Jewelry, Watches, Precious Stones, and Precious Metals

SIC 5094

Companies in this industry

Industry report:

This industry classification comprises establishments involved in the wholesale distribution of jewelry, watches, precious stones, and precious metals. Products of the industry include clocks, coins, gemstones, pearls, precious metals bullion, silverware, and trophies. Establishments primarily engaged in the wholesale distribution of precious metal ores are included in SIC 5052: Coal and Other Minerals and Ores.

Industry Snapshot

According to Dun & Bradstreet, 14,796 establishments engaged in the wholesale distribution of jewelry, precious stones and metals, costume jewelry, watches, clocks, silverware, and jewelers' findings in 2010. The industry employed 68,625 and generated revenues of $11.0 billion. Jewelry wholesalers accounted for the largest number of establishments (5,666) and for 33 percent of total industry sales. The second largest category was jewelry and precious stones, with 3,434 establishments and almost 20 percent of sales. Third, 1,338 were diamond wholesalers, which accounted for 19 percent of sales. New York was the number-one state in terms of overall industry revenues, generating $3.7 billion in sales or about 34 percent of the total. Other top earning states were California ($2.0 billion), Texas ($1.2 billion), and Washington ($430.2 million).

Background and Development

Jewelry is as universal and ancient a form of adornment as clothing. It has been made of a variety of materials from human hair to precious metals and gems, and has been used to signify social status, wealth, official or political rank, holidays and celebrations, and fad and fashion. Its forms have included items for the head (hairpins, headbands, crowns, earrings, and lip and nose rings); neck (pendants and necklaces); chest (brooches, cloak clasps, buttons); waist (belts and girdles); and arms and legs (bracelets, anklets, and rings). As an industry, jewelry has been represented in all the major civilizations by goldsmiths, metalworkers, gem cutters, and many others. The Byzantine Empire (approximately the 6th to 13th centuries) with its profusion of gold and enamel and the European Renaissance (the 15th to 17th centuries) characterized by the use of gemstone-emblazoned fabrics and chains, ropes, pendants, and girdles were perhaps the greatest moments in the history of jewelry.

Watches were developed around 1450-1500 when the coiled spring made the invention of the pocket watch possible. By the 17th century, crystal faces to protect the workings, bearings, hairsprings, and balance wheels were standard. Watches were handcrafted by skilled artisans until about 1800 when machine-made parts led to mass production. Electric and electronic watches were introduced in the 1950s and 1960s.

During the first few years of the 1990s, conditions within the jewelry, watches, precious stones, and precious metals industry were unstable. In 1993, the number of establishments was about 6,800 and sales were about $45 billion, which was up from a 1990-91 low of about 6,000 establishments and $40 billion in sales. High numbers of retailer bankruptcies, fluctuations in international currency exchange rates, and the recession in the United States and abroad led to reduced profitability for wholesale dealers.

In January 1994, however, Jewelers' Circular-Keystone reported that conditions were improving. Some diamond dealers attributed the turn-around to the repeal of the federal luxury tax in 1993. During 1994, the heaviest projected demand was for diamond jewelry, loose diamonds, and karat gold jewelry. Gemstones also experienced an upswing. The highest projected demand was for stones in earth tones, such as orange and peach. Pearl dealers also saw improving conditions. Although high-quality Japanese pearls remained expensive and in short supply, forecasters predicted that increased supplies of Chinese freshwater pearls and South Sea pearls would bring prices down in the lower-quality sector of the pearl market. This, coupled with increased demand, yielded higher net profits.

Annual U.S. watch sales were pegged at 65 million units in the mid-1990s, with women's and jewelry watches, sport watches, upscale watches, two-tone watches, stainless steel watches, and watches with lighted dials remaining popular.

In the mid-1990s, jewelers tried to lower their business costs, increase productivity, and tighten their customer base to increase profitability. The diamond trade experienced difficulty due to low confidence brought on by foreign competition.

The industry employed more than 50,000 and generated sales of about $44 billion in 1998. Sales in jewelry stores increased about 8.5 percent from 1997 to 1998 to $22 billion, and about 40 percent of sales occurred in the fourth quarter of 1998, in keeping with traditional holiday sales trends. Other than jewelry stores, gemstones, jewelry, precious metals, and watches are sold by department stores, warehouse stores, home shopping television, catalogs and showrooms, and over the Internet.

Over 28,000 jewelry stores across America accounted for approximately half of the nation's jewelry sales in 1998. Consolidation occurred as large chains purchased others, and growth took place as these same chains expanded their number of outlets in shopping malls. Zale Corporation acquired Peoples Jewelers of Canada in June 1999, but Service Merchandise (a major catalog showroom) filed for bankruptcy, also in 1999; these events showed that this industry remained both highly competitive and risky. Retailers sought new ways of improving product value. As a result, jewelry imports increased from 26 percent in 1983 to 52 percent in 1997. With economic declines in Asia, Asian wholesalers turned to the United States and Europe with increased volumes of exports.

Jewelers improved their prospects substantially in the late 1990s by better marketing and improved tracking of supplies, demand, and sales; they also were able to capitalize on simple demographics as the United States emerged from the recession earlier in the decade with baby boomers reaching their maximum earnings years and investing their income in jewelry. The large jewelry chains continued to consolidate into the 2000s.

In the mid-2000s, jewelers credited the bridal business with 30 to 50 percent of their revenue. Holidays and gift-giving opportunities were also major factors in sales of watches and jewelry. Year-round spending and the growth of purchases among women of jewelry for themselves made jewelers less dependent on December holiday sales, despite cyclic sales related to the economy and, to a lesser degree, the seasons.

