n expert in the world of luxury, author of a remarkable book on Chinese consumption (The Bling Dynasty), Erwan Rambourg has just published a new essay, Future Luxe: What’s Ahead for the Business of Luxury, which is full of predictions and analyses for the coming decade. At the heart of his book is the ever-increasing influence of women in luxury goods purchases, and the continuing demand from China.
This translates, among other things, into very high growth potential for the luxury segment of jewellery. For several years now, jewellery has outperformed other high-end product categories. And the purchase of Tiffany & Co. by LVMH for 15.8 billion dollars heralds a new era of consolidation around supergroups and global brands, in a sector that is still very fragmented. Erwan Rambourg answered our questions.
- Erwan Rambourg, luxury industry expert
Europa Star: In the first chapter of your new book, you present jewellery as the luxury segment with the strong- est potential for growth over the next decade. Why is this?
Erwan Rambourg: Over the next decade, I project that there will be an even greater luxury spending windfall generated by the female customer base, which will strongly benefit certain segments such as jewellery, but also cosmetics and accessories. In general, women will have increasing influence in the luxury industry, for several reasons. It is often said that “the future is female”: in the world of luxury goods, this expression has been used for a long time, but it is more relevant than ever!
On the one hand, the integration of women into the economy is increasing with the new generations: labour market participation rates are rising and wage gaps are narrowing – the “womenomics” will continue to grow strongly. On the other hand, changes in the family structure, with an ever later marriage age, sometimes counter-intuitively contribute to higher luxury purchases. According to MVI Marketing, more than 50% of women buy jewellery for themselves, whether to celebrate professional success, to indulge themselves or to invest.
- Introduced in 1999, the B.Zero1 has become a highly successful jewellery line for Bulgari. Its design is inspired by the circularity of Rome’s Colosseum. In 2020, the Italian jeweller, a pillar of the LVMH group which acquired it in 2011, introduced a new unisex collection, the B.zero 1 Rock, inspired by the heritage Bulgari Tubogas choker with studs, which dates back to the eighties.
For watches, on the other hand, you paint a darker picture...
All luxury segments with a strong male focus are experiencing difficulties. This doesn’t only apply to the watchmaking industry – I could also mention the men’s clothing segment. With the exception of certain dominant houses such as Rolex, Patek Philippe and Audemars Piguet, the growth of watchmaking seems destined to be much lower than that of jewellery.
Moreover, jewellery remains a very fragmented market compared to watchmaking. The influence of brands is still limited – which is due to the unique characteristic of a universal product that has historically been labelled in a very limited fashion, or unbranded. There is immense growth potential to be captured for global brands through iconic designs.
“All luxury segments with a strong male focus are experiencing difficulties. This doesn’t only apply to the watchmaking industry.”
Which jewellery houses are best positioned to capture this potential?
Four brands stand out today in terms of size and global reach: Cartier, Tiffany & Co., Van Cleef & Arpels and Bulgari. Each offers a different profile: the French brand Cartier, “jeweller of kings and king of jewellers”, is particularly popular in China; Van Cleef & Arpels is known for its romanticism and its pieces inspired by animals or floral motifs; Bulgari stands out as a colourful and exuberant Roman brand. Finally Tiffany & Co., the emblematic New York jeweller, is at the top of the list of con- sumer preferences in the United States. All four are likely to prosper over the next decade, but there is reason to believe that Tiffany & Co. will gain the most in market share.
- The Trinity ring by Cartier is made up of three intertwined, mobile bands in three colours of gold. A design created by Louis Cartier in 1924. The world-leading jewellery brand is also the crown jewel of the Richemont group.
Moreover, it is no coincidence that we are also seeing some major “generalist” luxury houses becoming more involved in jewellery, such as Chanel, Gucci, Dior and Louis Vuitton, which made several important announcements last year (including the acquisition of the second largest rough diamond ever discovered, called the “Sewelô” – 1,758 carats, the size of a tennis ball).
These brands are in a phase of recruiting new customers, particularly in China: local retailers such as Chow Tai Fook, Luk Fook or Lao Fen Xiang still dominate the jewellery landscape, but imported brands are on the verge of surpassing them. They bring a crucial element of trust as institutions that have been established for decades, enabling them to seduce new generations. According to De Beers, genera- tions Y (born between 1981 and 1996) and Z (born between 1997 and 2010) account for two-thirds of total diamond jewellery spending in the four largest markets for this category.
