Luxury Institute News

Luxury retailers are banking on an inspired mix of rose gold, antique cuts, and offbeat materials. But one thing is certain: The prices had better be right.

By Kristin Young
JCK Magazine
October 2010 Issue

Forget what you’ve heard about the lousy economy: Consumers are buying fine jewelry. At least that’s what luxury retailers are counting on for the holidays. But the category is still unpredictable, and when it comes to the most important selling season of the year—stores are staying on their toes.

The nation’s finest jewelers say they are upbeat about the holidays and have inventoried gold, antique-cut stones, natural materials, and even a few whimsical pieces to lure the wary shopper. Most are anticipating flat to single-digit growth in the period compared with last year. Still, last year’s anemic numbers shouldn’t be hard to beat, despite consumers’ odd spending patterns and erratic reactions to price points. And that’s on top of the challenge of predicting just what—exactly—will make shoppers slap down the plastic. “It’s really hard to identify the light at the end of the tunnel right now,” says Milton Pedraza, CEO of the Luxury Institute, an organization that does research on the high-end consumer.

Statistical evidence suggests the luxury sector slowed considerably over the summer. During the 12 months ended in June, the sector’s sales declined 6 percent, according to the NPD Group, with fine ­jewelry representing approximately one-quarter of total jewelry units sold, but three-quarters of the value. Yet many retailers are up for the year.

Saks Fifth Avenue posted a 6.1 percent increase in sales during the first quarter. Macy’s Inc., Bloomingdale’s parent, has been posting monthly same-store sales in the positive territory, year to date—from a low of 1.1 percent in April to a high of 10.8 percent in March. In July, which marked the end of the fiscal year for the Neiman Marcus Group, parent of Neiman Marcus and Bergdorf Goodman, the company recorded a 6.5 percent increase over last year. (JCK requested interviews with all of the major department stores, but all declined to comment on their holiday strategies.)

Even more positive signs are coming from independent jewelers. Jim Rosenheim, owner of Tiny ­Jewel Box in Washington, D.C., an institution that counts Madeleine Albright among its VIP clients, says his business has been outperforming projections. “We’re not booming,” he says. “But, locally, I’m thinking a 5 percent growth during the holidays.” Rosenheim says he’s betting on colorful gems—“Color is happy”—as well as bold yellow gold and multicolored South Seas pearls. Washingtonians have embraced designers Cathy Waterman and Stephen Webster, so the store has stocked up on both collections.

Learning your customers’ magic price point is critical, say retailers. And while it seems simplistic, chances are that sweet spot has shifted radically, and not always predictably, in the past year. Rosenheim expects most shoppers will spend between $1,000 and $10,000. “But we still sell jewelry between $10,000 and $30,000,” he says. “We’re not abandon­ing that price point. We know we’ll sell some of those goods.”

The Luxury Institute has found more and more jewelry designers have introduced secondary lines to help retailers mitigate their price points and retain their business. “They’re replacing precious metals with less precious metals and stones, ratcheting back their offerings because they have to make it affordable to consumers,” says Pedraza.

Kathy Rose, owner of Roseark (formerly Kaviar & Kind) in Los Angeles, is one designer who launched a less expensive line for her celebrity-frequented ­jewelry outpost. Roseark has a customer for pieces like Alon Shina’s 18k yellow-gold labradorite and moonstone bib necklace for $21,000, to be sure. But at press time, her eponymous secondary line, made of 22k gold and semiprecious stones and rarely priced above the $1,000 mark, had been on the floor for about a week. “I’ve sold three units,” she says. “That’s a lot for my first low-end line launch.”

Price point is top of mind for Jennifer McCurry, accessories buyer at Marissa Collections in Naples, Fla. Consumers are either spending less than $2,000 or more than $10,000. The middle range? Crickets. “I’m seeing that a lot in our industry,” she says.

Not even the Big Apple has been immune to shifts in spending habits. “In 2007 and 2008, we’d have $20,000 purchases,” says Franklin Edward-Flewelling Getchell, co-owner of Moss in SoHo. “Now it’s very hard to convince someone to buy over $4,000. It’s a different business.” Getchell expects the holidays to be in the flat to 5 percent growth range, but many of the players have changed, too. Moss used to carry lines like H.Stern. Today, the boutique features lesser-known designers out of Europe such as ultra-minimalist German-born jeweler Erich Zimmermann, Italian modern artist Monica Castiglioni, and Eva Eisler, an industrialist based in Prague. Prices range from $800 to $3,900.