Jewelry sales were also heavily dependent on fashion trends. Colored gemstones, designs from nature, diamonds in virtually any form, yellow gold, white metals, princess-cut gemstones, Tahitian pearls, and invisible necklaces were among the most popular.

In precious metals, gold commodity prices continued to drop, but jewelry manufacturers and retailers did not pass savings along in lower prices because, given the metal's volatile price, they had to protect their ability to pay higher prices for gold over the coming years. China and Japan led the world in consumption of platinum jewelry.

According to the U.S. Census Bureau, in 2002 the jewelry, watch, precious stone, and precious metal wholesalers represented approximately 8,215 establishments. Combined, these employed some 54,408 people with an annual payroll of $2 billion. In 2003, the total number of establishments climbed to 12,936 and the industry generated approximately $13.8 billion in annual sales. The total number of employees reached 61,411. The majority of the establishments remained small, employing fewer than five people.

Jewelry, the largest sector of the industry, numbered 4,872 establishments and dominated more than 37 percent of the market. Together, this group accounted for $4.8 billion in sales in 2003. The jewelry and precious stones sector numbered 3,435 establishments and controlled more than 26 percent of the market. Combined, this group generated $2.5 billion in sales. Diamonds represented 1,327 establishments and controlled about 10 percent of the market, with $1.7 billion in sales.

Current Conditions

The economic recession of the late 2000s took its toll on the jewelry industry, as consumers cut back on discretionary purchases. Although some predicted a recovery in the retail segment of the industry into the 2010s, jewelry wholesalers were facing a bleak future, as the trend toward bypassing the wholesaler continued and sales via the Internet and e-commerce outlets continued to rise. IBISWorld predicted the wholesale jewelry industry would react to these challenges through further consolidation.

Internet sales of jewelry was experiencing especially strong growth in the late 2000s and early 2010s. For example, international sales for Blue Nile Inc., one of the largest online retailers of fine jewelry, grew more than 51 percent in the first quarter of 2010, reaching $15.8 million. Overall sales were up almost 19 percent in the same time period at $74 million.

Industry Leaders

The top 20 firms in jewelry sales consisted of about 50 percent jewelry specialists in the 2000s. The specialty jewelry market posted positive results from 1998 through 2002, according to Jewelers' Circular Keystone, with overall sales increasing about 20 percent over the five-year period, falling only in 2001 by 2.2 percent. Growth was curtailed, however, when the economic downturn began in late 2007.

Tiffany & Co. of New York City was one of the largest jewelry wholesalers in the United States in 2010, with $2.7 billion in annual sales and 8,400 employees. Other industry leaders included Stuller Inc. of Lafayette, Louisiana; Aaron Group LLC of Long Island, New York; and Richline Group, of Tamarac, Florida, which was formed in 2007 by the merger of Bel-Oro International and Aurafin LLC. Fossil Inc. of Richardson, Texas, which was an important midpriced watchmaker and had sales of $1.5 billion in 2009. Former industry leader Whitehall Jewelers did not recover from an accounting scandal and financial problems in the early 2000s and went bankrupt in 2008.

Jewelry sales via the Internet continued to become more popular throughout the 2000s, and by 2009 Blue Nile Inc. of Seattle, Washington, was the nation's largest online jewelry sellers, according to Hoover's. The firm had sales of $302 million in 2009. Maintaining web sites for about 3,000 retailers and suppliers as well as providing online information resources, Polygon Network, Inc. called itself "the jewelry industry's largest e-marketplace." In the early 2000s, the network experienced daily transactions of about $3 million and held a loose diamond inventory valued at about $100 million.

Following a massive reorganization in the late 1980s, Zale Corporation was the largest specialty retailer in 2010 with 1,937 stores in the United States, Canada, and Puerto Rico under several firm names. The firm's three large chains included Gordon's Jewelers, Zales Jewelers, and Piercing Pagoda. The firm also had considerable direct mail and online sales. The late 2000s were difficult for the company, and it shut down almost 200 stores in 2009. According to National Jeweler, Zales' revenues fell 17 percent in fiscal 2009 to about $1.7 billion. That year, the company employed 14,500.

Research and Technology

Sellers of diamonds were increasingly threatened by sales of cubic zirconium and other less expensive "diamond look-alikes". De Beers, the largest diamond marketer worldwide, was one of many companies who participated in the "diamond branding" trend, whereby the firm's name and identification numbers were marked on diamonds. This technique required reader machines to detect the tiny, laser-cut inscriptions.

Production of synthetic gemstones also continued to be a strong research field into the early 2010s. According to Nina Shen Rastogi of The Washington Post, synthetic gems were more environmentally friendly, because even though mining is still required for the synthetic stones, "the relatively tiny demand for synthetic jewels isn't driving mining activity, unlike the way demand drives mining for natural gems."

De Beers, which was in control of the synthetic diamond market in the late 1990s, found it had new rivals as the twentieth century came to a close. Newly formed Apollo Diamond Inc. located in Boston, Massachusetts, and Gemesis Corp. of Sarasota, Florida had come up with a new technology for producing manufactured synthetic diamonds within a lab. Using technology from Russia, the manmade diamonds were created in only a few days versus the natural diamonds that were mined from under the earth. Apollo used a process known as chemical vapor deposition (CVD), whereas Gemesis used a high-pressure, high temperature technique that imitated the geologic conditions under which natural diamonds are formed. These "cultured diamonds," as they were called, had "identical chemical, physical, and optical properties as any diamond found in the earth," according to Apollo's web site. By the late 2000s, Gemesis was advertising its new pink- and blue-colored cultured diamonds.

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