In 1948, De Beers launched its now-famous slogan, "A Diamond Is Forever." But for many diamond retailers, forever is coming to an end.
In 2018, the Jewelers Board of Trade (JBT) reported that 852 U.S. jewelry retailers closed up shop, on top of the 817 retailers that shut down in 2017. Even though new retailers are opening up, it's not enough to offset the closures. The overall jewelry retail industry is shrinking, as confirmed by Richard Weisenfeld, JBT's president, in a January 2019 interview with National Jeweler magazine.
It's not a revelation to note that the country is overstored across all retail sectors, and that store closures are becoming more common. But the diamond jewelry industry is declining at an alarming pace. According to jewelry industry analyst Edahn Golan's assessment of the latest adjusted government figures, 2017 fine jewelry retail sales in the U.S. were $63.8 billion. That represents a growth rate of just 2.5% per annum over the last 18 years, or, according to Golan's calculations, a 60% drop in growth since 2000.
That's not to say there isn't still money within the sector. A recent Brides' American Wedding Study revealed that couples spent an average of $7,829 on an engagement ring in 2018, up an astonishing 56% from $5,023 in 2017, possibly representing an increased demand for more custom pieces, more complex settings or larger center stones.
And despite reports that millennials are shying away from buying expensive engagement rings, the 2018 average age of first marriage in the U.S. is 29.8 for men and 27.8 for women, according to the U.S. Census Bureau, which puts millennials right in the sweet spot for engagement and diamond purchases. That's even more significant because, in addition to being the target bridal market, the segment is also America's largest generation in terms of population. According to a 2018 report from the Brookings Metropolitan Policy Program, there are over 75 million millennials in the U.S.
"Millennials and Gen Z make up 2/3 of diamond purchases," said Kathryn Money, vice president of strategy and merchandising for digitally native jewelry retailer Brilliant Earth, in an email to Retail Dive. "They are the largest segment, and have demonstrated strong interest in the category. From cultivating social media standards to how they spend their money, millennials are known for shaking up norms, and the same holds true for their approach to marriage and engagements."
So why are so many stores closing? Part of the problem is that the bulk of the jewelry retail industry is made up of smaller stores, and those stores are struggling to keep up with current retail trends. "Aside from the big brands such as Zales and Tiffany's and Cartier, a big piece of the market is mom and pop shops," said Marie Driscoll, managing director of luxury and fashion at Coresight Research, a global research and advisory firm specializing in retail and technology, in an interview with Retail Dive. "And over the course of the last decade, companies like Zales have grown, and mom and pop shops have exited the industry."
"Right now, to the consumer, we look like what we are: a bunch of old white men creating a product and controlling it."
Co-founder and CEO of MVI Marketing
Also, the luxury jewelry market differs from other luxury products in that the bulk of it isn't branded, but rather comes from those same small, local stores selling and setting loose stones. "In the luxury sector, you generally know the brands you like, and you can begin a shopping journey looking at a brand's Instagram page, or at brick and mortar," said Driscoll. "But buying a diamond ring is very specific. If you're already frequenting Tiffany's for some reason, you'd look there, but one of the industry disruptor [factors] is that people are saying, 'I like Tiffany's, but I really love sapphires' or 'I love pink sapphires,' or they want some crazy opal."
Driscoll said that as younger consumers look to showcase self expression in their choice of engagement ring, an already unbranded product is becoming even more diversified. "The diamond industry is being disrupted more than most other retail sectors because of that lack of brand awareness and an empowered consumer," said Driscoll. Some consumers aren't only questioning the choice of which center stone to use in an engagement ring, but even the choice of whether they need a ring at all. Driscoll said that once a customer moves away from traditional product, the flood gates to creative thinking open wide. "They say, 'Why don't I get a vacation or a necklace instead of a ring?'" she said. "Once you start saying 'no' to something that's been so traditional for so long, you open up a realm of possibilities."
For an industry steeped in tradition and word-of-mouth, this new retail landscape has come bearing down fast and furious.
