Luxury companies including LVMH Moët Hennessy Louis Vuitton, Gucci Group and A&G Group are looking to strike it rich with high-end, branded jewelry collections aimed at fashion customers. Industry executives and financial analysts say the branded jewelry market is untapped territory — though one that will take significant long-term investment and a strategy not without its risks.
"The jewelry market is large and unbranded, and luxury goods companies have recognized the opportunity," said Sagra Maciera de Rosen, luxury goods analyst at J.P. Morgan. "They’re moving so fast and so aggressively, the customer needs time to catch up."
The potential prize is too large to ignore, however. De Beers Group and LVMH, which linked up in January 2001 to the diamond jewelry company De Beers LV, estimated at the time that the diamond jewelry market alone was worth about $60 billion. As Bernard Arnault, chairman of LVMH, said in announcing the joint venture, "It is our strategy to build one of the largest [jewelry] companies in the world in 10 years. But even a fraction of a percent of $60 billion is quite a lot of money."
The overall global jewelry market racks up sales of $100 billion worldwide, according to Sagra Maciera de Rosen, luxury goods analyst at J.P. Morgan in London. Only 4 to 5 percent of those sales come from high-end, branded jewelry, she said, adding that that percentage could easily double.
"This market can support an unlimited number of brands," she said. "Of course, like any other industry this one will have its top 10 players, but that doesn’t mean smaller brands can’t prosper, too."
Claire Kent, head luxury analyst at Morgan Stanley, agreed. "The jewelry market isn’t dominated by brands, so there’s a lot of growth potential there," she said. "In addition, with watches and jewelry, you get a very high [sales] return on very little floor space."
Regardless of their strategy, all jewelry businesses have to take the long view, given the sputtering global economy, war in Iraq and such worries as Severe Acute Respiratory Syndrome. Every jeweler interviewed expressed confidence that demand for fine jewelry would eventually rebound.