JA survey: 2008 jewelry sales down across board-Market Survey-Magazine-IRISPANCY FASHION ACCESSORIES & JEWELRY

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Magazine > Market Survey > News Content

JA survey: 2008 jewelry sales down across board

8/11/2009 3:37:45 PM

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New York--Sales were down across the board for every category of retail jeweler in 2008, according to Jewelers of America's (JA) latest Cost of Doing Business Report, which was released on Tuesday.

Results of the survey, conducted annually as a benchmarking tool for the jewelry industry, showed that overall sales were down 3.5 percent on average, compared with a 0.3 percent decline in 2007, which was the first decline of any kind recorded in the survey's history.

Based on data reported by respondents, JA concludes that "industry sales declined materially for the first time in 20-plus years. Not even the dot-com collapse early in the decade was as difficult."

The survey, conducted this year for the first time in conjunction with National Jeweler magazine and its "America's Best Jewelers" program, included responses from 687 companies: independent mid-range stores (44.2 percent of participants), independent high-end stores (30.7 percent), designer/artist/custom operations (22.2 percent), chains with three or more stores (8.4 percent) and other (2.9 percent).

Breaking sales data down by store type, the survey shows that designer/artist/custom retailers weathered the downturn best, recording only a 0.8 percent decrease in sales, after seeing sales increase 6.1 percent in 2007.

Independent high-end retailers were down 1.3 percent after recording growth of 3.5 percent in 2007, and independent mid-range retailers saw sales slip 5.5 percent, versus a 1.7 percent decline in 2007.

According to the survey, chain stores suffered the steepest decline in sales, off by 13.2 percent, after recording modest growth of 2.5 percent in 2007.

Industry profitability also was down (the report states it is the lowest recorded since 1989), with specialty jewelers experiencing a 3.6 percent net profit as a percent of net sales, down from 4.6 percent in 2007.

Gross margins declined for all store types, the survey shows, with independent high-end jewelers experiencing one of the larger declines. The median gross margin at 48.6 percent, however, remained consistent with the 48.7 percent recorded in 2007.

Diamond and gold sales

While sales and profitability are down, the survey showed consumers are not changing what they are buying, with the distribution of sales relatively consistent year-over-year.

Diamonds (loose and set) constituted the majority of sales at 49 percent, down from 52 percent in 2007, followed by colored-stone jewelry at 9 percent and karat-gold jewelry at 8 percent.

Repair sales remain important at 10 percent, while sales of timepieces increased from 3 percent of sales in 2007 to 6 percent of sales in 2008, survey results show.

Also interesting to note is the data on Internet usage included in the report.

According to the analysis, "jewelers went through a period of growth in Internet usage for their business, but the data shows that the Internet's full potential is still not being capitalized on by many retail jewelers."

Twenty-eight percent of respondents said they use the Internet for promotion and sales, while 48 percent use it for promotional purposes only, meaning that 76 percent of respondents use the Internet for their business in some way.

Another 13 percent said they plan to use the Internet soon, while 11 percent have no plans to get online.

High vs. low

In addition to covering sales, the report draws comparisons between the habits of high-profit stores--defined as those in the upper 50 percent of companies as ranked by ratio of earnings before interest and taxes (EBIT) to total assets--versus low-profit stores.

The survey shows that effective management is even more critical during tough economic times, with high-profit firms experiencing overall sales growth of 3.1 percent, versus low-profit firms with a decline of 12.6 percent.

High-profit stores recorded greater sales per store in 2008--$1.3 million on average compared with $1.2 million for low-profit stores--as well as higher sales per full-time employee and higher sales per square foot amid lower payroll and operating expenses.

In addition, high-profit stores experienced a 20 percent greater turn on inventory and contained operating expenses more skillfully than their low-profit counterparts, spending 9.6 percent less on total operating expenses.

High-profit firms also had slightly smaller stores, averaging 2,232 square feet versus 2,284 for low-profit firms.

"Jewelers who controlled their costs were able to hold the line in 2008, successfully managing their businesses, despite the more challenging environment," JA Director of Education David Peters said in a media release.

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