"The traditional model worked for so many years," said Marty Hurwitz, co-founder and CEO of MVI Marketing, which specializes in the jewelry industry, in an interview with Retail Dive. "It was a no-marketing model that was handed down from father to son to grandson. That isn't working anymore, but the industry has been reluctant to change. And this is a male dominated industry that's selling a product to women, and that's also a large disconnect. And then it's also a very white industry. There are massive blocks of consumers that the industry is avoiding and not doing anything about."
Hurwitz said that before any change can take place, the industry will need to take a long, hard look at its problems, and find ways to fix them. "The challenge for the industry is to accept that it's lagging behind, and take the steps to cater to a younger audience, and a female centered audience, and an ethically centered audience," said Hurwitz. "Right now, to the consumer, we look like what we are: a bunch of old white men creating a product and controlling it."
Gates, boundaries and misinformation
"You have a gated experience in the jewelry industry," said Ben Smithee, CEO of The Smithee Group (TSG), a consumer consultancy specializing in digital strategy and millennial marketing, in an interview with Retail Dive. "There's gates in knowledge, experience, background." Smithee said the disconnect between the customer and the counter is at odds with the connected retailing experience today's shoppers seek. "Consumers want control, and no one wants to feel ignorant," he said. "We want to know everything, and the more the [jewelry industry] can remove those gates, the more the experience can be improved."
The traditional, in-store retail experience has always involved creating physical distance between customers and merchandise. "When you walk into a jewelry store, it's still so unattainable," said Lee Senderov, president of Richline Digital. Richline, a subsidiary of Berkshire Hathaway, is one of the largest jewelry companies in the world. "You can't touch anything, and you have this boundary between you and the person who's finding the ring for you. Sitting in a back room with a sales person is very intimidating, and it feels very stodgy and very old."
The knowledge gap between customers and retailers adds another layer to the distance many customers feel. Yet when it comes to finding reliable information, many customers are on their own. Smithee said that the jewelry industry waits for questions instead of providing comprehensive information, which is "very pull instead of push. The consumer still has to go to [retailers] and find information, rather than having it delivered to them. The industry says there's so much bad information out there, but it doesn't create the content that's required to push the knowledge out there."
Transparency, secrets and questions
Today's diamond shopping journey may be hobbled by pricing obfuscation, misinformation, and standoffishness, but it doesn't have to be, according to Money. "Establishing trust is particularly important in the diamond retail space, as it's a considered, high price point purchase that can be an emotionally weighty decision," she said. "Consumers want to feel well-informed and educated about their purchase and confident in the retailer they've selected."
Smithee said pricing transparency may be the biggest hurdle for the industry to overcome. "It's a complicated product, and jewelers are worried about margins and profit," he said. "They think, if pricing is more transparent, what happens to the margins and the middle man? A lot of stores also care about origin, but the immediate concern is how to stay in business, and all of it comes back to price in some way, shape or form."
Hurwitz said that price is the main reason there's been resistance in thoroughly revealing chain of custody. "There's a concern that if we tell people too much it will lower the price," said Hurwitz. "And a lot of retailers are also afraid that if the truth gets out, consumers will realize we've done a terrible job of solving things in the diamond pipeline. But younger consumers really do care about chain of custody."
Consumer demand may move the needle, though. "There is increasing interest from consumers, particularly the millennial customers that we serve, in understanding how and where their products are sourced and in supporting companies that utilize business for positive social change," said Money. "They are seeking companies that have transparent and sustainable practices and focus on giving back."
Transparency is about more than price, though. Much of the conversation has to do with ethics. "There's transparency of price, and then there's transparency of materials, and then there's lab grown," said Senderov. "It all makes customers wonder what ecofriendly is. I don't know if anyone actually asks about mining, but people saw the movie 'Blood Diamond,' and think all diamonds from Africa are bad. And it's not just about tracking diamonds, but also materials such as gold."
