology and the convenience it affords.

Can a purchaser view jewelry pieces, their designs, weight/quality specifications, price, etc. online? Can they sort it by carat (14/18/21/22/24 carat), by design (Indian / Italian / Middle-Eastern), by attire (to compliment a dress / skirt-blouse / trouser-shirt / saree / traditional dress (lehenga or abaya) etc.), by occasion and so on?

Can users check the jewelry item on a virtual experience (with options to choose attire, design, color, etc.) and view an image for each piece (with ability to change skin tone) to allow a real-life, personalized experience? I believe this technology already exists and needs wider adoption.

Given that so many variables mean a lot of inventory holding, thereby requiring a large capital investment, or borrowing, whose cost may take the price of each piece higher thus making it unaffordable, is it possible for jewelry retailers to come under one electronic roof?

In Dubai, there is a Gold Souk with over a hundred retailers. Can they create an “E-Gold Souk” where all jewelry retailers can display their pieces for ease of use of consumers? Together, they can offer a much wider variety for consumers to choose from. This can also bring down the cost of hosting such a website for each retailer (as opposed to each retailer having its own). And it will be more convenient for buyers to see and compare what to buy and from where. I retain the copyright to this idea and can help its development.

There is another interesting thought around managing the large inventory levels. Nowadays, we are witnessing a new trend. While there are many occasions where a woman can wear jewelry, she does not want to repeat the same piece in another event. However, buying jewelry to wear only once is a costly affair.

Could jewelers then consider offering jewelry on a rental basis for a few days? When somebody approached me with this idea a couple of years ago, I did not take it seriously, but can see the merit now as social trends are evolving. There would be several issues to address here, such as security, testing before and after, risk of disappearance, rental pricing, pre & post cleaning, etc. However, if the use of modern technology can secure it (nano chips or tags) and a viable business model can be developed (business opportunity for Insurers?), then it can be a big hit.

Maintaining Quality (The Gold Standard for Jewelry)

Quality of jewelry is a key consideration when it comes to jewelry buying. In a market like Dubai, it is a given that the carat-age you pay for is the one you get, (i.e. 22 or 21 or 18 etc.), due mainly to strict laws and their enforcement. However, in a market such as India, this is a huge issue and consumers are never confident that the quality of jewelry is what they are paying for (issue of under carat-age).

Such is the importance of this aspect that it is no wonder that Indians prefer buying Indian jewelry from Dubai than buying it in India itself. Yes, pricing differential is also there due to lower taxes & duties in Dubai, but it would not hold water if the quality is not assured.

Independent hallmarking of jewelry is a good idea, but we are already seeing the turbulence it has created in India where its execution and sustainability are being debated. In UAE, hallmarking via self-certification is efficient (which has always been there across the world), but takes away the independence aspect. The jewelry sector has a huge trust deficit and it needs to earn that trust back to attract higher interest from potential customers.

Gold is still relatively easy to address. What about jewelry studded with precious stones such as diamonds, sapphires, rubies, emeralds, pearls etc.? How does one trust that these precious stones studded in jewelry are of the quality that the self-certification of jewelers says? Unless the stones are taken out of the jewelry item, it is not foolproof to confirm the quality. And then the certification says, for example, “color G to I” or “Clarity VS to SI” which means pieces are in that range but what is the proportion of each and whether larger pieces are of lower end of the range is not clarified. And then, independent stone grading companies such as GIA, IGI and others always qualify their certifications. Further, these different grading companies are not considered at par, thus one certification is preferred over the other, thereby resulting in different levels of discount. With so many variables, what should consumers do? The easiest way for them is to stay away from the purchase. If the industry wants consumers back, these aspects need greater attention.

Another related aspect of quality is the finishing of the product. We have seen Dubai based jewelry manufacturers making qualitatively superior products (for example, bangles) than the rest of the world. Similarly, jewelry manufacturers in Italy and India have carved their own niche in jewelry manufacturing – Italy in machine-made segment and India in hand-made. However, the quality and the finishing of the product is not uniform across the board and this needs to be addressed together with the jewelry design aspects mentioned above.

Ease of Jewelry Returns (Fair Price Mechanism)

The return or sale-back of a jewelry item is the most painful aspect for a consumer, no matter what the reason for return is. The proof of original purchase, the stated quality not matching the invoice quality (for no fault of consumer), loss of making charges, hair cut on gold price, value of stones, etc., are some of the realities that consumers dread. These are also reasons why the historical investment demand via jewelry purchases is moving away from jewelry to other instruments, leading to a reduction in overall demand for jewelry.

The jewelry community will have to seriously work on a practical and fair policy in order to make it easy for consumers to return or sell-back jewelry and get a fair price for such returns. This will give consumers a big peace of mind when buying jewelry and so, can support jewelry demand.

Supply chain sustainability (“Responsibly Made”)

This is the age of governance, responsible sourcing, sustainability, and the likes. Investing in building a sustainable supply chain is as important, if not more, as advertising, sales promotions, etc. These aspects are crucial for the jewelry industry as well because jewelry manufacturers are expected to use responsibly sourced gold, precious stones, and other materials, and the onus is on them.

This is a key consideration for jewelry manufacturing centers such as Italy, India, Turkey, Thailand, the UAE, etc., because if their purchase of raw-material is not responsibly sourced, then the jewelry that they sell would not be considered as responsibly made, thereby causing consumers to avoid buying their products or bring sanctions against them. Should that happen, it would have a disastrous effect on their economies due to the contribution this sector makes. In the context of India, the slogan “Made in India” warrants a change to “Responsibly Made in India”, as I have been saying at various forums for the last couple of years. This is true for other jewelry manufacturing countries as well.

Going forward, those countries that can demonstrate such responsible jewelry manufacturing processes will tend to benefit by attracting a higher demand. Others may perish at their own expense.

Targeted Promotions (The Group Mentality)

The jewelry industry is highly fragmented consisting of globally reputed brands, regionally famous brands, and country specific brands in addition to hundreds (if not thousands) of single owner or family jewellers in various cities, towns, and villages around the world. Each one of them plays an important role in expanding the demand for jewelry. However, the smaller the size, the lower is the awareness and horizon of the business.

In this context, the group mentality can work in industry’s favor by allowing promotions and advertisements that place emphasis on jewelry (its quality, design, online searchability, investment value, return policy, etc.) instead of a brand. It may also encourage healthy competition, enhance the overall quality of jewelry, and spread sustainable practices across markets, thus expanding the overall appeal and size of the market.

It may look like an uphill task, but a group does not have to be formed at the country level; it could be done at the city/town/village level and such regional groups can then feed into a national group which in turn could have interface with such groups from other countries and feed back into a global association. And this global association could then be coordinated by an organization that works for the benefit of the industry. Again, I can help in developing this concept should there be an interest.

The jewelry industry needs to appreciate and accept the importance of collaboration and recognise that being part of such groups does not lead to loss of individuality, innovation, or competitiveness of respective businesses.

Image courtesy: AU Finja Jewellery, Dubai

Courtesy: Ajay Mathur, Senior Banker, Regulator, Commodities Specialist, Speaker and Thought leader.