As the outlook for the luxury market begins to show signs of improvement, one area that is expected to continue its outperformance is jewellery. We look at what’s driving demand in this segment of hard luxury and how brands are leveraging the opportunity.
–
Nothing quite sparkles like a diamond. Or perhaps an 18 carat yellow gold bracelet sold with its own screwdriver. Whatever your preference, demand for fine jewellery is booming: making it one of the most illustrious segments in the luxury market, thanks to a shift in consumer spending behaviour and increased appetite from Chinese consumers.
Earlier this year, luxury conglomerate Richemont posted a 5 percent rise in third quarter sales, largely helped by its jewellery Maisons which recorded an increase of 14 percent to 2.4 billion Swiss francs ($2.6 billion) thanks to strong sales from its Cartier and Van Cleef & Arpels brands.
And the category is predicted to grow even further, according to analysts, who believe its retail-driven environment, a surge in female spending, and the benefits of a fragmented market make the segment an ideal opportunity for brands to tap into, particularly compared to watches, which have experienced tougher conditions for growth in the past year.
“We believe the outlook for high-end branded jewellery is very positive over the next few years driven by our ‘future is female’ theme, a retail-only exposure and above all a very fragmented and still mostly unbranded market,” said HSBC analysts Erwan Rambourg and Anne-Laure Bismuth in a note.
“Overall, we think the pie can grow for many,” they added. “Some progress has been made on environmental issues, transparency, traceability – and lab-grown diamonds could prove somewhat disruptive – but we are bullish on industry prospects and believe luxury jewellery can see high-single to low double-digit sales growth in a post COVID-19 world.”
Indeed, Google search volumes for jewellery brands like Van Cleef & Arpels, Chopard, Cartier, and Bulgari grew by 60, 29, 32 and 22 percent respectively during 2020, compared to the same period a year earlier, according to data compiled by DLG (Digital Luxury Group), illustrating the growing interest in the category.
And with the latest update on the luxury market from Bain and Altagamma showing that accessories and jewellery categories are driving the rebound in the market, and that 85 percent of luxury consumer purchases were influenced digitally, it comes as little surprise that many of the transactions fuelling the growth in fine jewellery came from e-commerce.
“Everyone has gotten more comfortable buying almost everything online. But jewellery was probably one of the biggest obstacles to get people to buy,” said Robert Burke, CEO of Robert Burke Associates. “We started to see it around five years ago, as companies like Moda Operandi began selling a few hundred thousand, million dollar pieces of jewellery online, and the female customer becoming much more comfortable buying these items, knowing that they can try it on and return it if needed. And then it just gained momentum, and gained momentum on every category of the jewellery business.”
Part of the reason that jewellery sales have been performing well online is the level of customer service that some brands have been able to offer, either through virtual VIP events like Cartier’s private broadcast – described as a blend of a movie and concert - or personalised services and direct messaging that companies have managed to maintain through the global COVID-19 pandemic.
“When the pandemic began, I thought sales in big investment goods would drop,” said Laura Chavez, Founder of Lark and Berry – a sustainable fine jewellery brand. “Buying jewellery (especially fine jewellery) can of course be very contingent on being able to try it on.”
“A big reason for our sales improving is that we were able to offer personalised services by quickly responding to customers and virtually showing them items,” she said. “We wanted to make sure we were fulfilling customers’ demands as thoroughly as we could. With our virtual appointments, for example, we like to offer to have someone on our team try on different pieces to show customers what they could look like.”
It’s something that Min Lee, Senior Principal for Fine Jewellery at Farfetch, has also seen grow during the pandemic. “We've definitely seen some record sales both online and offline,” said Lee. “The way in which customers buy jewellery is different and we've seen that when customers purchase, they're spending a little bit more.”
And offering customers the opportunity to experience something like a recent virtual event that it held with Chopard - where invitees were able to experience a virtual try-on of a watch with an iPhone and interact with a sales person - is one of the ways that Farfetch is experimenting and customising their clients’ experience in this segment.
“For us, innovation is always something that we're looking at especially when we're talking about higher value items” said Lee. “It allows more direct access or at least scale for customers to understand what it looks like, so I think that's something that we'll continue to look at, is the innovation of how we can digitise an experience but make it as human as possible because as we know with any watch or jewellery piece, the quickest decision is when you put something on and you know straight away you just know it feels right or doesn't.”
Indeed, it is these type of experiences that are contributing to customers’ comfort of purchasing hard luxury online. But it’s important to note that it has also been a long time coming. Online retailers like Farfetch, Moda Operandi and Net-a-Porter have spent a number of years ensuring the experience of buying jewellery and watches is as hands-on and detailed-orientated as it would be in a physical store.
“It does take time and it does take confidence and people's ability and I do feel that it is something that if you do it once and as long as the first time was a smooth transition, then your comfort level becomes at ease. I think it’s the ease of knowing who you're buying from. It makes a big difference,” said Lee.
Cartier's Love and Juste Un Clou jewellery collectionsCredit: Courtesy of Cartier.
Looking forward, Lee, Chavez and Burke believe a return to normalcy will also mean a return to stores, but with a strong digital focus.
“What it's going to be is really the true melding of the digital and the physical,” said Burke. “Brands need to be more, more accessible and attainable. To be able to communicate seamlessly with a consumer, whether they're in your store, or online and making that experience one, and also the importance of the transparency of the supply chain, sustainability, background of where the stones come from, and, and where their work is done.”
“The customer today is more demanding and more interested than ever about the origin of the pieces,” added Burke. “They are going to be just as likely to go online and look up the brands website. They expect to see prices today, it's not one of those mysteries any longer. Transparency is important. And they want to be able to shop online and physically go in and have the same experience. And then the companies that that merge the two, and also are able to market in a new way meaning in a digital format, whether that be Instagram, whether that be, whether that be Instagram that would be you to be direct to consumer that's kind of the future.”
“Buying jewellery online is easier than ever, but I believe seeing a piece shine in real life is still difficult to accomplish online or even on video,” said Chavez. “One thing that I do think is important, is giving customers unique experiences when they go out to shop or even when shopping from home. This is a reason we offer our new piercing experiences in-store. And I do think that the opportunity to collaborate in-person (all socially distanced of course) with our designers to create a bespoke piece is the most ideal way, as one can really get a sense of scale and details when sitting across from us in the store.”
“It will always be both,” said Lee. “One element that I do see as important is where the direction will go is towards the innovation. There will always be innovation in terms of how people show or experience jewellery and I think that's the element, that's the unknown that I'm really looking forward to seeing because so many people are working on different ways of interacting, experiencing and I think that's the next direction, is the way in what will be new in that realm.”