WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
1
Gold washed: Rising washed: Rising import penetration and volatile input costs will erode erode industry revenue revenue
IBISWorld Industry Report 33991
Jewelry Jew elry Manufactur Manufacturing ing in the US June 2015
Zeeshan Haider
2
About this Industry
16 Internat International ional Trade
33 Key Statistics
2
Industry Definition
19 Business Locations
33 Industry Data
2
Main Activities
2
Similar Industries
21 Competitive Landscape
3
Additional Resources
21 Market Share Concentration
33 Annual Change
21 Key Success Factors
4
Industry at a Glance
33 KeyRatios
34 Jargon & Glossary
21 Cost Structure Benchmarks 23 Basis of Competition
5
Industry Performance
24 Barriers to Entry
5
Executive Summary
25 Industry Globalization
5
Key External Drivers
7
Current Perf Performance ormance
26 Major Companies
9
Industry Outlook
26 Tiffany & Co.
11 Industry Life Cycle
29 Operating Conditions 13 Products & Markets
29 Capital Intensity
13 Supply Chains
30 Technolog echnologyy & Systems
13 Products & Services
30 Revenue Volatility
15 Demand Determinants
31 Regulation & Policy
15 Major Markets
32 Industry Assistance
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
About this Industry Industry Definition
Operators in this industry manufacture jewelry jewel ry or o r silverw sil verware are using u sing preci precious ous or or semi-precious metals and stones. Costume jewelry manufacturers, specialty coin producers and lapidaries
Main Activities
The primary activities of this industry are
(artisans that form stones, minerals and other durable materials into decorative items such as cameos and engraved gems) are also included in this industry.
Manufacturing bracelets Manufacturing rings Manufacturing necklaces Manufacturing and engraving personal metal goods Manufacturing silverware Manufacturing lapidary work Manufacturing costume jewelry
The major products and services in this industry are Costume jewelry Jewelers’ materials and lapidary work manufacturing Precious and semi-precious metal jewelry excluding gold and platinum Precious metal jewelry and accessories made from gold and platinum Other
Similar Industries
31691 Leather Good & Luggage Manufacturing in the US This industry manufactures personal goods except metal carried on or about the person, such as compacts and cigarette cases. 32799 Mineral Product Manufacturing in the US This industry manufactures synthetic stones and gemstones. 33221 Hand Tool & Cutlery Manufacturing in the US This industry manufactures nonprecious and precious plated metal cutlery and flatware. 33281 Metal Plating & Treating in the US This industry engraves, chases, and etches nonprecious and precious plated metal flatware and other plated ware and jewelry. 33299a Guns & Ammunition Manufacturing in the US This industry manufactures manufactures nonprecious plated ware except cutlery and flatware.
2
WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
About this Industry
Additional Resources
For additional information on this industry www.jckgroup.com Jewelers’ Circular Keystone www.modernjeweler.com Modern Jeweler www.nationaljewelernetwork.com National Jeweler www.gold.org World Gold Council
IBISWorld writes over US industry reports, which are updated up to four times a year. To see all reports, go to ww to www.i w.ibis biswor world ld.co .com m
3
WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
4
Industry at a Glance Jewelry Manufacturing in 2015
Key Statistics Snapshot
Revenue
Annual Growth 10-15
Annual Growth 15-20
Profit
Exports
Businesses
$8.5bn -1.6% $406.8m $8.4bn
Demand from jewelry stores
Revenue vs. employment growth
Market Share
Tiany & Co. 28.6%
20
15 10
10 e g n a h c %
e g n a h c %
0
-10
-20
5 0 -5 -10
-30
Year
1.1% 2,215
-15 07
09
11
13
Revenue
15
17
19
21
Year
09
11
13
15
17
19
21
Employment SOURCE: WWW.IBISWORLD.COM
p. 26
Products and services segmentation (2015)
10.0%
Key External Drivers
Costume jewelry
Demand from jewelry and watch wholesaling
13.0%
Precious and semi-precious metal jewelry excluding gold and platinum
Demand from jewelry stores
46.7%
Precious metal jewelry and accessories made from gold and platinum
World price of gold World price of silver Per capita disposable income
13.7%
Jewelers' materials and lapidary work manufacturing
Trade-weighted index Households earning more than $100,000
16.6%
p. 5
Other
Industry Structure
Life Cycle Stage Revenue Volatility
SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COM
Decline Medium
Regulation Level
Medium
Technology Change
Medium Medium
Capital Intensity
Low
Barriers to Entry
Industry Assista Assistance nce
Low
Industry Globalizati Globalization on
High
Concentration Level
Low
Competition Level
High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33
WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
Industry Perf erformance ormance Executive Summary | Key External Drivers | Current Perf Performance ormance Industry Outlook | Life Cycle Stage
Executive Summary
