The future of the gem and jewellery industry
(The future of the jewellery industry: a bespoke piece made recently by the London DE)
In 2016 the global e-commerce market grew to a staggering $1.85 trillion US, driven largely by increasing internet use in emerging markets, most notably India and China. It has been well documented that the jewellery industry has been slow to adopt e-commerce and the consumer demand to buy fine jewellery online has, hither to, been somewhat subdued. It is clear that consumer preferences are changing and they are progressively becoming more willing to buy fine jewellery online, aided by advances in computer literacy coupled with improvements in the visual quality of digital imagery and ease of navigation on high specification websites. Consumer confidence remains high, despite the headwinds of political uncertainty in the US and slowing economic growth in the emerging economies. Prices have stabilised, the recession is fading from memory and Brexit is now widely viewed as less of an obstacle to prosperity than it once was. As more and more jewellers recognise the opportunities presented by the e-commerce channel, the market will become increasingly saturated with ‘me-too’ entrants, consisting of both new and existing jewellery businesses. What will separate the wheat from the chaff will be the USPs and ESPs offered by these new market participants and their own understanding of their significance to consumers.
(Most people understand USPs but few grasp the importance of ESPs)
USPs, or unique selling points, are those that differentiate the logical uniqueness of a business versus its competitors and constitute its key practical strengths. ESPs, or emotional selling points, are the emotional ‘hooks’ that endear a customer to a particular brand, experience, idea or ‘look’ and persuade that person to buy into the offering on these terms. In essence, USPs appeal to the head, e.g. a competitive pricing structure, ease of navigation on an ergonomic website or any other practical consideration, whilst ESPs tap into what consumers feel about a company, its products and services and how they have differentiated themselves from their rivals in terms of look, feel and touch. As the market becomes more saturated it will become progressively harder for the participants to stand out from the crowd and those that seek to simply pile them ‘high’ and sell them cheap will fall by the wayside. Here brand positioning becomes more important than price point. To give you an example, a billionaire will only be driven by the ESPs or the experience of buying a luxury piece and how it makes him or her feel to touch, wear and own an ostentatious emblem of their wealth. Hence it is unlikely that such a consumer will be interested in buying an item online or in an economy store because they will not be fulfilled by that experience and they are not interested in getting a bargain or saving money on a purchase.
(The remote emerald mining region of Muzo, Colombia)
Whilst there are of course some universal truths when it comes to dealing with different market niches, such as the importance and value of good customer service, it is clear the businesses that understand what motivates their customer base to purchase (or not to purchase) one item or another will be better placed to successfully navigate the future fine jewellery markets. Consequently the mid-market jewellery and gem sector will become increasingly the domain of the hybrid e-commerce ‘clicks and bricks’ operators, who adopt a ‘mine to market’ approach. These participants operate from small cost effective offices (with no retail premises) and leverage the inventories of suppliers high in the chain to deliver superior value for money, whilst maintaining a fair margin for their shareholders. By operating a streamlined business model in which they keep overheads, including head count, to an absolute minimum they are able to undercut traditional high street jewellers by up to 70%. By these means they can effectively target the mid to high end of the market, for whom price and quality are both of concern, attracting their custom through digital channels and engaging with them face to face as well as by phone and email. In this space it is possible to deliver Cartier quality, at a price below that of most high street retailers, to a globally interconnected audience.
(A traditional craftsman at work on a bespoke piece)
Demand for bespoke pieces has risen significantly over recent years and now stands at over 40% market share of engagement ring sales. There is no evidence to suggest that this trend will abate in the foreseeable future. This places clothing brands that have turned to jewellery collections at a disadvantage because they tend to only offer off the shelf items and lack the experience of traditional jewellery manufacturers. The growth of social media and the rising use of smart phones are also disrupting the traditional norms of the gem and jewellery market. By 2016 over a third of online purchases were made on mobile devices and surveys suggest that over 82% of in store purchases are made as a result of research conducted on smart phones. A recently McKinsey & Co report revealed that 70% of jewellery purchases are made after a consumer has consulted social media for advice, ideas or inspiration. Comparatively few direct purchases are made as a result of social media marketing so it is crucial for a brand to engage with its customer base and play the long ‘game’ with them in terms of planting ‘seeds’ progressively, rather than employing an outdated in-your-face advertising strategy with the 21st century digitally savvy consumer. 3D printing is coming of age and it will make its mark on the jewellery industry. However, the lack of uniqueness it offers will predominantly keep it towards the lower end of the market in terms of uptake as a means of jewellery manufacture. On the other hand it will prove a universally useful technique when it comes to producing models of bespoke pieces for consumers to view prior to committing to the fabrication of the final creation.