Fine Jewelry - Cornell University presentations... · Fine jewelry is a high-involvement, sensory experience product, thus bulk of online sales come from affordable branded jewelry

Fine Jewelry Emma Newburger

Grace HarrisonGrace WinantMac Manion

Background

● Throughout history jewelry has signified status, importance, and changes in people's lives.

● The United States is currently the largest jewelry market in the world.

● The diamond segment accounts for nearly half of industry revenue as weddings still remain a central event in human societies across the globe.

● While diamonds and fine jewelry were at first exclusively for royalty, now diamonds are a popular tradition and fine jewelry has become accessible to many people.

About The Jewelry Industry

Industry Analysis Advertising Strategies Raw Data Analysis Recommendations

Jewelry Industry Structure

HHI: 309

Four Firm Concentration Ratio: 23.5-25.4%

Annual Growth: 1.2%

Revenue: $34.7bn

Concentration in the industry is low (3 main firms), but highly competitive

Nearly 70% of the industry players are nonemployers● non-competitive ● majority are independent, not chains

How are nonemployers and smaller companies dominating the industry? ● The specialized nature of the work and relatively low startup costs

Statistics Industry Ratio Specialty Jewelry Market Share


Jewelers Losing Market Share

All the above retail categories that do not sell primarily jewelry above report that they have $100 million or more of

jewelry sales annually.

Specialty jewelers are losing business from merchants who do not primarily sell jewelry

Specialty Jewelry Market Share


Jewelry Sales Growth

Jewelry Expenditure By Segment

What are consumers buying?

● The diamond jewelry segment accounts for almost half of industry revenue, and encompasses all engagement jewelry.

● Highly dependent on the US marriage rate

● Over past 5 years, marriage rate has gone down and diamonds have contracted as a share of overall industry revenue


Product and Services Segmentation (2016)

Consumers With Highest Expenditures The top buyers of fine jewelry and watches are married people without children between the ages of 55 and 64.


Expenditure by Household IncomeRelative to Average Expenditure

Jewelry Spending by Education


Expenditure by Education LevelRelative to Average Expenditure

Consumption by Region

Where do people buy the most jewelry?

Industry activity is concentrated in the Southeast and Mid-Atlantic regions of the United States.● These regions make up nearly half of

industry establishments

Residents of the Midwest spent the most on fine jewelry, and residents in the South spent the least.


Expenditure by US RegionsRelative to Average Expenditure

Barriers to Entry

Barriers to Entry are low and steady

Establishing a brand, investing in capital and contracting suppliers are obstacles to entrants.

Well established larger players have competitive advantage over new entrants due to brand recognition (ex: Tiffany)

Large industry players develop strong relationships with wholesale distributors, ensuring they receive the most competitive prices.

IBISWORLD


Key External Drivers

Marriage Rates

Disposable Income

Gold Prices

● When per capita disposable income increases, consumers have more money to purchase luxury products.

● Price of gold affects retailer’s input costs which influence prices, profit margins and revenue.

● When the price of gold increases, operators can typically pass this price in the form of higher selling prices, increasing revenue

● The marriage rate influences demand for wedding jewelry, which makes up a sizable portion of the industry's gold and diamond jewelry product sales.


Regulation

Regulation is light and steady

● The Responsible Jewellery Council implemented a Chain of Custody (CoC) Certification in March 2012.

● CoC is used to support responsible mining practices, identify the provenance of jewelry materials and enhance a jewelry retailer's reputation through responsible sourcing.

● CoC not required, but helps give customers assurance that their jewelry is conflict-free


Brand Equity

Low Brand Recognition

(17.4%)

(1.9%)

(4.2%)

High Brand Recognition

Luxury PerceptionLow Quality Perception


Major Players


Signet Jewelers Ltd.

Market Share: 17.4%

World’s largest jewelry retailer, sales have grown significantly since acquisition of Zales in 2014

Brands target consumers with various income levels

Signet's industry-relevant revenue is expected to grow at an annualized rate of 14.7% (IBISWorld)


Tiffany & Co.

Market Share: 4.2%

US retail stores account for majority sales

Tiffany spends about 7.4% of its total revenue on advertising and marketing costs

TIFFANY & CO. trademark is an asset essential to the competitiveness and success


A Glittering Future: Industry Trends

Growth in Branded Jewelry

● Experts say that the branded segment will account for 30-40 percent of the market in 2020

● Expansion of brands like Cartier, Tiffany & Co., new entrants like Pandora and David Yurman

● Future growth in branded jewelry likely to come from non jewelry players in categories such as high-end apparel - companies like Dior, Hermès, and Louis Vuitton


Industry Trends

Growth in Omni-Channel Marketing

● Currently online jewelry sales are only 4 to 5 percent of the market● Forecasted that online sales will grow 10 to 15 percent by 2020● Fine jewelry is a high-involvement, sensory experience product, thus bulk of online

sales come from affordable branded jewelry

According to a recent McKinsey survey, two-thirds of luxury shoppers say they engage in online research prior to an in-store purchase; one- to two-thirds say they frequently turn

to social media for information and advice.