Consequently, the price of gold experienced signicant volatility volatility over this period; overall, it is expected to increase at an annualized rate of 0.2% over the ve years to 2015. These conditions induced volatility in industry revenue and uncertainty in prot margins, which dissuaded new operators from setting up shop and forced existing ones to exit the industry. Nonetheless, overall performance improved in 2013 and 2014, as a decline in the price of gold and pent-up demand encouraged consumers to make jewelry purchases that they had delayed in previous years. Additionally, improving global economic conditions and rising demand for US manufactured jewelry in High prices of input materials and rising Asian markets sustained sustained industry import penetration hampered revenue exports, which are expected to account for 99.0% of revenue in 2015. The world price of gold exhibited Over the ve years to 2020, this signicant volatility volatility over the ve years to industry is expected to return to growth. 2015. Over the past ve years, uncertainty in IBISWorld expects industry revenue to currency and capital markets resulted in increase at an annualized rate 1.1% to consumers increasingly purchasing precious $8.9 billion. Improving economic metals and other commodities as a store of conditions and a signicant reduction in value val ue.. Howe Howeve ver, r, as th thee doll dollar ar sta starte rted d gain gaining ing price volatility is expected to benet this some momentum and capital markets industry and will increase industry normalized, demand for gold as a store of participation over the next ve years. value val ue dec declin lined, ed, man manife ifesti sting ng in a 115.4 5.4% % Additionally, increasing domestic domestic decline in its price in 2013 and an additional demand and improving conditions will 10.2% decline in 2014. The price of gold is boost demand for ne jewelry, which will expected to fall 2.1% over 2015. have a positive impact on margins.
Key External Drivers
The Jewelry Manufacturing industry is making a slow recovery from recession r ecession driven drops in demand and the large uctuations in commodity prices witnessed over the past ve years. Despite an economic recovery in the United States, this industry has failed to return to growth; however, its performance has improved manifold compared with the years prior to 2010. IBISWorld expects industry revenue to decline at an annualized rate of 1.6% to $8.5 billion over the ve years to 2015, including a 0.9% drop in 2015 alone.
Demand from jewelry and watch wholesaling
Demand from jewelry stores
In recent years, wholesale bypass has Jewelry wholesalers purchase industry become a commonplace practice practice in this products such as ne and costume jewelry, industry. Cutting out the middlemen silverware and lapidary work from enables industry operators to improve operators in this industry and resell them and sustain margins. It also enables to retailers. Therefore, a rise in demand downstream retailers to save on the from jewelry wholesalers leads to higher markup imposed by wholesalers. manufacturing demand and sales. The Additionally, it creates a direct direct Jewelry and Watch Wholesaling industry communication channel between is expected to decrease demand for retailers and manufacturers, which industry products over 2015, representing enables the latter to respond to changes a potential threat for the industry. in consumer tastes and demand more
5
WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
Industry Performance
Key External Drivers continued
rapidly. The Jewelry Stores is expected to increase over 2015, presenting an opportunity for this industry.
World price of gold The world price of gold aects the production costs and price of ne jewelry. During periods of increased gold prices, production costs for jewelry manufacturers rise, causing industry operators to either incur lower prot margins or raise the prices of goods. Greater prices typically reduce demand for jewelry, adversely aecting industry sales. The world price of gold has surged in recent years, but is expected to decrease over 2015.
World price of silver Much like gold prices, the world price of silver also drives up production costs and prices for industry products. When silver prices are high, the overall price of jewelry increases, causing causing demand to decline. The world price of silver is expected to decrease in 2015.
Per capita disposable income During periods when disposable income is low, retail demand declines since consumers’ purchasing power is reduced, inducing them to delay or cut back on purchases of industry products.
Subsequently, manufacturing manufacturing demand falls as retailers purchase fewer items to stock inventory. Conversely, when disposable income increases and demand for industry goods rise, retailers are likely to purchase more from manufacturers, leading to higher industry demand. Per capita disposable income is expected to increase over 2015.
Trade-weighted index The trade-weighted index (TWI) represents the value of the US dollar relative to foreign currencies. When the TWI is low, US-made jewelry becomes more aordable to foreign buyers because the dollar has a relatively relatively lower value against other currencies. currencies. Conversely, when the TWI rises, USmade jewelry becomes relatively more expensive on the global market. The TWI is expected to increase during 2015, representing a threat to the industry.
