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How the Pandemic Affected Diamond Jewelry Retail Sales: Insights from the 2020-21 Bain Report
The Antwerp World Diamond Center and the global consulting firm Bain & Company have released their 10th annual report on the state of the global diamond industry. As usual, it is full of indispensable insights for businesses at all levels of the diamond supply chain, from miners to retailers.
This year’s report will be of particular interest, as it reviews 2019, covers the effects of the global Covid-19 pandemic of 2020-21, and offers some predictions and suggestions going forward. The world is in a transitional period, and it is crucial that all businesses reflect, learn, and adapt to these changes. Here are the key takeaways for diamond retailers and suppliers.
When the pandemic began in early 2020, the diamond industry suffered immediately, with jewelry sales plunging 40% in the second quarter. Store closures, wedding cancellations, and restrictions on tourism all contributed to declining sales.
After these drastic short term losses, however, demand for diamond jewelry rebounded slightly in the third quarter, due in part to decreased competition from other luxury sectors such as travel and apparel. No one was spending their money on plane tickets, car rentals, gas, or hotels, and with nowhere to go, consumers eschewed luxury clothing in favor of sweatpants.
The report notes that “emotional hunger” played a part, as well. With emotional needs going unfulfilled during a seemingly endless lockdown, many Americans turned to online shopping to assuage their anxiety and isolation. As a result, online diamond retail sales increased from 13% in 2019 to 20% in 2020.
In the fourth quarter, as the holiday season began and a vaccine loomed just over the horizon, diamond jewelry demand increased 5%-10% over 2019’s demand. Overall, the report expects a 15% decrease in retail sales in 2020 compared to 2019, with luxury diamond jewelry seeing much smaller losses than premium diamond jewelry. Compare these numbers to Europe, which saw a 20% decline in retail sales in 2020. This is due in part to the fact that jewelry retailers and consumers did not embrace digital solutions to the same degree as their American counterparts.
Things could have been worse for the diamond retail sector in the US in 2020, but both the industry and government took steps to mitigate some of the worst effects of the pandemic on businesses. Miners created profit-sharing partnerships with manufacturers and suppliers, and diamond producers enacted a “price-over-volume” strategy designed to keep prices stable even as sales volume decreased. On the government side, stimulus programs such as the Paycheck Protection Program helped keep retail businesses afloat during the hardest months of the pandemic.
The Future of Diamond Retail
Throughout the pandemic, consumer interest in diamonds remained strong, but quarantine, lockdowns, unemployment, and loss of income lowered household consumption. Despite this decrease in income and consumption, a majority of consumers surveyed reported that they intended to spend the same amount or more on diamonds after the pandemic than they did before. Retailers and marketers must prepare new strategies to capture these customers. The report outlines four market shifts to consider.
Increase in online shopping. As mentioned above, online sales increased in 2020. But a strong online presence has become necessary even for those retailers who rely on brick-and-mortar sales. This is because 70% of consumers conduct research online before making an in-store purchase. So even if online sales decrease with the end of the pandemic, consumer online research is here to stay. Retailers must respond with enhanced digital capabilities and experiences. The biggest issue to overcome with the move to online platforms is trust. According to the report, 28% of consumers would consider buying diamond jewelry online if they knew they could trust the seller. Not many consumers would buy a car sight unseen, preferring to establish a rapport with the seller and inspect the product in person, and diamond jewelry is a similarly important investment. Retailers should also consider offering warranties, generous delivery and return policies, and certificates issued by independent accredited gemological organizations to help build that trust.
Social consumerism. Sustainability and social consciousness are becoming more important to consumers, especially younger consumers. These consumers are interested in conflict-free supply chains, environmental conservation, and lower carbon footprints at all points in the supply chain. Retailers who take these concerns seriously are more likely to thrive in the post-pandemic market.
Lab-grown diamonds. The production of lab-grown diamonds continues to increase, and their retail prices will continue to decrease. Wholesale prices, however, remained stable in 2020. The report expects prices to continue to decrease to the point where lab-grown diamonds move into the fashion jewelry category, which will make diamonds more accessible to a wider range of customers.
Marketing. In light of the above issues and opportunities, marketing practices must evolve. There’s more competition than ever in the luxury sector, and the new generation of customers, in addition to being more media savvy and resistant to advertising, have their own concerns, priorities, and values that retailers must address. This ties into the need for enhanced digital experiences, as younger consumers will often turn to podcasters or influencers on YouTube, TikTok, or Instagram for information. Marketers must employ analytics to make marketing more customized and personal.
The pandemic, as we have experienced it for the past 18 months, may soon be coming to an end. The diamond jewelry market is expected to return to pre-pandemic levels by 2023 or 2024. Customers will be ready to spend, and marketers and retailers must be ready to serve them.