Mostly time and investment in marketing, product and retail. Exposure to Asia is certainly stronger at Cartier, and Tiffany & Co. is trying to catch up in this area. This involves expanding the distribution network in China itself, but also developing products that are better adapted to this clientele. The social identification factor is very important in China. This is why jewellery that is immediately recognisable is popular, such as the Love range or Juste un Clou by Cartier, the Alhambra by Van Cleef & Arpels or the B.Zero1 by Bulgari. There is of course the T1 from Tiffany & Co., but the brand still needs to accentuate its recognisable, iconic side. On the other hand, Tiffany & Co. is likely to take a more muted approach to bridal: not only do young people marry less, but Covid-19 has made this segment even more challenging.
- Piece from the 2019 “Tiffany Jewel Box” collection. The most important American jewellery brand has just been acquired by world’s largest luxury group LVMH, opening a whole new business era for the entire segment. As author Erwan Rambourg underlines, the brand has yet to find its “iconic line” to conquer the Chinese market.
What’s more, if you look at a brand like Cartier, it offers not only jewellery, but also timepieces, perfumes and accessories. For many young Chinese women, Cartier is perceived first and foremost as a watch brand that also makes jewellery! This is also their strength: you go into their boutique to buy a ring and come out with another luxury product. This diversification, which increases margins, is essential for Tiffany & Co.: they already offer watches, perfumes and accessories, but it seems very few people are aware of that.
Which jewellery brands are holding up best after more than a year of the pandemic crisis?
Unsurprisingly, the major brands outperform in times of crisis: this may be the case today rather artificially, but they will continue to assert themselves in the post-crisis period. Smaller brands such as Chopard, Boucheron, Fred, Harry Winston, Chaumet, Graff, Buccellati, Damiani and Pomellato are following, but they lack the critical mass to fully capture the growth potential that is opening up for global jewellery houses.
You also point to a strong opportunity for new entrants in the entry-level segment.
High-end jewellery remains a very difficult segment to conquer, which is why the major international houses are increasingly dominating this market: they need the financial strength to manage very valuable and expensive inventories that can remain unsold for years. The barrier to entry is high. On the other hand, there are a lot of accessible local jewellery brands, such as Agatha in France or APM Monaco in China. There are very few truly global brands in the entry-level seg- ment: we might think of Swarovski or Pandora, but they are positioned on niche products, crystals or “charms”. There are opportunities for players with global ambitions.
“High-end jewellery remains a very difficult segment to conquer, which is why the major international houses are increasingly dominating this market: they need the financial strength to manage very valuable and expensive inventories that can remain unsold for years.”
- Magic Alhambra long necklace in guilloché yellow gold. In 1968, Van Cleef & Arpels created the first Alhambra long necklace, inspired by the four-leaf clover shape. This motif has since become the absolute emblem of the Richemont-owned brand.
How fast is the jewellery industry going digital?
E-commerce is much more suited to the accessible niche than to high-end jewellery. Digital sales have certainly progressed during the pandemic, but I remain firmly convinced that the physical network will remain ultra-dominant in luxury jewellery, even if we may see pronounced differences from one market to another.
What potential do you see for lab-grown diamonds?
They are most popular in the United States at the moment, but I think they will become the standard for mainstream jewellery. It’s only a matter of time – not so much for environmental reasons as for the cost factor, in a very pragmatic way. Eventually, mined stones will become reserved for exceptional pieces or centre stones. Hybridisation might also happen, with the use of both categories of stones on certain pieces, each fulfilling a different function.
“Lab-grown diamonds will become the standard for mainstream jewellery. Eventually, mined stones will become reserved for exceptional pieces or centre stones.”
FACTS & FIGURES
THE RISE OF GLOBAL JEWELLERY DEMAND, 2009-2019 (in US$)
- The rise of global jewellery demand, 2009-2019 (in US$)
PROJECTED ANNUAL TURNOVER OF THE LARGEST JEWELLERY BRANDS, 2021 (in US$)
- Projected annual turnover of the largest jewellery brands, 2021 (in US$)
GROWTH RATE OF THE JEWELLERY CATEGORY VS. THE GLOBAL LUXURY INDUSTRY, 2005-2020
- Growth rate of the jewellery category vs. the global luxury industry, 2005-2020
SHARE OF JEWELLERY IN THE TURNOVER OF LUXURY BRANDS, 2020
- Share of jewellery in the turnover of luxury brands, 2020
In Future Luxe: What’s Ahead for the Business of Luxury, Erwan Rambourg identifies the major forces and emerging trends that are set to reshape luxury over the next decade. The expansion of Chinese consumption and the boost in women’s spending power around the world will fuel continued growth in the industry. But, even more importantly, fundamental changes are on the horizon. To ensure his portrait of the industry has the depth and nuance of real-world experience, Rambourg interviews several CEOs from the largest groups and brands, including Kering, Cartier, Puma, and Moncler, in addition to drawing on his own observations from over two decades in the luxury milieu.
Future Luxe: What’s Ahead for the Business of Luxury, Erwan Rambourg Figure 1 Publishing, 272 pages.