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Our annual retail survey revealed that consumers are holding on to their wallets, but change may be just around the corner.

by Suzanne Wade
Illustrations by Joe Rocco

While retailers aren't exactly giving the economy a big thumbs-up, Colored Stone's annual survey of retailers detected some sighs of relief, especially at the upper end of the market.

Forty percent of the respondents for this year's survey of retail jewelers reported that their overall sales were up over 2002, while only a quarter said their sales were down.

For the 40 percent who were doing better, what made the difference was customers' willingness to spend more money. Almost half of them reported that their clients were buying at higher price points than in previous years. That didn't necessarily mean expensive merchandise — those jewelers were selling items that ran from the lowest end of the market to the highest. But whatever the budget, jewelers saw an aspiration to buy better jewelry.

"Each year we gradually move up in price points, and for the last several years we've been working at price points higher than [many retailers] because we do so much custom work," says Judi Anderson of Bijoux Extraordinaire in Manchester, New Hampshire. Anderson says the shop's most popular price point is currently above $2,000, and the trend shows no signs of slowing. "We have had an increase in customers, and our business is up quite a bit — which is weird because the economy has been bad," she says. "I didn't spend as much in Tucson as in prior years because I was expecting it to be another bad year, but it's been a surprisingly strong year."

The jewelers whose sales were down from 2002 felt the same trend in reverse: Their customers bought at the same or lower price points than before, resulting in fewer overall profits. Those retailers saw their customers gravitating heavily toward the low end of the market, with almost half of the stores reporting that their most popular price point was under $500.

"It's just the economy in general," says Jim Dunker, the owner of Michael's Jewelry in Freemont, Nebraska. He notes that they started seeing a decline in the number of customers coming into the store in January 2001, and the trend hasn't yet reversed. "When there are people in the store, we're getting more [sale] closings, but there just aren't as many [customers]."

Price points have also been dropping in Dunker's store. "Our inventory has changed from being an average retail of $750 to where 90 percent [of the items] are priced below that."

Taken together, the two extremes in buying patterns reflect a polarization in the market. The people who can afford high-quality jewelry are buying the best they can get, while the people who can't afford it prefer to buy "impulse" items or no jewelry at all.

Keith Hurdle, owner of Hurdle's Jewelry in Boulder, Colorado, has seen both aspects of the trend at work in his store. "We're finding that there's the client that has no problem spending whatever they want. We're also finding a group of clients that need to buy something nice, but can't afford to step up into the several thousands of dollars," he explains.

Despite the continued weakness in the market, most retailers were optimistic about the future. Just 20 percent named the economy as the greatest problem facing the jewelry industry today, down from 49 percent in 2002.

"I know it's all cyclical, and eventually [the economy] will come back. It's just a matter of when," says Dunker. "I finally read an article in the paper not long ago where they thought that the retail [Christmas] season should be good. That's the first time they've printed something like that [in a while], so maybe [things will improve soon]."

GEMS IN DEMAND.

Sapphire and ruby remained firmly at the top of the bestseller list in this year's survey, with emerald and tanzanite continuing to vie for the number-three spot. The pair swapped places once again this year, with tanzanite edging out emerald in popularity.

Meanwhile, pearl's fortunes continued to wane. The gem slipped out of the top 10 entirely in 2003, down from number seven in 2002 and number two in 2001, a year when fashion put pearls on everyone's "must-have" list.

Amethyst remained solidly in fifth place, followed by blue topaz, which rose from the number 10 spot, and tsavorite.

Tsavorite garnet made its first-ever appearance in the top 10 at number seven, while rhodolite, the usual garnet staple, dropped out entirely. Tsavorite did especially well for retailers in the southwestern United States and the ordinarily conservative Midwest.

Retailers were at a loss to explain tsavorite's sudden jump in popularity.

"That's just what I've seen," says Dunker. "We've had a few customers come in here asking for it, and it's been more popular than tanzanite. I can't explain it either."

However, Anderson suggested one theory: In a world where enhancements are becoming ever more common, tsavorite is one of the few gems that doesn't have a controversial treatment associated with it.

