When consumers are asked to think of a country that produces elegant and sophisticated design in many aspects of life, the name they usually come up with is Italy. But with its great success in the art of producing highly original work comes the problem of imitation. In an age of globalization where information can be downloaded in seconds, Italian-style jewelry can be found all over the world, but it has not necessarily been made or even designed in Italy.
A further problem for the country is the fallout from the global financial crisis which saw a sharp reduction in demand for jewelry in general, and high-end creations in particular. And that has forced the Italian jewelry sector to overhaul its marketing strategies, to pay closer attention to what customers actually want, to create lower price points as well as a wider range of prices, and to search for new markets. The soaring price of gold last year also has led jewelry firms to review their approach since customers with less money to spend are not willing to pay higher prices for jewelry.
Preliminary data suggests that Italian jewelry exports to its major markets fell last year. Where, in 2008, there had been a strong rise in sales to the United Arab Emirates, it appears that in 2009 sales there rose only minimally, according to some figures, and that in likelihood was due to the increase in the price of gold. In the first half of 2009 –the most up-to-date figures available – turnover for the Italian jewelry industry fell 24.4 percent, according to the Club degli Orafi, an independent association representing all sectors of Italy's jewelry trade. Exports, which in 2007 were 5.04 billion euros, and in 2008 had fallen to 4.66 billion euros, declined by 20.6 percent in the first half of 2009.
The Club degli Orafi said that of Italy's four largest markets – the United Arab Emirates, Switzerland, the United States and France – the UAE posted a tiny rise in Italian jewelry imports of 0.7 percent, while the other three recorded falls of 25.3 percent, 32.1 percent and 21.2 percent, respectively.
Meanwhile, according to the VicenzaOro First trade show organizers, Italian gold jewelry exports in 2013 are estimated to have fallen by around 20 percent overall last year compared with 2008. Italian gold jewelry sales to the country's main export markets: the United Arab Emirates, Switzerland and the United States are believed to have declined by 15 percent, 27 percent and 30 percent respectively on the year in the first nine months of 2013.
Conspicuous consumption has been dealt a strong blow by the global economic downturn, and is being replaced by caution and thrift. The industry is now talking more to customers to find out what they want – and the conclusions include more and lower price points and better customer service, said Milton Pedraza, chief executive of the Luxury Institute, a research organization that studies the luxury industry. He said many high-end brands were also taking a leaf out of the book of lower-end jewelry firms by, for example, making their websites more streamlined and easy to navigate.
"They're foregoing all the flash they used to put in front of their websites because it was like a six-foot brick wall on the left lane of the autobahn," Pedraza told Reuters. "It took a while for the creative people to get that consumers want to get in and get out."
Leading Italian jewelry designer, Roberto Coin, launched his Capri Plus collection, offering items with identical designs, but varying materials and prices ranging all the way from $2,500 to $50,000. "We are saying put that in the window now, put all the five different price points, show them to the clients, show them the price and let them decide which price they feel comfortable with, but you are showing the same design."
Luxury brands are now having to work harder to justify their high prices, he said. "More than ever when someone buys something of a certain value, they want to feel like a king," Coin said. Like others, Coin said consumers were looking for more valuable pieces in the current tough climate. "The more unique you make the pieces, and then the more the high-level clientele will restart to re-buy because they want something more unique than everybody else," he said.
However, he said he is confident that next year will see a recovery around the world "because the damage cannot go any further than in 2009 ... that is the worst," Coin told the Reuters Luxury Summit in London. He said there would be some improvement this year, but not that much. Coin said all markets had been affected, but said he saw demand in Turkey, Egypt, Morocco and Nigeria.
Further support for the argument that luxury goods sales will return to growth next year came from a Bank of America Merrill Lynch report. The study saw profitability increasing more than revenues thanks to strong cost containment policies in 2009. Sales will likely grow by 5 percent this year while core profit will rise 17 percent. Net profit will increase 13 percent, the report said, citing a consensus of estimates from analysts.