Who to Target

Two main times in life when people are buying jewelry

Mid 20’s and 30’s (marriage) Early to Mid 50’s (Highest earning bracket)

Raw Data Analysis RecommendationsIndustry Analysis Advertising Strategies

Jared, Kay, and Zales

● Jared is seen as the higher end of the 3 ● Kay and Zales are more affordable,

offering sterling silver and semi precious stones

● Shows in their advertising their different targets○ Jared never mentions pricing○ Kay and Zales do (even for same

line of jewelry offered in all locations)


Our Findings

Price Advertising Bridal

Celebrity

22.5%


Price Disclosure in TV Advertisements

13%

Ad Strategies

Memory Jamming Informative


Ad Comparisons

Jared Kay


http://www.youtube.com/watch?v=gN8BXTpD6BE

http://www.youtube.com/watch?v=Rjh_onTnNh8

Ad Strategies

Promotional Collections Celebrity


How They Advertise

Persuasive● Created a name for themselves ● Maintained their brand by upholding their

reputation● Blue box people aspire to get or give


Super Bowl 2017

● A response to November’s falling revenue (14%) at Tiffany's Fifth Avenue location, located next to Trump’s Tower

● First-ever Super Bowl ad, tapping halftime performer Lady Gaga to appear in a 60-second spot

● Tapping a new market with Gaga’s “edginess” yet still elegant in a black turtleneck & Penthouse apartment

● Costing around 10 million ● "The brand is definitive and iconic, yet

continues to push and evolve with the times"


http://www.youtube.com/watch?v=f-r3SQE5iVk

Digital Advertising

Tiffany&Co. Zales Kay Jared

Facebook(likes)

9.3 million 1.7 million 1.5 million 0.5 million

Twitter(followers)

1.53 million 23 thousand 40.9 thousand 20.7 thousand

Instagram(followers)

6.5 million 43.9 thousand 59 thousand 422

Youtube(subscribers)

36.5 thousand 3.1 thousand 6 thousand 164

Apps Tiffany Engagement Ring Finder


Product Placement Tiffany&Co.

● TV Show, Scandal ~ Kerry Washington● Kelly Clarkson in 4 Carats Lyrics

○ “Like diamond ring just a little something from Tiffany's”

● Madonna in Santa Baby○ “Come and trim my Christmas tree, with some decorations

bought at Tiffany”

● Breakfast at Tiffany’s Movie

https://docs.google.com/file/d/0B6rCFrG-eCdIbU1qSjVyRVY0YzQ/preview

Product Placement Zales

● Zales forms a partnership with the Bachelor & Bachelorette, providing rings for their engagements

● With 7.85 million viewers, Zales increases air time and consumer exposure

Fine Jewelry Markups

● What makes Tiffany & Co. products worth so much more?

● The EXPERIENCE ● Average Mark-up at Tiffany & Co. is

253% ● Lack of transparency with in-store

pricing displays - no pictures allowed


http://www.youtube.com/watch?v=FxJD5x_DWaQ

Same Sex Couples Advertising

● Tiffany & Co. first same sex marriage ad 2015

○ Positive feedback ○ Miley Cyrus reposted thanking jeweler “for being

badass” ○ Hard to measure ads impact as investors were more

focused on company’s lower profit forecast and a drop in sales during the Holiday season

● Zale’s first ad in 2016○ Received criticism from a christian group, One

Million Moms○ Not much data on positive impacts of the ad

Sustainability Advertising Niche

● Manufacture the Majority of their own products○ Manage quality and monitor supply chain

● Responsible Mining● Kimberley Process Certification Scheme

○ Established by UN to prevent “conflict diamonds” from entering the market

○ Only sourced from countries that are full participants

● Invest in Local Communities ○ Local hiring and fair wage practices

● Iconic Blue Boxes are Green ○ Sustainably sourced from responsibly managed forests and

recycled paper

Primetime Data Analysis

● Between Kay, Jared, and Zales, Kay spends the most on advertising.

RecommendationsAdvertising Strategies Raw Data AnalysisIndustry Analysis

Advertising by Network

● Balanced advertising spend for each network.

● Zales chooses not to advertise on ABC.


Breakdown of Advertising by Program Type

● All three spend the highest proportion of ad budget on Drama programs

● Kay and Jared have very similar advertising breakdown (Signet Brands)

● Zales not acquired until 2014


Targeted Advertising Program Types

Slice of Life- The Biggest Loser, The Voice, The Bachelor, Shark Tank

Drama/Adventure- The Blacklist, Grey’s Anatomy, Scandal

Situational Comedy- The Big Bang Theory, Brooklyn Nine-Nine

Police/Suspense- NCIS, CSI, Law and Order

News Magazine- Dateline, 60 Minutes

Award Shows- CMA, Iheartradio Music Awards

College and Professional Football


Targeted Advertising by Program

● Kay spends more on Slice-of-life programs on ABC even though overall it spends more on dama.

● Similar advertising spend for Jared and Kay.



● Zales spends the most of its ad budget on CBS for professional football.

● Kay spends more on sitcom than drama on CBS (CBS has popular sitcoms).



● Jared advertises heavily during slice-of-life programs on Fox (American Idol).



● Zales advertises heavily during slice-of-life programs on NBC (The Voice)

● Jared and Kay have very similar advertising spend on NBC.


Advertising/Sales Ratios

Signet: 5.9%

Jared and Kay (Sterling Division): 6.6%

Zales (Zales Division): 5.5%

Industry: 5.5%


Recommendations

● Increase same sex couples advertising, more ads to meet popular trends

● Continue working on building a larger social media platform

● Improving the online experience while maintaining quality in store experience

● Other companies should expand into the “sustainability” claims that Tiffany makes,

placing them above any ordinary jeweler and reaching the “conscious” consumer base

● Expand with the apps

Advertising Strategies RecommendationsIndustry Analysis Raw Data Analysis

Industry Wrap Up

The fine jewelry industry is mature

The technology used in this industry has not changed significantly over the five years to 2016 and is not expected to experience any substantial growth during the next five years

● The industry is consolidating● Jewelry products are not expected to dramatically

change in the near future● Technological change for the industry is minimal

Advertising Strategies RecommendationsIndustry Analysis Raw Data Analysis

Questions?

Documents

Fine Jewelry - Cornell University presentations... · Fine jewelry is a high-involvement, sensory experience product, thus bulk of online sales come from affordable branded jewelry