September, 2011 – This article from The Centurion (E-Newsletter & Info Hub for Prestuge Jewelers) features AARC research about the differences between the affluent market and the luxury market—and who jewelers actually are serving (http://news.centurionjewelry.com/articles/view/who-are-americas-highest-ticket-jewelry-stores).
By Hedda Schupak
New study finds the average ticket among top 15 most expensive luxury jewelry stores is $5,559. But typical guild jewelers’ average receipt is only $1,100. Why is there such a difference?
New York—What jeweler is writing the highest tickets in America?
Not surprisingly, it’s Harry Winston (left). According to a report released Tuesday by bundle.com, the tony jeweler averages $8,388 per ticket sale. Trabert & Hoeffer in Chicago is second, with an average sale of $6,627. By contrast, the typical guild jewelry store’s average ticket is around $1,100, says industry analyst Ken Gassman. (This figure is adjusted and does not include watch batteries, repairs, or bead sales, he told The Centurion.)
Bundle.com’s report is based on data provided by Citi for average receipt amounts based on millions of transactions in jewelry stores across the United States from July 2010 to June 2011. The study includes only Mastercard and Visa transactions; it does not include cash transactions or those made with American Express, Diners Club, Discover, or private store accounts, says Mike Dang, the article’s author.
“We were surprised at how many stores that made the list were names that most consumers [outside the retailer’s trading area] probably never heard of,†Dang told The Centurion. “We also were surprised to see that three stores on our list are in Dallas. It’s the first time that Texas made it on a list,†he said, referring to a number of lists the site tracks. William Noble Rare Jewelry with an average ticket of $5,839 took the number-four spot, Sue Gragg Precious Jewels came in fifth with an average receipt of $5,605, and Eiseman Jewels is in 11th place with an average of $5,028.
The three Dallas stores and Trabert & Hoeffer were among nine independent stores on the list of 15 jewelers. The others were Betteridge’s Vail, CO store (average ticket, $5,391, number nine on the list), Fourtane in Carmel, CA ($5,937, number three), Hyde Park Jewelers, Las Vegas, NV ($5,423, number seven), Belluso, a watch store also in Las Vegas, ($4,753, number 13), and Westime, a watch store in Los Angeles, CA ($4,591, number 15).
Also on the list were De Beers, New York City ($4,625, number 14), the Rolex boutique in South Coast Plaza, Costa Mesa, CA ($4,861, number 12), Chopard, New York City ($5,305, number 10), Wynn & Co. Jewelry, Las Vegas ($5,412, number eight), and Van Cleef & Arpels’ store at South Coast Plaza ($5,599, number six.)
Read bundle.com’s entire jewelry article here.
The consumer finance website also recently released its list of the top 25 most expensive apparel stores. According to its research from Citi, the top store is Oscar De La Renta. The designer’s eponymous dress shop on Madison Avenue in New York City had an average sale of $3,217. The lowest of the bundle.com apparel list is Prada, with an average ticket of $1,429—still higher than the $1,100 average guild-level fine jewelry store ticket.
The average ticket for chain jewelers is, not surprisingly, even lower than for guild stores. It’s about $400 at Zale, $350 at Kay, and $800 at Sterling’s higher-end Jared division, according to Gassman’s research. Tiffany, incidentally, did not make Bundle.com’s list of priciest jewelers either, presumably because its wide selection of affordable sterling silver jewelry brings down the calculation of the average ticket.
“I bought a sterling silver necklace for my girlfriend, so I’m probably one of those people who brings their average down,†laughed Bundle.com’s Mike Dang.
But why is the sales figure for a typical guild store tracking below even the apparel leaders?
Part of the reason could be that the jewelry industry is highly fragmented, with few brands big enough to spend with the kind of dollar clout that global luxury brands have, says Huw Daniel, president of Platinum Guild International. Now that De Beers has shifted marketing to its own Forevermark brand and away from generic diamond advertising, there’s no entity pushing jewelry into consumers’ lives with the same impact as luxury brands.
