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Jewelry Sales Kept Declining in September

October 11, 2023 /

Jewelry sales declined in September. Year over year, US fine jewelry and diamond retail sales declined 8.6% by value and 3.8% by quantity of units sold. Average unit retail price pulled back 1.7% year over year to $1,677.

The September decline brought year to date sales down 8.1% as nearly every category suffered from a decline.

September Was Mixed For Jewelry

The fine jewelry market appears to have re-established a consistent year-over-year trend line. In April, Tenoris forecasted that the market had posted the last of its significant year-over-year corrections against the end of the Covid bubble.

In the May to September period, the fine jewelry market was down 4.1% year-over-year in unit and 5.3% by retail sales value. Each month, unit sales declined 3% to 4.9% year-over-year. Monthly retail sales declined 4.7% to 6.1%.

September unit sales fit the trendline dead-on with a decline of 4%. Retail sales were down 6.1%.

This five-month stretch has seen fashion jewelry down 3.6% in units and 3.5% in value. The average transaction price is up 0.9%.

Bridal Jewelry Sales Declined, Fashion Jewelry is Trailing 2022

In the May-September period, finished bridal jewelry, excluding loose diamonds, was down 4.8% in units and 17% in value. The average transaction price decreased 14%.

The market pattern has remained consistent over this relatively brief time span. The fashion jewelry market has found footing running just behind 2022. The overall jewelry market is showing larger softness due to continued weakness in bridal.

We head into the holiday season with mixed messages from the US economy. On the plus side, inflation continues to moderate and job growth remains surprisingly strong.

On the downside, interest rates remain high, and a potential government shutdown could hit just as the holiday season ramps up. Pending any meaningful external impact, there is no reason we shouldn’t expect a Holiday season continuing this trend line.

US Jewelry Sales chart - Jan 2020-Sep 2023 - Jewelry sales decline Source Tenoris

September Diamond Jewelry Sales Declined 6.4%

Year over year, natural diamond jewelry sales declined 8.1% in volume and 9.1% in value. Gross margins declined to 48.4%. Sales by product category showed bracelets up 5.2% in units and 3.1% in retail sales value. Necklace sales rose 1.2% in units and 7.7% in sales value. Rings posted the most abysmal performance with unit sales down 12.3% and retail sales value down 15.8% with declines in all ring sub-categories.

Year over year, lab-grown diamond jewelry sales increased 64.4% in units and 47.3% in retail sales value. Retail margin is 57.8%, up 5.2%. Sales by product category displayed the start of LGD inroads into additional categories. Bracelet sales were up 121.3% in units and 143.5% in retail sales value. Necklaces experienced an increase in unit sales of 71.4% and 203.2% in retail sales value.

There is an interesting trend among US specialty jewelers of not picking up full lab-grown diamond jewelry lines. While 68.3% sold LGD jewelry in September, only 41.7% of them sold stud earrings and just 35% sold LGD-set engagement rings. Only 16.4% jewelry retailers sold bracelets and 15.1% sold Necklaces.

The percentage of retailers selling LGD stud earrings and engagement rings is up 28% year over year. The percentage of retailers selling LGD necklaces is up 58.9% while the percentage selling bracelets is up 90.7%.

Tenoris will drill down into retailer adoption rates in a future report.

Demand for Diamonds, Including Lab Grown, Shrank MoM

The combined value of loose diamonds sold by US jewelers declined in September month over month as consumer demand continues to face headwinds.

Total loose diamond sales fell 15.2% in September compared to August. Number of units sold declined 10.3%. The average expenditure on diamonds also declined, down 1.8% Month over month.

Loose Natural Diamond Sales Down 23% YoY

In September, year-over-year sales of natural diamonds dropped 23.2% by value after declining 17.4% from August. By number of stones sold, sales decreased 20.5% year over year and 12.3% month over month in September.

Not all items lost favor in the last month. Demand for 5 carats leaped 167% by number of stones sold. Diamonds in the 1.80-1.89 range were also in greater demand, with 45.5% more stones purchased by consumers.

The sizes that suffered the most from a drop in demand were 4 carats, 6 carats and larger, and 1.60-1.69 carat goods (-40%, -37.5%, and -37.1%, respectively).

A rising share of sales is of memo goods, 24.6% in September compared with 17.8% in 2022. This is an indication of the industry’s desperation to generate sales, even if that results in delayed revenue.

Another sign of the difficulty in selling natural diamonds is retailers’ shrinking gross margins. In September it averaged 34.8%, down from 35.5% in 2022. Here, retailers are taking a bite out of their own profitability to make a sell.

The speed of selling natural diamonds is also decreasing. In September, goods lingered in inventory 19 months on average, more than a year and a half. In September 2022, the average was 15 months. The difference is in capital efficiency, or how often the same amount of money generates income and is reutilized to buy a replacement item that can generate additional revenue. The faster this happens, the better.

There is some good news. The average size of sold natural diamond keeps rising, up to 1.20 carats in September. Call it a halo effect driven by demand for larger lab-grown diamonds. Americans at present want larger diamonds. This means higher expenditure. This is something the industry should strive to encourage if it wants to increase revenue.

Average Retail Price & Cost of loose natural diamonds Jan 2020-September 2023

Loose Lab-Grown Diamond Sales Declined MoM

Year over year, lab grown diamond sales are clearly growing. Unit sales increased 38.3% but the total value of sales rose by a modest 4.5%.

This is the second month in a row that year-over-year sales growth is single digit. And this single digit was slashed in half compared to August. This is a serious growth deceleration that, if continued, will lead to a decline in sales revenue.

The broad gap between unit sales growth and the revenue this is generating is tied directly to the ongoing price free fall. The average price is down 24.2% at retail.

Month over month, unit sales declined 8.4% and revenue decreased 7.9% in September.

Retailers’ gross margins inched up again in September, averaging 64.7%, a new record high. Also inching up is the average size of sold LGD, now up to 2.00 carats from 1.97 carats, in August.

As a long-term trend, this means that while more LG diamonds are sold, revenue per item is not keeping up and total revenue is signaling that it may start to shrink.

If prices keep declining more rapidly than unit sales rise, the LGD sector will face a market where their overall revenue will start eroding pretty quickly as well.

Is There a Long-Term Future for LGD?

There’s a class in every first semester MBA that discusses the four stages of a product life cycle: introduction, growth, maturity, and decline. The following lesson is the Product Life Cycle theory.

Briefly, a new product is introduced, sees market share growth, it matures, and then consumer interest declines. Product Life Cycle examines potential and there are four categories: Stars, Question Marks, Cash Cows and Poor Dogs. Stars are products with high growth and market share. This is where you invest, and is what we have seen happening with LGD in the US market in the last five years.

Poor dogs are the opposite, low growth and share products at the end of their life cycle that you stop investing in and let die.

Some speak of Shooting Stars, products that very quickly capture market share and generate high cash revenue, but then burnout quickly and fade. Products move from one category to another based on how well they are managed.

If LGD proponents don’t carefully manage their rising star, this fast cash generating product may become a poor dog in no time.

If there is a lesson the LGD sector should learn from De Beers, it’s how to keep your non-essential product alive and interesting for more than a century.

Our tip: Keep an eye on unit sales and slow down price erosion. Fail in doing that, and you may end up a dog with nothing but a dry bone.

Average Retail Price chart & Cost of loose lab grown diamonds Jan 2020 - September 2023

If you want to better understand the US jewelry retail landscape, contact us for a deeper and comprehensive understanding of the market and how Tenoris can help improve your business.

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