By Stephanie Rosenbloom
In a different economy, Billy Mitchell and Nicole Drucker of San
Francisco might have splurged on a $10,000 engagement ring. But
Ms. Drucker is out of work and they need to save for a house. So
in April, Mr. Mitchell got down on one knee on the Golden Gate
Bridge and proposed with a $4,000 diamond ring he had bought on
“We had to decide, where do we want the money?” Mr. Mitchell
said. “On her finger?”
In this economy, many consumers would rather keep their money in
their wallets than on their fingers, necks or ears. As people
re-examine their budgets, jewelry is turning out to be one of
the easiest places to cut back — or trade down.
“The half-carat is the new three-carat,” explained Hayley
Corwick, who writes under the pseudonym Lila Delilah for Madison
Avenue Spy, a blog about designer sales.
Yet the understandable penny-pinching by consumers is putting a
painful squeeze on the jewelry industry.
The new frugality has forced diamond mines to curtail
production, led to deep discounting at jewelry chains, spurred
hundreds of store closings and resulted in job cuts at boutiques
and department stores. Because jewelry is expensive inventory
that moves slowly even in better economic times, many stores are
laden with debt — even though wholesale global prices of
polished diamonds were down 15.4 percent in June compared with a
Experts say that when the shakeout is over, far fewer jewelers
will be left standing. About 20 percent more American jewelers
will go out of business this year than did last year, according
to Kenneth Gassman, president of the Jewelry Industry Research
Institute, an independent research practice.
The jewelry chains that have filed for bankruptcy in the last
year or so include Fortunoff, Whitehall Jewelers, Friedman’s,
Christian Bernard and Ultra Stores (which operated jewelry
departments inside Filene’s Basement and other chains).
Still in business but posting losses, meanwhile, are big jewelry
chains, both high end and low — from Harry Winston and Bulgari
to Zales and Claire’s Stores.
And while the venerable Tiffany & Company is still making money,
sales have dropped 34 percent at its stores in this country that
have been open at least a year.
Major mass-market retailers including Wal-Mart, J. C. Penney,
BJ’s Wholesale Club and Costco have cited jewelry as one of
their worst-performing categories this year. Even online jewelry
and watch sales are down, declining 7 percent in the first
quarter, according to the Web analysis firm comScore.
“You’re seeing the traffic fall off a cliff at all price
points,” said Stacey Widlitz, a retailing analyst with Pali
Of the consumers still buying jewelry, many are trading down.
Blue Nile, the giant online jeweler, said some people were
opting for less costly engagement rings made of semiprecious
stones instead of diamonds.
And yet, sales of diamond rings and wedding bands seem to be
holding up better than for other kinds of jewelry. Retailers and
analysts say a decent engagement ring is still seen as a
necessity for men hoping to get a yes to a marriage proposal.
Even Mr. Mitchell, of San Francisco, who knew the outcome
because his fiance’e had collaborated in the planning,
considered the ring to be “hugely” important. And he spent hours
learning about diamonds on BlueNile.com. But “we knew that we
only wanted to spend so much,” he said, “and this Web site
really enabled you to get the best diamond for the dollar.”
Many consumers still intent on expanding their jewelry
collections are now doing so with costume and vintage pieces
instead of new, fine jewelry.
Megan Wishnow of Long Island City, Queens, trolls eBay for
pieces. “It’s become a little bit gauche in a way to walk
around, to flaunt, whether you have it or not,” said Ms.
Wishnow, who sells vintage clothes on the Web after years of
working in public relations for high-end fashion brands like
Gucci. “I think women are definitely more conscious of how they
come off. And everyone wants to be respectful of what’s going
on, especially in New York City.”
Instead of buying jewels, some people are even renting them by
the week or month for glamorous events or for gallivanting
around town, as one might do in a leased Mercedes. At Avelle, an
online rental site for swanky goods, more and more consumers are
signing up to rent jewelry by the likes of Chanel and Louis
Vuitton, resulting in double-digit year-over-year growth in
jewelry rentals, according to the company’s senior vice
president of product management, Dana Palzkill.
Some bargain hunters have taken to haggling — even at Tiffany.
After all, consumers are loath to overpay in a down market.
“I think everyone feels compelled to ask the question for fear
of being, feeling foolish after the fact,” Michael J. Kowalski,
chairman and chief executive of Tiffany, said last month at a
Thomson Reuters luxury and retail industry conference in New
Tiffany has lowered prices on diamond engagement rings, a core
part of its business, by about 10 percent since the holiday
“We’re not going to discount or run short-term sales,” Mark L.
Aaron, vice president for investor relations at Tiffany, said in
a telephone interview. “We’re simply going to take a little bit
less gross margin in the engagement category. It was our gesture
to a young couple. We just made it a little bit more
Tiffany hopes it is laying the groundwork for a lifelong
relationship with the newly betrothed.
Not surprisingly, the more expensive the jewelry, the greater
the sales declines in the last year. In Tiffany’s most recent
reporting period, sales of jewelry above $50,000 were softest.
Even selling midpriced jewelry has been brutal for chains
because the market is awash in marked-down goods from so many
liquidation sales. “This is forcing luxury players to make one
of two decisions,” said Ms. Widlitz of Pali Research. “You
either chase the consumer downstream or you stay the course.
Tiffany is staying the course.”
As a result, Tiffany is among the jewelers expected to gain
market share amid the industry shakeout.
“Tiffany has the balance sheet to really withstand a prolonged
period of weakened demand,” said Bob Drbul, a retailing analyst
with Barclays Capital who tracks the company. The company’s
stock price peaked around $56 in autumn 2007 and fell to about
$17 this March before rebounding. The shares closed Monday at
$24.70, up 41 cents.
To weather the recession, many chains are slowing new store
growth and making cuts to capital expenditures, inventory and
their advertising budgets. Harry Winston, Tiffany, Zales and De
Beers have collectively cut hundreds of jobs.
In February, Finlay Enterprises — a major operator of licensed
fine jewelry counters in department stores like Macy’s,
Dillard’s and Lord & Taylor — said it would exit the
department store business and close about 40 of its
approximately 100 specialty jewelry stores, which include
Bailey, Banks & Biddle.
For the retailers the good news, relatively speaking, is that
the chains say the rate of deceleration has slowed in the last
three months. No one is declaring a recovery, or even that the
market has reached a bottom. But Tiffany, which has been selling
its signature six-pronged diamond solitaire engagement rings
through booms and busts since 1886, is confident the sparkle
will return once again.
“We’re going through a business cycle,” said Mr. Aaron of
Tiffany. “There will eventually again be a rising tide of
affluence around the world.”