Three questions for Ralf Jackels
Who or what inspired your interest in the jewelry and watch industry?
As industry insiders, we as the IFH Institute for Trade Research in Cologne provide information, research and consulting on trade-related questions for purposes of practice-oriented knowledge and better corporate decisions. An accurate knowledge of the industry is an essential basis here. Within eight business areas with sixty consumer goods markets, we look at over 500 product groups. With our many years of expertise in the industry, we know the markets and can classify the trends there.
Our examination of the watch and jewelry market is based on the product groups of wristwatches (with casing made of precious metal), other wristwatches (casing made of other materials), clocks (alarm clocks, wall clocks, other clocks) as well as gold/platinum jewelry, silver jewelry, fantasy jewelry and rolled-gold jewelry. The watch and jewelry market is an exciting sector because distribution still takes place in a traditional, almost classical way. Interesting too are the differences between two so closely related submarkets on account of the brand situation—the predominance of manufacturers’ brands in watches vs. the predominance of the traders and dealers in rather non-branded jewelry—and the effects this has on the distribution of market power.
What problems/aspects (please mention three) do you think are influencing the jewelry and watch industry today?
• Distribution | The specialized trade is increasingly under pressure
We have observed a shift in the distribution scene. The typical small-scale business structure of the specialized trade is coming increasingly under pressure. The market share of the watch and jewelry trade has been falling noticeably for years and could drop to a good fifty percent by 2025. At present, the specialized trade holds a share of just under two thirds of the market. The main reasons for losses of market share are (still) problems of location and succession that are typical of the specialized trade. In addition, there is the online trend with an accompanying predatory tendency.
• Dependence on volume of sales | Great importance of Christmas business
Watches and jewelry have a distinctive character as gift articles because of emotionality so that the focus is naturally on Christmas business. For the sector, the year’s performance is still decided in the last two months of the year. Of sales for the year 2016, approximately 24 percent was accounted for by Christmas business.
• Emotionality | Store design & service with upside potential
Especially in this sector, an investment backlog is frequently to be observed. On the one hand, there are the flagship stores of suppliers that operate nationally or even internationally and the mono-label stores, all with a lavish design that sets standards; and, on the other hand, the small, outdated shops that put you in anything but a buying mood. As well as shopwindows that may display a lot but arouse no emotion whatever. And this with such an emotional product! Once the customer is in the store, it’s often the sales conversation that decides the outcome. Due to a lack of concepts for the training and development of staff as well as rules for the everyday work, potential is squandered!
What is your vision of the future for the jewelry and watch sector?
The market is influenced by many factors. Here is an abstract of exciting determinants.
• Fantasy or fashion jewelry | Fresh impetus for the market
With the emergence of the fashion jewelry boom, there has been movement in an otherwise relatively stable demand structure. The range of offers has become enlarged in the lower price categories. Outside the traditional jewelry trade, fashion jewelry is often offered as an accessory for the personal outfit and is suitable as a stylistic element for lifestyle-oriented end consumers. In this way, groups of young purchasers are being introduced to the jewelry trade and thus form the urgently needed reservoir of future customers. Male target groups are also being addressed, their potential can still only be tapped very slowly.
• Smartwatch | Wearables as growth drivers
With the emergence of the smartwatch—perhaps extended further through wearables—the classical watch market is steadily acquiring another determinant which will influence the demand for watches and should not be underestimated. From our viewpoint within the industry, wristwatches are getting a competing application through digital connectivity in addition to the purely timekeeping function and along with a different, ‘younger’ product image.
• Individuality | Personalization increases demand
There is a trend in society towards more individuality. The wristwatch is mutating from a precise timekeeping instrument into a fashion article. Having a ‘watch for every occasion’ means owning more than one of them, at least for consumers as a whole over all age groups. Through the watch on your wrist, you personalize yourself. Jewelry is suitable anyway as a tried and tested instrument of individualization.
• Demography | Joyful market, sorrowful land
The population is growing ever older and this poses increasing challenges for German society. As against that, new opportunities are opening up as a result of the relative increase in older population groups. Because the typical buyer of genuine jewelry is over 50 and prefers gold as a material. However, buying habits will have to remain unchanged.
• Personal feel-good situation | Macroeconomic situation as barometer of mood
The decisive determinant of demand for jewelry is still the state of private demand. If buyers assess their situation as positive now and in future—which also includes good news about labor market trends—then the demand for jewelry remains strong.