Certainly, gem enhancement is a growing concern among retailers: 16 percent cited it as the greatest problem facing the industry in this year's survey, up from just 4 percent the prior year. Worries about enhancements were second only to the economy as a primary concern and beat out retailers' other top problems: issues such as low-end discounters, Internet sales, competition from other luxury items, and uneducated customers.

"Every year there are new treatments and new processes, and it's difficult even if you have a gemology background to identify [treated] stones on a regular basis," says Anderson. She's nervous about rumors that bulk diffusion treatments may have been used on blue sapphire as well as orange stones.

Diffusion has become a dirty word for retailers, with just 14 percent saying they would offer such stones to their customers. In comparison, 64 percent find heating acceptable, 50 percent sell irradiated gems, and 34 percent would offer dyed gems. An additional 18 percent say they would sell gems with any type of enhancement.

"With diffusion, sometimes it's only a thin layer, and if you scratch it you might be going through the whole layer," says Nick Fratto, graduate gemologist for Anthony Jewelers in Palmyra, New Jersey, explaining his dislike for diffused gems. "Sometimes it goes deeper, but there's really no way of knowing. And you could also buy natural stones [which turn out to be] diffused. You're not always really sure."

Eighty percent of survey respondents say they offer their customers the option of buying unenhanced colored stones, and 76 percent say that all other factors being equal, they'd be willing to pay more for those stones.

"I do sell natural sapphires that have certs, and [those customers] pay a premium for non-enhanced stones," says Anderson. "But it depends on the person. For some people, [getting an unenhanced stone] is very important, and they don't care if it's double the price, while others wouldn't pay a 10 percent premium."

While some consumers appear willing to pay more for untreated stones, retailers admit that most customers don't care whether the stones have been treated or not. "It's not like people call up and say, 'How do I know what's been done to this stone?'" says Anderson. "I don't think there will be a lot of people who demand natural stones [who aren't willing] to pay the price for it."

As a result, few retailers plan to shift their stock to include more unenhanced colored stones. "The demand isn't there for us yet," says Kelsey Woodell, assistant manager of Freeman Jewelers in Rutland, Vermont. "Personally, I haven't had anyone ask for untreated sapphire or emerald."

POLITICS AS USUAL?

Many retailers also find that lack of consumer concern extends to the hot political topics of the day. Sixty-six percent said their customers are not concerned about issues such as human-rights violations or suspected criminal connections with gemstone mining. Eighty-two percent said news reports about such issues did not have an impact on their jewelry sales.

"I think it's a concern within the industry, but I don't think our customers care," says Rodger Krisukas, owner of Steckl's Jewelry in Bangor, Pennsylvania. "I think they want the nicest thing they can get, and I don't think they're really concerned [about where it comes from]."

Despite that lack of concern among the public at large, 34 percent of the retailers surveyed supported the United States' recent ban on Burmese imports, which is intended to pressure the ruling military junta to relinquish power.

"I think we have to police ourselves," says Krisukas. "It's an ethical thing — you should feel responsible. I don't think it should matter whether consumers care. I think we should, as an industry."

"I just think it's the right thing to do," agrees Dunker, who says he tries not to sell conflict diamonds or banned Burmese stones. "Obviously, no one is perfect, but I'm going to try and do what's right when I can. You do it when you can."

Other retailers are less confident about the ban on Burmese imports: 26 percent said they did not support such measures. And nearly half said they would not voluntarily stop selling Burmese gems above and beyond what is required by the ban.

"How are they going to track it?" asks Fratto. "I just don't think there's going to be a way to do it. As long as my supplier says it's not [Burmese] . . . but it's even hard for him to tell sometimes."

"I think it's going to be similar to the diamonds — how do we know it's truly coming from Burma?" says Hurdles. "If it's traceable, then there's no question we want to address the issue. And if my customers ask and want to verify location, that's what we'll do."

READ MORE: Additional retail statistics including a regional breakdown.

January/February 2004 • Style: Winner's Circle • Style: Shapes of Things to Come • Selling: Counting Change • Sources: Book Highlights - Tanzanite: Purple Majesty • Bonus: Future Industrial Trends • News & Updates • In This Issue

• Online Bonus: Additional statistics including a regional breakdown