Households earning more than $100,000 Jewelry, watches and silverware are nonessential nonessent ial goods that are most often purchased by high-income earners (households in the highest income quintile). As the nu numbe mberr of of hou househ sehold oldss in in this this gro group up increases, so does the consumption of jewel je welry ry pro produc ducts. ts. The num number ber of hou househ sehold oldss earning more than $100,000 is expected to increase over 2015. World price of gold
Demand from jewelry stores 15
2000
10
e g n a h c %
e c n u o y o r t r e p $
5 0 -5
1600
1200
800
-10 -15
Year
400 09
11
13
15
17
19
21
Year
07
09
11
13
15
17
19
21
SOURCE: WWW.IBISWORLD.COM
6
WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
Industry Performance
Current Performance
After almost a decade of decline, decline, revenue growth for the Jewelry Manufacturing industry has nally begun to pick up, even though revenue remains below its level in 2010. A number of factors have worked in favor of this industry industry over the few years, which have helped it recover from the recessionary years following the nancial meltdown in the United States. There has been a resurgence in demand for domestically manufactured jewelry, aided by growth in per capita disposable income, which has improved overall consumer sentiment. A resurrection of condence in currency and capital markets has also helped relieve some pressure o the price of precious metals,
Industry structure
Following the nancial meltdown in the United States, consumer condence in currency and capital markets plummeted. The stock market crash and the closure and declaration of bankruptcy bankrup tcy by many man y nancial institutions left consumers rattled with many people losing their entire savings. Consequently, people started investing in commodities that had a tangible value as currency came close to losing its function as a store of value. Two of the commodities that received substantial investment during this period were gold and silver. Therefore, the increase in demand for gold and silver resulted in a signicant increase in their prices during the earlier half of the ve-year period. Under normal circumstance circumstances, s, this would have beneted industry operators that had inventories of gold and other precious metals that they bought prior prio r to the price pr ice hikes. However, following the economic downturn, consumers had lost interest in purchasing jewelry, which is generally sold at a markup over the total value of the precious metal contained within it. Instead, people started buying solid gold
especially gold and silver, which has reduced input costs for manufacturers and prices for consumers. Consequently, a fall in the price of industry items has once again sparked consumer interest in jewelry, which has helped industry operators recover some of the revenue they lost during the recession. However, imports still pose a signicant threat to the industry, which are becoming increasingly more competitive, while the industry also loses its export revenue due to the strengthening dollar. Overall, IBISWorld expects industry revenue to decline at an annualized rate of 1.6% to $8.5 billion over the ve years to 2015, with an expected decline of 0.9% in 2015.
Prot margins suered as operators were forced to reduce their markup and other precious metals to preserve and increase the value of their wealth. Consequently, industry operators had to reduce their markup; as a result, prot margins suered. Even though a reduction in the markup charged by industry operators, coupled with more economic certainty toward the middle of 2010, helped release some pent up demand, constant increases in the price of gold until 2012 and the weak recovery of downstream demand resulted in many operators closing shop. Over the ve years to 2015, industry establishments are anticipated to decline at an annualized rate of 0.3% to 2,229 locations. A decrease in the number of establishments resulted in a decline in the amount of labor employed by this industry, which reduced the the industry’s wage bill to $1.1 billion, representing a 1.8% annualized decrease over the ve-year period.
7
WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
Industry Performance
Exchange rate dynamics
There is signicant import penetration in this industry. The United States imports industry items from Israel, India, China and Belgium. These countries have a signicant cost advantage in manufacturing jewelry because of lower labor costs. Furthermore, Belgium is known for its diamonds, while one of India’s largest exports is jewelry and precious metals. These countries have also been closing the quality gap relative to domestic manufacturers at a rapid rate, giving them a further competitive advantage in this industry. Over the ve years to 2015, imports have increased increased at an annualized rate of 2.8% and are expected to reach $39.6 billion by the end of 2015, satisfying 99.8% of domestic demand. Import penetration has hurt industry revenue growth, especially over the past ve years, because of an increasing number of price-conscious consumers and a general increase in the price of products produced by this industry. Consequently, many industry operators have closed their domestic manufacturing operations and shifted their production facilities oshore. Conversely, exports have declined as a proportion of revenue, to 99.0% in 2015. Overall, exports are anticipated to fall to $8.4 billion in 2015, representing an annualized decline of 2.0% over the ve years to 2015 2 015 thanks to an appreciation appr eciation of the dollar, which has diminished export growth in this industry. Furthermore, domestically manufactured manufacture d jewelry also competes with foreign goods in the international market, which enjoys proximity to the largest importers of industry goods from
Import penetration hurt revenue growth and many operators shifted production oshore the United States. Subsequently, foreign goods enjoy lower overhead costs due to lower freight costs, in addition to a more competitive cost structure, which is making it increasingly dicult for domestically manufactured products to compete in the international market. Furthermore, the dollar has appreciated against most major countries’ currencies that import jewelry from the United States, which has reduced demand for domestically manufactured industry items in these countries, resulting in exports declining faster than overall industry revenue. Nonetheless, relative to the rise of the trade-weighted index, lost export revenue is expected to be small as increasing demand from Asian markets, especially Hong Kong, sustains some export revenue. Jewelry exports to Hong Kong have increased at an annualized rate of 9.9% over the past ve years and its share of exports has increased from 15.8% in 2010 to an estimated 25.3% in 2015. Hong Kong’s proximity to Asian markets, especially China, and its status as a popular shopping destination for tourists around the world has sustained demand for US manufactured jewelry in the country. For further details regarding trade, please see the Internation International al Trade section of the report.