Driscoll said that a long history of evading questions regarding transparency on several levels has eroded consumer confidence and damaged the industry as a whole. "Trust is so important," said Driscoll. "Technology has enabled consumers, but there's also a lot of misinformation on the internet. And a consumer can turn away from a brand for the rest of their life if they think they see a blood diamond. And the fact that the industry isn't coming together and being more transparent and calling out bad players hurts the whole industry."
The slow speed of digital and omnichannel
If the beginning of a consumer shopping journey is information gathering — 87% of shoppers now begin product searches online — then the desired end result is making a purchase decision. Yet, McKinsey reports that fine jewelry sales will only reach 10% of the market by 2020, and then stagnate there, perhaps indefinitely.
That puts traditional diamond retailers, and especially bridal stores, in a rather disadvantageous spot. "As sophisticated digital natives, millennials comfortably and extensively utilize technology throughout their entire engagement and wedding process," said Money.
Some of that technology involves self-education, some centers around virtual try-ons and some is social sharing. That means today's stores need to meet the customers at every part of their journey. "I don't know if you can be truly successful if you don't have an omnipresent strategy," said Senderov. "People are looking online. You still need a location, but I think it's the combination of the two. So how do you marry these two worlds? How do you make the user experience easier to use for the customer? The store of the future will have certain styles in the store to take home with you today, or if you want it in rose gold, we can ship to your house in two weeks."
Yet most diamond retail hasn't made the move past brick-and-mortar. "Only 10 percent of jewelry is bought online," said Senderov. "The jewelry industry is so behind. I think, how do we bring in more choices and make it really easy for customers?"
Money agreed. "Fine jewelry is still a relatively underpenetrated category within e-commerce," she said. "With such a considered purchase it's important that people have confidence and can really understand what their ring will look like."
For smaller mom and pop stores, however, it's not easy to find the right talent to bring their retail concept into the present-day. "It's really hard if you're a small business now," said Hurwitz. "Generally it's a relative running the social media, and they're not putting the effort into it. You have to be telling stories and you have to tell them everyday."
Instagram in particular has changed the way diamonds are sold. "Instagram jewelers are selling big ticket items, and you have a lot of Instagram influencers winning over women consumers," said Senderov. "You have a lot of women buying pieces for themselves before they get engaged. So when they do get engaged, guess where they'll tell their fiancés to go?"
"It used to be that you won the sale with engagement and then tried to keep customers," she said. "But now it's the other way around. And that's great. Women who self-purchase don't result in bridal sales overnight, but if you think about the long haul, women buy from brands they trust."
Smithee said that jewelry retailers need to make a bigger financial investment in digital if they want to stay relevant, especially in bridal. "One hundred percent of your bridal market, which is younger and millennial, will consume social media," he said. "Why wouldn't you spend on digital? Just like a lot of retailers have to revamp their brick-and-mortar stores, they have to invest in digital. Diamond retailers have been slower to adapt, but the survivors will be the ones who do."
But it's not about digital versus brick-and-mortar. It's about every channel working together. "Customers want to shop when, how, and where they want," said Money. "They are seeking a high-touch, seamless omnichannel experience. For many customers, it's important to physically see and touch the product in addition to conducting research online, and particularly for a high price point purchase like a diamond or engagement ring."
Furthermore, the line between digital and physical is blurring. "Retailers with brick-and-mortar stores have an advantage," said Senderov. "Brilliant Earth, which started online, found that they need physical locations to close the sale sometimes." Now there's more seamless transition between store and web, said Senderov, and the two need to work together and not independently. "Digital teams at some stores almost don't want to send customers to a brick-and-mortar location, because then the digital team won't get that win," she said. "So one of the challenges is, where does the sale get attributed? You see those battles today, where the head of e-commerce isn't compensated for in-store sales. So what I'm envisioning in retail is a model moving toward more pooled resources."
