The Rise of Affordable Luxury in Real Jewellery

The Rise of Affordable Luxury in Real Jewellery – International Jewellery London

Written by Chloe Wu, Industry Analyst, Euromonitor International

The gap between the prices of real and costume jewellery is widening. Prices of real jewellery, or fine jewellery made of precious metals and/or gemstones, are rising. In contrast, prices of costume jewellery, made of non-precious metals, semi-precious gemstones or synthetic materials, are dropping. With the jewellery landscape showing signs of polarization, the need for jewellery players to maintain clear pricing and brand positioning is more important than ever.

Current state of play

According to Euromonitor International’s latest estimates, the average unit price of real jewellery in 2015 is US$521. This is higher than what one would expect, which is an average unit price of US$510 in 2015 based on inflation. The difference between both price points is considerable, given that global averages are being looked at. Thus, it would seem that real jewellery brands and retailers are commanding substantially higher premiums.

In contrast, prices of costume jewellery have dropped. A piece of costume jewellery that would cost US$21 based on inflation, currently sells at an average retail price of only US$19. Numbers aside, the falling prices of costume jewellery are not completely unexpected, given how often price wars are waged amongst fast fashion brands selling costume jewellery, such as Lovisa, Forever 21 and Cotton On.

Affordable pricing becomes commonplace in real jewellery

In recent years, however, a large number of mid-priced jewellers selling real jewellery have gained popularity. Notable examples include the likes of Pandora and Thomas Sabo, which offer the option of affordable luxury, even though real jewellery is typically considered an aspirational product (think luxury, premium and high-end – in other words, costly).

What can mid-priced jewellers do to prevent their target segment of relatively price-sensitive consumers from trading down to lower-cost options in costume jewellery?

Tip #1: Price right

The industry is expected to be increasingly defined by price points and brand positions; thus adopting the right pricing strategy is an important challenge for many jewellery retailers. One option is to offer several well-differentiated product lines, from low to high end. This would comprise of an entry-level line priced affordably to gain market penetration. Higher-end lines should also be carried, as these are where mid-range players can make the bulk of their profits. However, encouraging their relatively price-sensitive consumers to trade up would mean creating high-involvement branding which is unique, relevant and experiential.

Pandora, for example, decided in 2011 to capitalise on its enhanced brand recognition in major developed markets such as the US, the UK, Germany, and Australia. Thus, Pandora raised the price of nearly its entire portfolio in order to actively compete with premium brands such as Cartier and Tiffany in terms of value sales. It currently offers sterling silver charms at entry-level prices starting below US$100, as well as various other precious metal accessories, retailing from US$1,000 to US$5,000.

Tip #2: Stay relevant

In order to compete with lower-priced costume jewellery players, it is also important for mid-market real jewellery players to master what their costume jewellery counterparts do best – perpetuating the notion of fast fashion to encourage frequent and repeated purchases. This is achieved by launching trendy collections at an accelerated pace.

There are many smart ways to stay relevant, and it is necessary to look to the apparel industry for insights. Jewellery is, after all, an accessory meant to complement and enhance an overall look. It is thus subjected to the whims of fast fashion just as much as the apparel industry is.

Firstly, it is important to keep up with trends in the fast fashion industry. Jewellery players should stay “close to the ground” by working closely with retailers and staying informed about changes in consumer preferences. Just like the apparel industry, collaborations with fashion designers can help to create runway looks and drum up excitement. In order to keep consumers updated on the latest collections, it is also important to communicate through social media and maintain a strong internet presence (something not often seen with exclusive premium players).

Demand for affordable luxury will remain strong

The current economic instability and social unrest have driven up demand for affordable luxury in both emerging and developed markets. Mid-priced jewellery players are expected to do well, but only if they play the game right. It would seem that to do well in an increasingly fragmented jewellery industry, finding the right pricing and brand positioning will be critical for industry players going forward.

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