8
WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
Industry Performance
Industry Outlook
Decrease in exports
Revenue growth is expected to pick up over the next ve years. Domestic demand is expected to increase; however, much of it will be satised by imports. An appreciation of the dollar will d iscourage exports and will likely force domestic manufacturers to concentrate on the local market. However, exchange rate appreciation will also benet domestic manufacturers by making the imports of unprocessed and semiprocessed precious metals and minerals cheaper, which is also likely to reduce costs for domestic manufacturers. Overall, IBISWorld expects that revenue will increase at an annualized rate of 1.1% to $8.9 billion in the ve years to 2020.
Over the next ve years, the trade weighted index ind ex is expected exp ected to increase incre ase at an annualized rate of 3.2%. Consequently, domestically manufactured manufacture d jewelry will likely become more expensive for internation international al buyers. Coupled with the fact that largest importers of industry products are countries whose currencies have been on the decline and are not expected to rebound signicantly over the next ve years will w ill further accentuate this trend. Therefore, industry exports are projected to decline over the ve years to 2020 at an annualized rate of 0.3% to $8.3 billion. Consequently, exports’ share of revenue is anticipated to increase from an expected 99.0% in 2015 to 92.5% in 2020. Conversely, imports are expected to rise at an average annual rate of 4.1% to $48.4 billion. An appreciation of the dollar is expected to make imports even more attractive for domestic consumers than they currently are. Imports’ lower price point, particularly for costume jewelry, engraved personal p ersonal metal me tal goods and silverware, will substantially reduce demand for domestically manufactured manufactured
Industry revenue 20
10 e g n a h c %
0
-10
-20
-30
Year
07
09
11
13
15
17
19
21
SOURCE: WWW.IBISWORLD.COM
products in these categories. As a result, industry operators are likely to move out of these product segments and more likely to target the market for ne jewelry geared g eared toward towa rd high-income high-in come individuals. Those that choose to remain producing silverware and costume jewelry are a re likely to face low prot margins and tough competitio competition. n. Nonetheless, an expected improvement in demand is likely to increase industry participation. IBISWorld expects the number of industry enterprises to increase at an annualized rate of 1.1% to 2,334 companies over the ve years to 2020. Operators are expected to become more domestically oriented as the US economy improves and demand for ne jewelry in i n the United States S tates increases. increa ses. As industry participa participation tion grows, IBISWorld expects jewelry manufacturers manufacture rs to hire more labor, w hich is expected to increase the wages paid out by this industry at an annualized rate of 0.2% to $1.1 billion. However, wages as a proportion propor tion of revenue will decrease, relieving some pressure o prot margins.
9
WWW.IBISWORLD.COM
Jewelry Manufacturing in the US June 2015
10
Industry Performance
Potential opportunities
While exchange rate dynamics are unlikely to benet this industry, other structural changes taking place in the economy are likely to oset falling exports and will spur revenue r evenue growth. For example, the number of households earning more than $100,000 per year is expected to increase at an annualized rate of 0.8%, reaching 24.0% of all households in the United States by 2020. The increase in the number of households earning more than a $100,000 per year is expected to be twice as fast as it was during the previous ve year period, which represents a major opportunity for this industry. This market segment is of prime importance for this industry, as it constitutes one of the largest markets for the industry’s products. People in this income group engage in more discretionary spending, are brand conscious and do not deter from paying premium prices for premium products. In fact, industry major player, Tiany & Co., has a product segment called statement, ne and solitaire jewelry, which specically targets targets highincome individuals that still purchase jewelry for its value as a status status symbol. An increase in the the number of people that fall in this segment is likely to help the
Higher household income willl like wil likely ly o oset set som somee of of the the revenue losses and sustain prot margins industry oset some of the revenue losses incurred because of an increase in the trade-weighted index, while simultaneously sustaining prot margins. Furthermore, as economic conditions improve and consumer sentiment rises over the next ve years, it is likely to encourage import substitution, whereby people that previously could not aord to buy domestically manufactured manufactured jewelry will w ill be able ab le to do so. so . Coupled with the reduced red uced cost of imported raw r aw materials due to exchange rate appreciation,, as well as price increases appreciation of gold and silver slowing, the industry will have a new market mar ket segment to tap, t ap, which still gives this industry ind ustry some hope. However, due to continued volatility in commodity prices, it remains to be seen whether the industry will be able a ble to fully ful ly reap the benets of these structural changes taking place in the United States’ economy.
