María Eugenia Girón. IE Business School
28 November 2014
The jewelry sector is an exception in the luxury industry, given that not only does it show few signs of becoming more concentrated, it is also leading the way in online sales.
Over the last few decades we have witnessed the concentration of the luxury industry into groups and conglomerates. According to Altagamma, in 2011 only 30% of the luxury industry was in the hands of families and entrepreneurs compared to 70% in 1995. Sixty-five percent of the sector was managed by large groups, compared to 45% in 1995. This concentration of market share into a small number of brands is a feature of all sectors of the industry except for the case of top of the range jewelry, where the sector is still fragmented and brands only represent 20% of the sector. Expert analysts such as MacKinsey forecast that the accumulated turnover of jewelry brands will reach 40% by 2020. When, some fifteen years ago in 1999, I headed the acquisition of Carrera y Carrera jewelers together with investment fund 3i, our opinion was that jewelry brands would grow at above average rate. In other words, the sector would increasingly follow the trend of being boiled down to a limited number of brands.
Nevertheless this concentration process has not occurred as rapidly as expected. There are still many small jewelry brands, family or private businesses, and 80% of those selling today have no brand. Why does the jewelry sector behave this way? What makes it different from other luxury categories? My theory is that confidence is an enormous barrier to entry. It is the local players, the centenary jeweler’s shops in every city, that continue to get the lion’s share in terms of jewelry sales. When we take the decision to buy a jewel, the most important thing when it comes to choosing a jeweler is the confidence you place in the establishment. It is even more important than design. Remember that when buying jewels we have no choice but to believe that the red stone is a ruby and the green one is an emerald given that only diamonds have certificates and all other gems are a leap of faith. If the jeweler sold jewels to your mother or grandmother, the long-standing relation gives you some kind of guarantee.
Which new kids on the block are capable of building trust-based relations with jewelry clients? On the one hand you have traditional fashion and leatherwear brands who have eyed the potential and have built a jewelry segment. Hermes, Chanel and Dior have all created and launched jewelry and watch collections in addition to building new stores dedicated to this product category. A more recent phenomenon is that of online sales, which are finally taking off in the jewelry sector. Not only the websites of established brands like Tiffany or Cartier, but also small designers featured on the multibrand portals. New luxury channels such as Maiyet (http://maiyet.com/shop/jewelry ), Moda Operandi (modaoperandi.com), or J Crew (https://www.jcrew.com/es/womens_category/jewelry.jsp ) all state that they have seen strong growth in jewelry sales, which in some cases was unexpected.
We have also seen the appearance of portals specialized in jewelry like The Editorialist (https://editorialist.com/jewelry ), or Stone & Strand (http://www.stoneandstrand.com ), which are now becoming consolidated. The collateral effect of the increase in online jewelry purchases is that they bring with them a new distribution channel for jewelers/designers who are starting out. Internet brings the opportunity for widespread distribution and to reach clients around the world. One more example of the so called “longtail” effect. Brands like Shaun Leane (www.shaunleane.com/) which offer a bespoke line, Bibi van del Welden (http://www.bibivandervelden.com/) known for its mammoth tusk line, MdeU Design (http://www.mdeu.es), or Sue Rockefeller (http://www.susanrockefeller.com). All these jewelers, which used to be considered as niche brands or designers, have raised their visibility and built up their business. These brands were local brands before the advent of online sales, and today they can penetrate the international market and find clients around the world through this new distribution channel.
In this scenario Mexican brands have a magnificent opportunity to cross borders and present their product to the world. Daniel Espinosa (http://www.danielespinosa.com) who I met in Madrid when he was looking to expand in Spain, is an example. Why not go for virtual expansion as well?