Jewels Need to Be Unique to Be Profitable

ONLY FEW ITALIAN JEWELRY MANUFACTURERS HAVE BEEN ABLE TO REINVENT THEMSELVES BY FOCUSING ON PRODUCT DESIGN AND DIGITAL SALES CHANNELS. THE HARD PART IS PERSUADING WOMEN TO BUY JEWELS AS THEY BUY PURSES, RATHER THAN SEEKING THEM AS GIFTS

by Luana Carcano, Dept. of Management and Technology, Bocconi
Translated by Alex Foti


The Italian jewelry industry is one of the sectors that make Made in Italy famous abroad. After years of world supremacy in exports of precious jewelry, over the last decade, Italy has lost leadership positions to India and China, countries that can both boast traditions in the production of precious ornaments, and have integrated supply chains, from mines to outlets. Still in the top ten of world exporters, Italy can count on a total turnover of around €7.8 billion in 2016, for a total of 25,000 medium-sized businesses giving jobs to 75,000 employees. The decline in world demand for gold has negatively affected the value of exports for about €300 million, according to data from Goldsmiths' Club of Italy, which now are about the same as they were in 2012, with negative growth in almost all major markets (Switzerland, United Arab Emirates, Hong Kong, and the United States). It has been the domestic market sustaining sales of Italian jewelry, in contrast with the recent past.

But even more so than on foreign markets, it is in the minds of women that jewels must regain their space as objects of female desire. Not that women desire them less, it is that they usually prefer to receive them as gifts, so that the seasonality of sales of jewelry, with peaks at certain occurrences, is well known to operators in the industry and has little changed over the last decades. On the other hand, purchases for self-gratification, perhaps as a form of impulse shopping, or as personal investment, is not very widespread not only in Italy, but even in the United States, the world's leading marketplace.

Why? Certainly not because of the lack of supply range, and it might not even be due to decline in purchasing power, but could just be a cultural fact.

Conversely, the parallel market segment of fashion accessories is constantly expanding and has managed to capture attention of customers with items that match unusual materials (titanium, wood, plastic) with colors and styles that follow seasonal trends. The digital channel, which fashion companies master very well, is contributing to the dissemination of fashion products and knowledge of fashion brands, while engaging the Millennials’ consumer demographic. In this regard, the jewelry industry is divided among those who have successfully focused on creativity and design, and those who languish in the limbo of classicism lacking originality. The former tend to be few, and the latter tend to be many. Thus there is a plethora of firms offering only offer slightly differentiated items which, by irony of the fate (rather, because of the decisions taken), find themselves to compete with one another on the basis of price, in a sector like the luxury industry where quality and style usually prevail in determining competitive advantage.

The opening of mono-brand retail outlets is not a viable option for all firms, for a variety of reasons, including the large investments required, and the excessive number of companies relying on an independent and specialized distribution, which has been weakened by market conditions, and is unlikely to offer a unique shopping experience at the point of sale. Online sales are still underdeveloped in the Old Continent, while the success of US companies listed on Wall Street that sells rings and necklaces online demonstrates how you can create experience and personalization on the digital channel even for expensive jewelry items.

To convince a woman that a ring or a pair of earrings are as gratifying as a purse or a pair of shoes, companies should focus on originality (in terms of product design, market positioning or consumer experience) and leave behind the traditional, but now obsolete, industry patterns. Those Italian jewelry firms that are capable of reinventing themselves will thrive and increase market share. For all the others, the future will be pure struggle for survival.