“The global luxury brands have made themselves relevant for today’s woman’s lifestyle, and their objects—bags, shoes—are a highly telegraphic marker of one’s status and personal style,†says Daniel. “That being said, however, adornment will always be a human need, so jewelry has a big role to play and the brands that can seize this can make a very nice profit.â€
“Jewelers spend 4-6% of sales on advertising, while true luxury retailers or brands spend up to 20% or more of sales on advertising,†says Gassman. Plus, he says, don’t discount the fact that Mother’s Day and Valentine’s Day—even at guild stores—tend to be fairly low ticket sales, which brings the overall average down.
But that doesn’t explain why some jewelers are hitting the mid $4,000’s and $5,000’s for an average ticket.
What might, however, is identifying the differences between the affluent market and the luxury market—and who those jewelers actually are serving.
According to the American Affluence Research Center, those differences are both distinct and important. The AARC defines the affluent market as the wealthiest 10% of U.S. households as determined by the Federal Reserve Board, based on net worth. But only 10% of the affluent market—or 1% of U.S. consumers, approximately 1.1 million—have the means to acquire and are familiar with the brands and price points of products or services generally considered to be true luxury, says Ron Kurtz, AARC president.
AARC identifies true luxury consumers, who are the most likely to be viewed as conspicuous consumers, with the following profile:
• Average annual income of $982,000
• Minimum net worth of $6 million; average net worth is $15.3 million, or 33% of total net worth of all U.S. households.
• They earn about 14% of the total income earned by all American households.
The affluent market, by contrast, has this profile:
• Average annual income of $256,000
• Average net worth of $3.1 million; and comprise 70% of the total net worth of all U.S. households.
• They earn 36% of the total income earned by all American households and account for almost half of all consumer spending. This represents about a third of total GDP (gross domestic product).
• Additionally, these 11.4 million households hold 89% of the value of all publicly traded stock and stock mutual funds in the United States.
• Only a small segment of this demographic are conspicuous consumers; most are careful spenders and aggressive savers.
According to Forbes.com, the most affluent towns in the United States are Westlake, TX—a suburb of Dallas—and the Village of Kenilworth, IL, a suburb of Chicago. No surprise, then, that four of the 15 stores on the Bundle.com list are nearby. Several more of Forbes’ most affluent towns are New York City suburbs, while Orange County, CA, where South Coast Plaza is located (Rolex and Van Cleef & Arpels’ boutiques from the list) also has a number of very tony zip codes. Cities like Vail and Las Vegas, meanwhile, may not make the list for permanent residents, but they’re favorite affluent vacation spots.
The definition of “luxury†is ambiguous, not quantifiable, says the AARC. In fall of 2008, the organization polled well-heeled consumers asking, “what’s the most you could imagine spending†for 37 different categories of products and brands.
“The numbers were much lower than we expected,†Kurtz told The Centurion. Consumers offered up a very wide spread of price points they considered luxury—but the medians (the point at which half of the responses were above and half below) were surprisingly low.
Kurtz shared the jewelry and watch results—three of the 37 categories—with The Centurion. When asked “what’s the most you could imagine spending for a watch for a dressy occasion,†the median value among respondents was $1,000. 36% of men and 26% of women responding indicated they would spend $2,000 or more. Among the top 1% of respondents—those with net worth over $6 million—the median figure rose to $3,000, and the top value cited was $30,000. Not surprisingly, the most popular brand named was Rolex.
For an everyday watch, the median was a shockingly low $130. 29% of men and 27% of women said they’d spend $500 or more on an everyday watch, and the top value cited for this category was over $20,000. Only about half of the respondents naming a maximum price for this question named a brand; however, among those, the brand most often cited (22%) was Timex.
For diamond stud earrings, only women were polled. The median response was $1,000, with a point spread ranging from less than $100 to more than $10,000. 20% of women said they could imagine spending $2,000 or more for a pair of diamond studs. Only about 15% of women naming a maximum price also named a brand, says Kurtz, and the brand cited most often was Tiffany.
In recent years, says AARC, much of the growth of the luxury market has come from people who have the income ($100,000 to $250,000) to purchase some luxurious products, but not the wealth (or credit) to sustain such purchases, especially if portfolio values dip or the breadwinner loses a bonus or job.
That said, however, AARC’s conclusion from its research is that in the long run, marketers of luxury goods and services will find it far more productive, accurate, and practical to focus on the larger affluent market than the very ambiguous and often elusive luxury market.