LONDON, United Kingdom — Besides being a luxury adornment, and the oldest one at that, jewellery is also considered a form of universal currency. It has funded wars and explorations and allowed many aristocratic families fleeing the Bolshevik terror to start a new life abroad from the sale of their jewel-encrusted possessions. In the past 20 years, gold has appreciated by 472 percent, while the value of some precious stones has increased by 900 percent or more.
But will that be the case this time around, as the coronavirus pandemic puts a virtual halt on the global economy?
It’s clear that luxury as a whole is going to take a hit as hard, if not worse, than in 2008, when the market contracted further than the global economy as a whole. About half of consumers across the US and Europe expect to reduce their spending on discretionary items like fashion and luxury goods over the next six months, according to research from the Boston Consulting Group. C-suite luxury industry executives expect sales to be down 25 percent to 35 percent this year, with profits down 40 percent to 45 percent — across categories. Jewellery, to be sure, is not immune.
“When media is all about the latest figures of contagion and deaths, buying jewellery isn’t a priority,” said Tobias Kormind, managing director of online-based diamond specialist 77diamonds.com, which has seen sales drop by two-thirds since the beginning of the lockdown. Right now, the retailer, whose biggest markets include the UK and Europe, is offering online one-to-one consultations via Skype and WhatsApp. Some customers, he said, are opting for a home proposal.
“The West at the moment, apart from Russia and Latin America, is switched off,” said Jean-Christophe Babin, chief executive of Bulgari on the phone from his home in Switzerland at the end of March. The LVMH-owned Italian jewellery house — which has supported the fight against the virus with a major donation to the research department of the Spallanzani Hospital in Rome — has shut down its leather manufacturing operation in Italy and its watch workshop in Switzerland. (Its perfume partner, ICR, is making hand sanitiser, like many other LVMH brands.)
“It does not make sense to add to our inventory when we do not know when money will start flowing back in again,” he said.
With stores and productions closed, Bulgari, like many other jewellers, finds itself in an unprecedented situation. In China, Bulgari never went a day without being able to sell, thanks to some stores that were partially operational and the online e-commerce platforms Bulgari.com and WeChat. While Bulgari’s online sales may have spiked, they never compensated for the loss of transactions in stores where high-ticket items are typically sold.
When media is all about the latest figures of contagion and deaths, buying jewellery isn’t a priority.
However, Bulgari is seeing recovery in the region. After eight weeks of disruption, Chinese shoppers seem now keen to celebrate the end of quarantines with some expensive jewellery. “Although the footfall in stores is down by 30 percent to 50 percent, depending on the days, the conversion rate is higher,” Babin said. “We have seen a period of about five days in a row in which our sales are catching up with those of last year.”
The hope is that Western markets will bounce back in the same way in summer, when Bulgari will introduce its new high-end jewellery collection. (Work on the collection will resume in its atelier in Rome when it is safe to do so.)
But while Bulgari’s trajectory might fall in line with that of its main competitors, it does not reflect the state of the market as a whole. A long-established company like Bulgari with ready access to liquidity can afford to wait out the storm, while smaller organisations have had to restructure — and fast.
The seven-year-old Loquet moved out of Selfridges at the eleventh hour, left its office to save rent and now ships from the home of its founder, Sheherazade Goldsmith. Other companies exposed to wholesale have seen more than half of their business evaporate.
To be clear, a good percentage of independent jewellery designers are also independently wealthy, which means that they can afford to sustain their own lifestyles — and hold onto much of their inventory — through the crisis. But already-fragile relationships with multi-brand retailers, which often take jewellery pieces on consignment, meaning that the jeweller isn’t paid until the item is purchased, are taking their toll. (The store gets a percentage of sales.) Valery Demure, a London-based jewellery consultant and agent representing small, independent jewellery designers, says that many of her clients have not yet been paid for consignment sales that took place prior to the retail lockdown in the West. Others that operate under the wholesale model have not always been paid for orders that were shipped weeks, sometimes months ago. Retailers including Bergdorf Goodman, Saks Fifth Avenue, as well as large established online players, have not placed orders for autumn and winter seasons.
Brands with a solid online business presence and less dependence on wholesale have fared better. London-based brand Annoushka, for instance, is relying on technology tool Hero — a virtual reality tool embedded into the website that simulates the in-store experience — to boost sales while stores are closed. While there’s been an overall decline in revenue, sales of talismanic jewellery like the “evil eye motif” have grown.
It is time to build out your brand. Sales will follow.
London-based Carolina Bucci, who has accelerated the online development of her brand by making her jewellery easily personalisable, has seen a strong performance of “wish-well” items such as “Forte” beads and “Lucky” bracelets. Her focus, for now, is not on the top-line. “This is not a time for simple sales messages,” she said. “It is time to build out your brand. Sales will follow.”
Sometimes, however, a strong digital strategy is not enough. To comply with the government’s restrictions, France-based Messika will not even be able to fulfil online orders during the lockdown.
That means costs must be reduced at every angle. For instance, instead of paying for expensive samples, jewellery designers are drawing jewellery for special clients rather than commissioning workshops and buying precious materials, which means that those factories and suppliers are being hurt, too. What’s more, gold prices are extremely high right now, trading for $1,602 per ounce on April 2 versus $ 1,474 in November 2019. London and Paris-based designer Anissa Kermiche said that she will probably have to redesign some of her jewels to reflect this reality. Annoushka hopes that gold will be more affordable in summer when it has to replenish stock.
While small and large brands have been challenged by the pandemic in different ways, there is one segment of the market that seems to be benefiting, at least for now, from the situation. On March 27, Sotheby’s announced that its online jewellery auction hit $739,375, surpassing projected sales, with a 97 percent sell-through rate.
The auction house also saw a significant number of new collectors entering sales, accounting for more than 20 percent of overall participants. Asian buyers were more active than in previous sales, according to Sotheby’s jewellery specialist Quig Bruning, confirming the trend of wealthy Chinese pre-ordering symbolic jewellery in the high five figures — such as the ruby bangles commissioned to Shanghai-based jewellery artist Feng J. — to celebrate the end of quarantines.
“As consumers start more discretionary spending again, jewellery can still feel like a smarter investment than some other luxury categories,” said Sarah Willersdorf, partner and managing director at BCG. “People are still celebrating birthdays and getting engaged.”
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