Diversity and the changing face of the dollar
Diamond retailers also need to address their changing customer base. The mainly millennial engagement and diamond jewelry market is made up of customers who are still seen as niche, instead of the majority. For example, millennial women are driving business, especially in the self-purchasing category. MVI Marketing recently reported that over 51% of millennial women said they self-purchase jewelry.
Millennials are also diverse. According to the Brookings Metropolitan Policy Program, millennials are now 44% minority, and according to GLAAD, 20% of millennials identify as LGBTQ and 12% identify as either transgender or gender-nonconforming.
Every millennial — like any other customer — wants to be seen and represented in the stores, brands, and companies they do business with, but so far, the industry as a whole hasn't stepped up. "Customers really want to see reflections of themselves in marketing," said Hurwitz. "Customers definitely care about that, but management in the jewelry industry doesn't care about that."
That's not to say there aren't stores and brands trying to target specific consumer subsets. But according to Smithee, jewelry retail is still focusing on a very narrow market. "The majority of retail jewelers are targeting a 40- to 60-year-old male, Caucasian customer with household income of $100K/year," said Smithee. "But by statistical significance they should be targeting 25- to 45-year-old male and female consumers who are diverse in every sense of the word."
For an industry so focused on adorning women, the continued emphasis on outdated notions is surprising. "It's still traditional, and it's still about falling in love with the man, and how he's going to be your prince," said Senderov. "You've seen so many different people represented in other clothing and cosmetics sectors ... It's great, and representative of our society. But you don't see that in diamonds."
"We're in the age where it's a second revolution of gender, racial and age equality. Consumers are starting to vote with their dollar, and the jewelry business needs to look more like the communities it's trying to sell to."
CEO of The Smithee Group
Hurwitz said that diamond retailers are stuck in the past. "The diamond jewelry industry is probably still targeting the last vestiges of the baby boom generation," he said. "It's mostly men, who are also targeted through watch advertising, which is 100% male. Rolex, for example, targets all men and late-stage baby boomers." But he said that's a mistake. "[Jewelers] should target younger bridal couples; self-purchasing women; African American consumers; the LGBTQ+ community, which is sizable, and they're ignoring it; and Hispanic consumers," he said. "Maybe only one jewelry store in the country has a website that translates into Spanish."
Smithee said that as the U.S. population changes, retailers will need to change, too. "There's going to be a day that the jewelry industry will realize that the majority of the luxury dollars will be spent by non-Caucasian Americans," said Smithee. "Dollars are getting more diverse, not less, because the world is getting more diverse, not less. We're in the age where it's a second revolution of gender, racial and age equality. Consumers are starting to vote with their dollar, and the jewelry business needs to look more like the communities it's trying to sell to."
Some companies are already beginning to change. "We launched a skin tone slider to show how a ring looks on a customer's hand for a more inclusive representation, and to ensure all customers could envision themselves wearing our products," said Money, who also stresses the importance of talking to women customers, and not just men. "Women are increasingly involved in the purchasing process," she said. "Because of this, it's imperative to speak to both a male and female audience in an engaging and relevant manner."
Customers are also looking to see themselves reflected in who owns, manages, and makes decisions at a company. Hurwitz said that some change in that area is already happening, but slowly, and sometimes only as a result of pressure. "There's some natural attrition already," he said. "For instance, at Signet. They're struggling right now, because of a lot of those issues. But even with a female CEO, their marketing is always targeting males. Being aware of the problem and taking steps to change it is sometimes different. But businesses are losing customers daily because of their failure to understand the new consumer. The diamond industry is still very heavily male."
Driscoll said that customers want to see themselves reflected in both a company's marketing and its values. "We live in a time when inclusivity is really important," she said. "I think using AR and VR with diamonds is good, and I think seeing yourself is important in branding."
For Hurwitz, it's not just about who the diamond industry wants to be, but who it wants to see in its stores moving forward. "Adornment is eternal," he said. "But the way we present the industry to these younger and newer and multi-ethnic and multi-income consumers needs to change. We have to show them who they are, and not who we are."