Materials are another hot topic for fine ­jewelry purveyors. Back in Naples, Fla., Marissa Collections has posted a 20 percent growth in sales thanks to the popularity of one-of-a-kind “investment” pieces—specifically, gold. And the funkier, the better. Rougher, tougher gold—like oxidized black gold from Arunashi, rose gold from Lucifer Vir Honestus, and “gilver” (a gold/silver hybrid) from Yossi Harari—is particularly popular, and McCurry expects the trend to continue through the holidays. She expects mid-single-digit growth, noting her business depends on the snowbirds who flock to South Florida between January and April.

Melissa Geiser, veteran fine-jewelry buyer at Stanley Korshak in Dallas, agrees gold will be a strong seller. “Whether it’s diamond hoops, stack rings or pendants, they are easy gift-giving items,” she says. “My clients want the gold and they will spend for the gold because they see its intrinsic value.”

Rose gold is in high demand at Roseark. L.A.’s glitterati (Cameron Diaz, Nicole Richie, and Jennifer Aniston are Roseark fans) go for diamond pavé manta ray cuffs, snake cuffs, and eagle cuffs—all set in the skin-tone-flattering metal. Feminine pieces like the quartz-on-quartz Thousand Petalled Lavender Necklace by Gintare and sculptural items such as Anndra Neen’s Cage Cuffs are also doing well. “It’s going to be an easier holiday for everybody,” says Rose, predicting flat to single-digit growth. “I’d put money on it.”

Gold may be a staple, but retailers are also confident in unusual designs made from rustic natural materials such as horn and ebony combined with sliced and raw gems. Woolly-mammoth ivory, the ­fossilized prehistoric stuff found in the Arctic, is blowing out of Stanley Korshak. “It’s a casual trend, even if it does have a diamond edge,” Geiser says. The sting of a big purchase—in the $1,000 to $5,000 range at Korshak—is lessened by the fact that designer Monique Péan collaborates with Alaska Native Eskimos and sends some of the proceeds back to their villages.

Like Tiny Jewel Box’s Rosenheim, Geiser is not backing down from the $20,000 price point and is “psyched” about designer Wendy Yue’s whimsical over-the-top monkey and garden rings made out of every gem under the sun—from brown diamonds, black agate, and orange sapphire to garnets, amethysts, and blue topaz, sometimes all piled on one piece. (For more Yue, “JCK5: Carved Gems.”)

Antique-cut stones—specifically rose cuts, which retailers often describe as “quiet” or “subtle”—are another booming category. Paul Schneider, owner of Twist in Portland, Ore., says more and more shoppers are going for the Old World–style stones. The primary reason, Schneider says: “Natural materials just don’t work with brilliant-cut stones that scream.”

Twist does particularly well with designers Cathy Waterman and Monique Péan, and business has been better this year. “Shoppers are back, but they’re not the same people,” says Schneider, who is expecting 10 percent growth during the holidays. Again, price is key for Twist shoppers. “We’re not buying as much over $8,000 as we used to,” he says, noting most purchases are between $500 and $1,000. “Over $10,000? We bought them cautiously. Now we’re not even buying in that category.”

For most of this year, online sales across all categories have posted double-digit increases, with fine jewelry proving itself one of the more resilient categories, according to MasterCard Advisors’ SpendingPulse. This seems to be true for Ylang23, a 25-year-old brick-and-mortar store in Dallas with a growing e-commerce business. Joanne Teichman, who owns the store along with her husband, Charles, says she is forecasting a record holiday season.

“The level of substantial orders for more expensive pieces surprises us every day,” she says. Designer exclusives, such as a charms collection from Irene Neuwirth and one-of-a-kinds from Cathy Waterman, Lucifer Vir Honestus, and Jamie Joseph, help drive traffic. To celebrate the store’s 25th birthday, a dozen designers are collaborating with Ylang23 on limited-edition charms, whose proceeds will go to charity.

In the end, retailers agree on one thing: Times are tough, but you can’t keep fine jewelry down for long. Even small gains during the holidays will be welcome, and there’s optimism for the future. “People love to adorn themselves,” says the Luxury Institute’s Pedraza. “As long as the opposite sex is around, that will happen till the end of time.”

http://www.jckonline.com/2010/09/29/what-upscale-buyers-want-holiday