WHAT PEOPLE BUY: JEWELRY AND WATCHES

After advancing from 40 percent in 2000 to 48 percent in 2001, household purchase incidence of jewelry and watches remained about even in 2003. Some 46 percent of households bought jewelry and/or watches in the past year. Contributing to the growth in the jewelry market is the expanding availability of jewelry sold at discount prices. In 2002, Wal-Mart was the nation's largest jewelry retailer, with over $2 billion in jewelry sales. Zale Corporation, number two in the retail jewelry market—with their Zales, Gordon's, and Bailey Banks and Biddle brands among others—is getting into the discounting business in a serious way. They have a chain of 100 Zales outlet stores that sell jewelry 20 to 70 percent off traditional retail prices.

Industry Snapshot

Total sales of jewelry and watches were $51 billion in 2002, up 0.8 percent over 2000's sales of $50.6 billion, according to statistics collected by the Bureau of Economic Analysis (see Figure 6.5). The past two years have been full of turmoil for jewelry and watches, the epitome of luxury products. Retail sales of jewelry and watches actually declined in 2001 only to recover in 2002. Because of the economic slowdown following September 11, consumers were challenged to justify making purchases in what most consider an extravagant category. On the other hand, mass market jewelry, especially costume jewelry that gives maximum style at a minimal price, and fine jewelry bought at discounts of 50 percent off and more helped keep consumers in the market during the slow time. After all, jewelry provides an emotional lift that people need in times of stress and trouble.

	2000	2002	% CHG '00–'02
Total Personal Consumption in millions	$50,568	$50,978	0.8
Source: Bureau of Economic Analysis

Figure 6.5: Jewelry and Watches Industry Snapshot

Retail Overview

Shoppers are turning away from traditional jewelry stores, used by 39 percent for jewelry purchases last year, as they seek out and find nice jewelry sensibly priced in a wide range of retail outlets, including traditional department stores, used by 48 percent of jewelry shoppers in the past year; discount department stores, used by 38 percent of shoppers; and nonstore retailers including Internet, mail-order, and television shopping, a source for 17 percent of jewelry shoppers. The U.S. Census Bureau's retail census reports that traditional jewelry store sales totaled $25.1 billion in 2002, 1 percent less than jewelry store sales in 2000 of $25.3 billion. That means that market growth in the jewelry business has come about through increased sales in all other retail channels of distribution.

Direct to consumer channels are increasingly capturing a greater and greater share of the jewelry business. Television shopping giants QVC, with estimated jewelry sales of $950 million, HSN, with jewelry sales of about $415 million, and Shop NBC, which boasts category sales of $300 million, all rank in the top 20 national jewelry retailers, according to National Jeweler magazine (see Figure 6.6). Numerous pure-play Internet jewelers are cropping up too, notably Bluenile.com, which specializes in diamonds, and ashford.com, which focuses on fine jewelry for less. Not to be left behind in cyberspace, most of the name brand retailers, including Tiffany's, Zales, Fortunoffs, and Ross Simons, have implemented "bricks-and-clicks" strategies to ensure that their brand names come up when jewelry shoppers google to find their next jewelry piece.

	2002 SALES
Wal-Mart	$2.3 billion
Zale Corporation	2.1 billion
Sterling	1.6 billion
JCPenney	1.0 billion
Sears	1.0 billion
Finlay Fine Jeweler	953 million
QVC	950 million
Tiffany & Co.	786 million
Helzberg Diamond Shops	500 million
Kmart	500 million
Fred Meyer Jewelers	450 million
Target	450 million
Home Shopping Network	415 million
Friedman's	411 million
Macy's East	400 million
Whitehall Jewelers	338 million
Costco	325 million
Macy's West	300 million
Shop NBC	300 million
Source: National Jeweler Magazine

Figure 6.6: Jewelry and Watches Market Share Leaders

Purchase Drivers

Jewelry is a favorite indulgence item for women and an important fashion accessory. Jewelry, especially fine jewelry, is also a favored gift item for men to give on ceremonial occasions such as weddings and anniversaries, as well as birthdays, Christmas, Valentine's Day, and Mother's Day. Moreover, women are prone to give themselves a gift of jewelry when they need a boost, as one woman clarifies: "I bought a bracelet for myself on my birthday. I spent $5,000 at Neiman-Marcus buying a bracelet that I always wanted. For my birthday, my husband took me out to dinner at a restaurant not far from where I bought the bracelet. He thought [dinner out] was all I was getting. But I felt I deserved [the bracelet] now."

With rings given to celebrate marriage, jewelry carries a more symbolic meaning than many other discretionary items as one young respondent explains: "I like to shop for jewelry. There are so many things connected with jewelry, like Christmas and the birth of a child. It is symbolic and meaningful to someone. I have lots of nice jewelry that I will pass down to my daughters." Another respondent explained that, often, it is the symbolic meaning of a jewelry item that drives its purchase: "I was in Toronto and found an emerald ring in an antique shop. I had to buy it. It took me back. It was nostalgic, fulfilling a desire I have had for 20 years to own a ring like that. I will always associate that ring with Toronto. At the time, I was making memories, as well as enjoying them."

Demographic Variables

With a purchase incidence of 51 percent, women are just slightly more likely than men (41 percent) to have purchased jewelry and/or watches in 2003. While the highest purchase incidence of jewelry is found among households with consumers aged 18 to 24, jewelry is actively purchased at all age levels under age 65. Even the seniors have a purchase incidence of 37 percent, which is less of a drop off than found in many other discretionary categories.

While households at all income levels buy jewelry, those at the highest level, $50,000 and above, report the highest purchase incidence (52 percent among $50,000 to $75,000, and 59 percent for $75,000 and above). Two-person households, as opposed to those with children or more members, buy jewelry the most.

Key Demographics for Buyers of Jewelry and Watches.

• Women buy slightly more than men.

• High-income households of $50,000-plus buy more.

• Younger households aged 18 to 24 are the most active buyers, but buying remains strong through age 65.

• Two-person households buy more.