Are Diamonds Forever? How ‘Millennials’ Are Changing the Jewelry Game, Part I
“Millennial” is a tired term, yet it’s aptly stuck as a defining label for a generation. (We define Millennials as anyone born between 1980 and 1995, and as the first generation that grew up in the digital age but aren’t true “digital natives”, another term we can’t wait to tire out.) It’s easy to jump to conclusions about why this group behaves the way they do, for instance preferring things like avo-toast to home ownership.
And although there may be many theories about various Millennial behaviors, one thing is becoming obvious — this generation perceives a traditional consumer staple very differently than older generations: Jewelry! The story isn’t as easy as “they spend less”, but instead requires an introspective of individuals’ needs and wants to understand their shifting preferences. This is Part I of a two-part series in which the GBS NA Strategy Labs investigates American Millennials and their buying behaviors concerning jewelry.
As Good as Gold
The value of gold as a currency has a clear history. The historical value of gold as jewelry comes flatly from human perceptions of beauty. Therefore, it makes perfect sense that jewelry especially, is a good that needs to be re-evaluated and re-understood as each generation develops its themes of values and needs.
According to the World Gold Council (WGC), the demand for gold jewelry in the US rose 3% in 2016. While the industry benefited from the lower price of gold and subsequent increase in sales, the WGC notes that this is a “fragile” uptick. The ‘National Jeweler’ notes forbiddingly, that in many instances, increased disposable income is being spent on experiences (i.e. travel) rather than retail goods. However, given that per capita disposable income is expected to increase and follow this trend into the coming decade, there is an opportunity for large jewelers to target newfound Millennial wealth.
Like many other industries, the American fine jewelry market took a hit following the 2008 financial crisis, but has since rebounded. This product segment includes traditional jewelry, such as rings, necklaces, earrings and bracelets, made from precious metals and stones. According to the US Department of Commerce, the total US fine jewelry and watch sales were $58.1 billion in 2009 but increased to $80.1 billion by 2013. Fine jewelry accounted for roughly 37% of US Jewelry revenue in 2016, so sales still seem strong for the Millennial crowd.
Diamonds in the Rough
And let’s discuss, for instance, diamonds. The modern view of diamonds can be credited to De Beers whom restricted the diamond supply to increase demand and value. Through a genius marketing ploy, De Beers began the “A Diamond is Forever” campaign that created the concept of a diamond engagement ring. Before the original ad was produced in the 1930s it was not the norm to propose with a diamond ring, but now 75% of modern American brides have a diamond ring that costs on average $4,000. A large part of the modern view on jewelry is built on what suppliers told the masses they wanted — and what to buy. For Millennials however, classic advertising has less effect. In fact, only 1% of Millennials said that an advertisement would get them to trust a brand.
1. Delayed Marriage and Disposable income for 20 Somethings
Young people are now waiting to get married which affects the market for diamonds. According to the Census Bureau, the median first-time American bride is almost 28 years old, and the first-time groom is 30, compared to 25.5 and 27 ten years earlier. With marriage as a key driver for diamond rings purchases and, to a lesser extent, other jewelry (i.e. anniversary gifts, push presents, etc.), Jewelers may have reason to be concerned. Interesting to note, however, that with the delay, it means that income-earning millennials have more disposable income, freed from marriage-related commitments. Despite an increase in price and sales of polished diamonds since 2011, this has leveled out and is predicted to remain stable or decrease in the future.
2. Ethical Priorities and the Rise of Attractive Substitutes
A defining characteristic of the millennial generation is making sustainable shopping a priority and that fact is also affecting the global market for diamonds. In a study by Nielsen, 3 out of 4 respondents said that they were willing to pay a premium for sustainable options. This mindset is increasing throughout the years with a jump from 55% of respondents willing to pay more ethical goods in 2014 to 72% in 2015. To fulfill their needs for ethically sourced and environmentally friendly jewelry options, one option for millennials would be to turn to the new approach of synthetic, lab-made diamonds.
Due to changing attitudes, Start-ups like Ada Diamonds are producing synthetic diamonds at a fraction of the environmental and monetary cost of mined diamonds. Lab-grown diamonds run between 30 –40% cheaper than traditional diamonds and can be produced to the same level of quality as a mined diamond. The current sales of these lab-made diamonds is around $150 million and are projected to grow to over $1 billion by 2020. The technology for creating these diamonds is getting better and VC’s have been funding start-ups in the tens and hundreds of million dollars.
3. Function and Technology… in Everything
And millennials aren’t just looking to buy ethical jewelry; they are looking at function and technology as well. The wearables industry is growing at a faster rate than ever as 51% of Millennials are likely to purchase a fitness band in the next year, and 40% are likely to also buy a smart watch in the next year. Brands have already started to take notice, with Michael Kors releasing a smart watch, Tory Burch designing a Fitbit band and cover, and Hermes creating a $1,200 Apple Watch band. These pieces mesh form and function which is in line with Millennials spending habits.
4. Online Sales Begin to Soar
Across retail segments, consumers are using multiple platforms to connect with brands both online and in-person. Online sales currently hold 4–5% of the fine jewelry global market, with projections to capture 10% by 2020. Growth across the e-commerce space has created an atmosphere in which consumers are becoming more comfortable shopping for fine jewelry online. Online sales in the luxury market have grown 20x between 2003 and 2016 with 2016 alone seeing a 13% growth in the market for online luxury goods, including fine jewelry. Because of this, it is important for brands to build a consistent presence across multiple channels to offer the best customer experience at all possible points of purchase.
One company building out this strategy is Signet Jewelers who recently partnered with IBM Interactive to develop an Omni-channel marketing strategy. Another startup, Mejuri lives their motto by providing “everyday fine jewelry minus the traditional markups” and caters directly to women who are interested in purchasing higher-end jewelry for themselves without having to wait for someone else or a special occasion to justify it.
Companies like Blue Nile and James Allen offer customers the ability to shop online for customized rings and premade pieces. Some of the desirable advantages of online jewelry shopping include 24/7 customer service, free shipping and easy returns, seamless online to store services like resizing and exchanges, and secure checkout.
Looking ahead to Part II — First-Hand Insights
So, what are the needs and wants when it comes to jewelry for Millennials? We conducted our own study with the help of Lucid with 300 participants across the US. Among other interesting tidbits, we found that 33% of millennials receive inspiration from jewelry purchases compared to 8% of non-millennials. What else did we learn? Look out for Part II of “Are Diamonds Forever?…