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Jewelry Sales Stabilize in May, Diamond Sales Are Sliding

June 14, 2023 /

Jewelry sales stabilized in May, however the average price point of diamond engagement rings is dragged down by lab grown.

Diamond sales are suffering from a continued decline. Prices are declining as unit sales are shrinking. Memo is on the rise, indicating possible financial stress among wholesalers.

Jewelry

As anticipated, finished jewelry sales found some stability in May. The month’s figures indicate we may have reached our new normal in jewelry.

Total unit sales were down 4.7% year over year. Total value sales were down 5.3%. Fashion jewelry was off 4.1% in units and 3.5% in value. Bridal was off 11% in units and 13.5% by value.

These results entail some weakening but effectively ends the dread of the sharp results of the last few months when compared to the incredible numbers of 2022.

A look at the market by retail price point provides a reinforcing perspective to this view. As seen in the table below, the retail price ranges between $1,000 and $10,000 continue to generate a dominant share of retailer revenue and gross profit.

Total Market

Under $1K

$1K – $10K

+ $10K

Share of Revenue

22%

59%

20%

Gross Margin

54%

51%

43%

Looking at year-over-year performance by these same retail price points shows three quite different stories:

All Jewelry

Total Market

Under $1K

$1K – $10K

+ $10K

Unit Sales

(5%)

(6%)

(2%)

(9%)

Value Sales

(5%)

(7%)

(1%)

(15%)

Gross Margin

51%

54%

51%

42%

The key $1,000 to $10,000 price range is essentially flat year on year. Both the low end and high end show continued weakness.

This differentiation of market by price point is even clearer when looking at fashion jewelry.

Fashion Jewelry

Total Market

Under $1K

$1K – $10K

+ $10K

Unit Sales

(4%)

(5%)

(0%)

(7%)

Value Sales

(4%)

(6%)

1%

(12%)

Gross Margin

52%

54%

51%

43%

What’s up with bridal? In May diamond engagement rings declined 11.8% by units and 19.3% by value year over year. Cultural issues begin addressing the decline in unit sales. The sharper decline in value sales appears to have a couple of sources.

The first is that consumers are buying less expensive diamond engagement rings, both natural and lab grown.

DER Avg Retail Price

2022

2023

Change

Natural

$4,867

$4,355

(11%)

Lab Grown

$3,597

$3,355

(7%)

All DERs

$4,739

$4,192

(12%)

The second factor is LGD diamond engagement rings’ continued share growth:

DER Share

Unit Share

YoY

Natural

83%

(18%)

Lab Grown

17%

43%

Combined we see consumers shifting to lower price points as well as to the overall lower costs of lab grown diamonds. The combination is a significant drop in year-over-year sales revenue.

These changes are delivering a significant impact on the supply side. The question is, how are retailers faring during these shifts? What is the impact on their bottom line?

The answer is that, while playing a risky game, their financial performance year on year remains viable.

Retailers are maintaining their gross profit by capturing increased margin on lab-grown goods. They are securing lab-grown diamond sales by aggressively offering larger carat goods at a similar retail price.

The bottom line is that while the fashion jewelry market may have reached a new normal, the bridal market is only increasing the risk of volatility.

Jewelry Sales Stabilize in May US Jewelry Sales chart - Jan 2020-May 2023 - Source Tenoris

Diamond Sales Declined

Natural and lab-grown polished diamond sales are experiencing a continued slowdown. Prices are equally taking on a new direction and memo supply is on the rise.

Natural Diamonds: A Year of Sliding Sales

Sales of natural diamonds continued to decline in May. The number units sold declined 16.5% year over year, while the value of sales dropped 20.6%. This completes a year of sales declines.

Together with the decline in sales come price declines. The average retail price of 1-carat rounds eased down 1.8% month over month, although retailer costs were practically flat (-0.1%). The result was shrinking retailer gross margins, down to 34%, from the historic 36%.

Another emerging trend is a slow but continues decline in the average diamond size consumers are buying. In May the average purchased diamond weighed 1.63 carats, compared to a record 1.77 carats in January.

A further sign that the diamond midstream remains under pressure can be identified in the share of memo goods. In 2022, the share of memo was 18%. By January of this year, memo rose to 20% and climbed rapidly to 25.2% in May.

The best-selling natural diamonds were 1.00-1.04 carat, round, I/SI2, GIA goods. Consumer demand for this item jumped 60% compared to April, and retailer inventory levels declined 4.9% month over month.

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

Lab-Grown Diamonds: Average Retail Sales Prices Nosedived in May

After two months of rising prices, the average retail price of loose lab-grown diamonds tumbled in May, signaling the so-called race to the bottom is yet to reach that bottom.

The average retail price of lab-grown sank 9.6% in May compared to April. The sharp price decline is stunning in light of the 6.1% month-over-month rise in the number of units sold.

The simple equation of rising demand leading to higher prices is not happening in the lab-grown diamond sector and for a compelling reason.

The primary price drivers are oversupply that reduces prices, prompting a deep need of the midstream to sell rapidly to avoid inventory price erosion. Ironically, that advances prices down even further.

This explains why at a time when unit sales were up 67.8% in May 2023 compared to May 2022, the average price fell by a third.

Meantime, retailers are lowering their selling prices, but in a more moderate pace. The benefit is a swelling gross margin. In May it averaged 66%.

The declining prices are allowing American consumers to purchase bigger goods and they are taking advantage of the opportunity. In 2022, the average size of LGDs consumers purchased fluctuated around 1.50 carat. This year, it’s north of 2-carats.

Resonating with that, the top selling item in May was 2.00-2.24 carat Round G/VS1, followed by F/VS of the same size range and shape. Further, the top nine selling items were all 2 carat or larger, F or G color and all VS1.

All possess two additional characteristics: retailers had them on hand on memo, and the quantity of goods held in inventory was down 12-19%. Sounds like an opportunity.

LGD Average Retail Price & Cost Jan 2020-May 2023

Tenoris Diamond & Jewelry Reports Update

We keep expanding! We just added a Bestsellers page to the diamond report, complete with data on how the rise in sales looks from the perspective of inventory availability. Play around with it, kick the tires and let us know what you think about it.

More functionality and features are on their way, as we are constantly working on the reports. Thanks to all those that provided us with feedback and helped improve these unique services.

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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