5 Predictions for Jewelry Retail in the Second Half of 2022
From a slowdown in sales growth to rising costs, Fruchtman Marketing outlines its expectations for the second half of the year.
In its latest “State of Jewelry Retail” report, Fruchtman Marketing outlines its expectations for the second half of the year.
“With all the turmoil in the news, including rising interest rates, inflation and the state of the market, there are a lot of unknowns as retailers move forward in 2022,” said the report.
Here are five key takeaways.
Sales growth is expected to slow.
Industry analyst Edahn Golan dubbed last year the “year of jewelry,” and for good reason.
Full-year sales in the watches and jewelry category reached an estimated $115.29 billion, a 51 percent increase year-over-year, according to preliminary data from the U.S. Bureau of Economic Analysis.
Jewelry sales in 2022 are expected to grow, but not nearly as aggressively as last year.
This year, as of March, full-year watch and jewelry sales are expected to reach an estimated $125.53 billion, about a 9 percent year-over-year increase.
Fruchtman predicts year-over-year growth of between 4 and 8 percent.
“We think it will be tough to hit double-digits over last year, which saw double-digit increases the year before,” the report noted.
Two major jewelry retailers, Pandora and Brilliant Earth, both also recently predicted a slowdown ahead.
Travel may not be as strong of a competitor as originally thought.
Travel tends to be jewelry’s biggest competitor in the fight for consumer discretionary dollars, and travel being restricted because of COVID-19 has worked to jewelers’ advantage.
An easing of travel restrictions coupled with the pent-up demand for vacations is a cause for concern for jewelers, but rising travel costs may soften the impact this year.
“One only has to look at what the cost of a roundtrip fare was pre-pandemic [compared] to now,” said the report.
The cost of airfare rose 19 percent from March to April, according to data from the Bureau of Labor Statistics, marking the highest-ever monthly increase since the agency began compiling that data.
Year-over-year, the cost of airfare has climbed 33 percent.
Inflation is taking a toll on shoppers.
The cost of airfare is rising, and so is the cost of nearly everything else.
The consumer price index, which measures the average change in prices over time consumers will pay for a basket of goods and services, rose 0.3 percent month-over-month in April.
It was up 8.3 percent year-over-year, nearing the highest level seen since the summer of 1982.
Prices are rising at the gas pump and in the grocery aisles, while housing costs are also going up.
“This will affect nearly every consumer. If you are a lower to a moderately priced retailer, it will most likely affect you more,” said the report.
“If your customer is more ‘middle class’, they’re getting squeezed the most.”
For wealthier customers, how the stock market is performing and other factors will impact their buying decisions, the report noted.
Engagement ring shoppers may prioritize value.
Consumers are also contending with rising mortgage interest rates and rent prices, noted the report.
With the cost of living rising ever higher, many young adults live at home with their families longer and when it’s time to pop the question, they might have less to spend on an engagement ring.
“This can go either way on the engagement ring front. They may spend more money on the ring if they are no longer in the market for a home. Or they may need to have more money to put down on that home, reducing their spending or looking to [natural diamond] alternatives such as lab-grown, less expensive colored gemstones, or repurposing an heirloom.”
The average age of an engagement ring purchaser is 32, said the report, with many people in this demographic saving up longer for larger purchases.
“This age group will be hyper-focused on ‘value’. You may see carat size go down. Or you may see less importance on quality in cut and color sacrificed to purchase that larger diamond. You also may see more inquiries about lab-grown diamonds,” said the report.
Rising gas prices may impact foot traffic.
U.S. retail gas and diesel prices hit a record high last week with energy costs up 30 percent year-over-year in April.
“Foot traffic might decline,” said the report. “On the other hand, if that customer is making the effort to come to your store, your closing ratios should be higher.”
Though foot traffic may take a hit, online shopping is expected to increase, so jewelers should fine-tune their websites now, if they haven’t already.
“Getting your website in tip-top shape will be critical in 2022. If you actually sell online, you should see an increase this year,” said the report.
“If you don’t, there’s no better time than now to seriously make this change.”
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