The rich really are different: They're buying more jewelry during Covid
Posted October 19, 2020 3:27 p.m. EDT
CNN — Here's the latest sign of economic divide between the haves and have-nots in the pandemic: Rich people are buying more high-end jewelry like diamond rings and gold necklaces.
According to Edahn Golan, founder of Edahn Golan Diamond Research & Data, purchases of fine jewelry in the US recovered from the early months of the pandemic and started to gain momentum heading into the summer. Fine jewelry sales were up nearly 10% to $5.25 billion in August from the same month last year, according to the latest data available.
Signet Jewelers, which owns and operates the retailers Kay Jewelers and Zales, said the company's preliminary August sales for all jewelry are up 10.9% compared to a year ago.
Meanwhile, Tiffany, a chain that was hit hard by the drop in tourist visits to stores, said last week that US sales in August and September declined by a low double-digit percentage, an improvement since May.
The company, which is currently embroiled in a high-profile court battle with French luxury brands conglomerate LVMH over a merger agreement, also called out strong performance of its T1 line, its newest gold and gold with diamonds jewelry collection.
Improving fortunes for the jewelry industry come as the US economic recovery runs out of steam after a rapid rebound witnessed in the summer.
Some economists have argued the economic recovery appears to be a K-shaped one, where the wealthiest Americans are quickly rebounding while the middle- and lower-income households are not.
Daniel Bachman, US economic forecaster with Deloitte, said the pandemic has hit the labor market unevenly.
"The lower end was hit hard, and frankly they are not buying jewelry," he said. "The higher end is sitting on unspent income and the savings rate is very high right now."
Buying diamonds instead of traveling
Jewelry sellers have a theory on why they're seeing sales come back.
"In every market in the world, the number one competition to our industry is travel," said Stephen Lussier, executive vice president with De Beers, the world's largest diamond mining firm. "If you have a wedding, a 10th or 25th wedding anniversary, a significant birthday, the romantic thing to do is travel."
But now, with travel in a slump, diamond jewelry has been capturing some of the unspent travel budget, he said.
In the US, De Beers' diamond jewelry brand Forevermark has seen year-over-year double-digit growth each month since July, he said.
Macy's CEO Jeffrey Gennette highlighted a similar sentiment at a Goldman Sachs retail conference in September, noted noting how sales of luxury items were "outpacing expectations."
"There's a lot of theories for that. I think one of them is that you've got customers that are not traveling. So those budgets that used to be spent on experiences are now going to kind of treating themselves with products," he said.
Macy's, in an email to CNN Business, said it has seen customers during the pandemic "gravitate toward the jewelry category, in part because it retains its value."
Signet Jewelers is seeing that trend with engagement rings.
Because couples aren't doing destination engagements, "they're investing in an even more fabulous [diamond] ring," said Jamie Singleton, president of jewelry retailers Kay Jewelers and Zales.
One smaller seller says things are getting better after it was hit hard earlier this year. As with most retailers, the Covid-19 lockdown forced Van Cott Jewelers, a 100-year-old business in Vestal, New York to shut its doors in mid-March.
The business reopened on June 8. Since then, owner Birdie Levine, a certified gemologist appraiser, has noticed a few trends in diamond jewelry purchases.
"Due to Covid-19, we were closed for almost three months and then we were only allowed to offer curbside sales," said Levine.
"These conditions definitely had an adverse effect. It was not until July that we witnessed an uptick in higher-end diamond sales. We've been selling a lot of $20,000, $30,000, $40,000 diamond jewelry pieces," she said.
Levine said her customers are either upgrading the diamonds in existing jewelry they own, like an engagement or wedding ring, or buying a completely new piece. As a result, she said her average sale since reopening has been "much higher" though her total sales haven't caught up to what they were a year ago.
Still, Levine expects diamond jewelry will be a hot seller for the holidays. "I'm gearing up to purchase lots of loose diamonds to be ready," she said.