CHANGING CONSUMER PREFERENCES AND THE GROWTH OF BRANDS IN THE UNITED STATES AND CHINA
The diamond dream is very much alive. The physical attributes that diamond jewellery consumers are drawn to - the sparkle and beauty of diamonds - are accompanied by emotional associations of love and promise, prestige, mystique, tradition and a sense of the eternal. Diamonds continue to be seen as an emotional symbol and a store of value.
However, the diamond industry cannot afford to take this situation for granted, especially when the consumer landscape is changing so rapidly.
THE US: POSITIVE OPPORTUNITIES EMERGING DESPITE CHALLENGING CONDITIONS
The US remains the largest market for diamonds in the world. Total US retail sales of diamond jewellery reached pre-2009 downturn levels in 2013 while polished diamond content in jewellery increased by 20 per cent from 2008. Overall, the US accounted for approximately 40 per cent of global polished diamond consumption by value in 2013.
FINE JEWELLERY IS FACING STRONG COMPETITION FROM OTHER CATEGORIES
It is clear that, as the US economy recovers from the financial crisis, the new consumer landscape holds both challenges and promise for diamond jewellery.
In 2013, fine jewellery was not among the top five on the list of gifts that US women would most like to receive, ranking behind holidays (foreign and domestic), electronics, home furnishings and spa days. Among young people (aged 18-34), the desirability of fine jewellery ranked below branded luxury products such as designer handbags and clothing. However, diamonds were still the most popular choice for fine jewellery for all age segments; in fact, diamonds were almost three times more popular than any other type of jewellery.
BRANDS HOLD THE KEY TO GROWTH
Brands are becoming more important to the US consumer. The acceleration in consumer preference for brands of diamond jewellery is evident from the claimed acquisition of branded engagement rings – from just seven per cent in 2002 to three and five times that level in 2011 and 2013 respectively. The growth in importance of branded jewellery will have a particular impact in attracting the brand-conscious younger US consumer.
The attraction of branded diamond jewellery to retailers is that it supports both the diamond dream and higher margins. The offer of brands with a specific positioning and story, which goes beyond the 4Cs, helps retailers address consumer needs for emotional engagement with the product and protects the offer against commoditisation.
HIGHER-END JEWELLERY IS A FURTHER GROWTH OPPORTUNITY
There are exciting growth opportunities in the US for high-end diamond jewellery. Average incomes for the top one per cent of Americans have grown much faster than national average wages. In 2013, female consumers with household income of over US$150,000 accounted for only eight per cent of the consumer base for diamond jewellery, but in terms of actual acquisition this group accounted for 14 per cent of diamond jewellery pieces and 33 per cent of sales by value. Clearly, precise targeting of this consumer segment through higher-end products and brands would help capture its potential more effectively.
THE BRIDAL SEGMENT HAS EXCELLENT PROSPECTS
Despite a lower percentage of the US population opting for marriage, and a longer wait to first marriage among those who do, among those who choose to marry the average amount spent per occasion continues to increase, according to a report by Mintel, a consultancy. Current penetration of bridal diamond jewellery is in line with historic levels, highlighting the resilience of this segment to the economic pressures in the US in the last few years:
79 per cent of those who got engaged in 2013 acquired a new diamond-only DER
73 per cent of those who married in 2013 acquired a new diamond-only DER
Of all DERs acquired in 2013, a total of 82 per cent were diamond-only rings, the majority set in white gold or yellow gold, followed by platinum and silver, with the latter taking share from gold in the last few years.
THERE IS STRONG POTENTIAL FOR FURTHER GROWTH
Fine jewellery is the object or experience most desired by urban women in China. Asked to select from a list of competitive items or experiences they most coveted, almost half (48 per cent) of Chinese women selected fine jewellery, a much higher percentage than the next most desirable gift item - designer handbags, chosen by just under a third of Chinese women. Among types of jewellery, diamond jewellery was by far the most popular choice, with about two-thirds of female consumers selecting it as their first or second preference.
CHINA: A STORY OF GROWTH AND EVEN GREATER GROWTH POTENTIAL
Sales of diamond jewellery to Chinese consumers were the fastest growing in the world over the last decade, with a compound annual growth rate of 21 per cent from 2003 to 2013. As a result, the share of polished diamonds sold in jewellery to Chinese consumers grew from barely three per cent in 2003 to just over 13 per cent of global demand in 2013. Including Hong Kong and Macau, the share of this region’s consumers in the global demand of polished diamonds in jewellery was almost 16 per cent in 2013 in USD.
THE IMPORTANCE OF THE BRIDAL SEGMENT IN CHINA
In 2013, diamond jewellery consumption by Chinese women was led by married women who acquired almost two-thirds of pieces and accounted for the same proportion of sales value. The second most important consumer segment was bridal women, who acquired about a fifth of pieces and contributed just under a quarter of sales value. Single women represented the smallest proportion of sales, acquiring 14 per cent of pieces representing 11 per cent of total value.
GROWTH IS LIKELY ACROSS ALL THREE ROUTES TO DIAMOND OWNERSHIP
The bridal segment in China is important today not only for commercial reasons but also because of the important role it plays in the consumer’s introduction to the diamond category. There are three main routes into the diamond jewellery category for the Chinese consumer. By far the most common of these is falling in love and getting married.
Major milestones in life such as birthdays and wedding anniversaries form the second most important route into the category for Chinese consumers.
Finally, there is receiving or buying their first diamond jewellery piece (usually earrings or a bracelet) as a treat. In 2013, 18 per cent of Chinese consumers bought diamond jewellery for ‘no specific occasion’ and 24 per cent of diamond jewellery was self-purchased rather than received as a gift.
ENGAGING THE CONSUMER WILL BE KEY TO GROWTH
The vast majority of recent acquirers or consumers currently choosing a piece of diamond jewellery consider branded offers as their first or second choice. When it comes to actual acquisition, Chinese consumers prefer to buy from trusted domestic retailers such as Chow Tai Fook and Chow Sang Sang, which surveyed consumers say they can trust. Since 2008, however, claimed acquisition of diamond jewellery from international brands Cartier and Tiffany by young middle-class consumers has grown eight to nine times.