Paola Durante, head of corporate broking for Bank of America Merrill Lynch in Italy, said the effects of cost-cutting and efficiency measures that luxury goods makers implemented last year would bear fruit in 2010. "No one can allow themselves to be inefficient," she said, adding that companies should not be looking to increase prices to boost margins. China remains the fastest-growing major market for luxury brands. However, Durante said companies should not abandon "the mature consumer – in Europe, Japan – which remains very important" while looking for growth in emerging areas.
Meanwhile, Italy, which saw jewelry sales at home and overseas drop by 20-30 percent last year, could see the falls bottom out this year. Nonetheless, the country's exporters need to search out new customers in order to survive and could no longer depend on tried and trusted markets. "We need to go where consumers are: Brazil, Russia, India, China, Mexico, Middle East where economies will recover quicker than in Europe and the United States," said Massimo Carraro, chief executive of jeweler and watch maker Morellato & Sector.
Morellato & Sector, which sells about 50 percent of its products abroad, already sells in China and India, and plans to expand in Brazil, the Middle East and Russia, Carraro said. He added that limited exposure to the U.S. market had helped his firm's financial performance.
Italy used to sell around 25 percent of its jewelry output in the United States. But its share of the world's biggest jewelry market has fallen in recent years due to strong competition from China, India and Turkey.
As a result, many Italian jewelers have decided to look elsewhere. Latin American consumers have taken a liking to Italian jewelry. Domenico Girardi, general manager of the Vicenza jewelry fair, said it was a potentially large market that was for long overlooked by the sector. Growing wealth in Latin American countries, fuelled by a boom in demand for its commodities, has given consumers the wherewithal to buy high-end jewelry. Other jewelry-makers have identified Russia, Ukraine, Kazakhstan and Azerbaijan as alternative export markets.
The impact of rising gold prices and consumers' reluctance to pay higher prices has led high-end gold jeweler Chimento to create its first-ever silver jewelry collection for women, targeting mostly U.S. and other foreign markets. With gold soaring to $1,200 an ounce, a silver bracelet by Chimento costs 700 euros compared with 3,500 euros for a gold item of the same design.
But jewelry and industrial demand will be supported by signs of economic recovery, while uncertainties about its pace, inflation and currency risks will bolster investment demand this year, said Rozanna Wozniak, investment research manager at the industry-funded World Gold Council.
"We've got this situation when we've got improving economic conditions but an ongoing economic uncertainty ... Investment (demand) will be supported by the uncertainty," she said. Jewelry demand, which started picking up at the end of last year, is seen gathering strength this year as consumer demand recovers, especially in core markets such as India and the Middle East, Wozniak said.
Evidence that jewelry brands were also struck by the global economic crisis and that even wealthy clients cut back came last month when Italian jeweler Bulgari recorded its first quarterly loss in 10 years. The world’s third- largest jeweler, Bulgari said revenue declined 5.1 percent in the fourth quarter as the recession curbed consumers’ appetite for expensive watches and perfumes. Its results also provided a snapshot of the sales situation being experienced by most jewelers.
The drop in revenue was lower than the previous quarter’s 9 percent fall, aided by 19 percent growth in Asia outside of Japan. Sales in Japan, which represents 17 percent of Bulgari’s total revenue, slumped 27 percent. European revenue edged up just 0.7 percent, and the Middle East was up 2.5 percent, while the Americas region reported a 17 percent fall.
In a report on the Italian jewelry sector, which was delivered on the opening day of this year’s Baselworld show by Gaetano Cavalieri, president of the world jewelry confederation CIBJO, he touched on the issue of his countrymen’s struggle to maintain ownership of the concept of Italian design. “Goods can be easily copied, but you cannot copy a designer's originality and ability to innovate,” he said. “You either have it or you don't. You can copy products, but you cannot copy the talent to create groundbreaking designs and build a reputation for exciting, high-quality jewellery.”
“Consumers are not fools: they know how to recognize high-quality goods produced by master craftspeople and designed by talented individuals with their own unique approach to their work,” he continued. “There simply is no substitute for originality and our Italian jewelry designers have that ability to continuously re-invent themselves. They use their imagination to produce breath-taking designs again and again. Italian jewelry is copied the world over, but jewelry buyers know there is only one origin for exciting, beautiful high-quality products, and that is Italy.”
