Developed market retailers are under pressure, but some business models perform strongly

In developed markets, multiple business models exist within diamond jewellery retail, ranging from luxury chains to small, independent, family-owned stores. Many of the large listed retailers across the US, Japan and Europe have failed to meet their cost of capital, resulting in negative returns. Leading US speciality jewellery chains closed over 2,000 doors in the last five years, with several traditional large chains such as Whitehall, Friedman’s and Finlay no longer trading.

Among several retailers that have established successful business models is Tiffany, which maintains one of the highest margins of its peer group.

On the whole, emerging market retailers have outperformed developed markets

For retailers in emerging markets such as China and India, sales of gold and gold jewellery, normally a low margin category, represent the majority of their revenues. However, retailers in these markets have benefited from structural factors: growing economies, an increasing base of consumers with an appetite for diamonds and expanding number of stores selling diamond jewellery. In China, there is also a benefit from relative sector consolidation, with multiple retailers operating ‘at scale’.