September 23, 2005
Best Jewelry Customers Not Daunted by Gas Price Hike
Jewelry analyst Ken Gassman, reporting for IDEX Online research, said the
recent increase in gasoline prices leads him to believe jewelers' best customers won't cut back on jewelry buying this holiday season.
"Averages don't tell the story for the jewelry industry," says Gassman.
"There is no 'average' jewelry customer.For jewelers, their best customers are concentrated in households with more than $50,000 annual income.And for those customers, the impact of higher gasoline prices will be minimal."
Gassman says almost 23% of all jewelry sales are generated by consumers with household incomes above $150,000 annually; these households represent just 4% of the total households in America.
"For jewelers, the mother lode is concentrated in households with incomes
above $50,000 annually:38% of all American households make more than
$50,000 annually; their aggregate spending on jewelry represents nearly 75% of all jewelry sales in America," he says.
In addition to rising gasoline prices, American consumers can expect higher energy costs electricity, heating oil, natural gas as a result of soaring oil prices, says Gassman. "However, even when utility costs are added to the analysis of consumer budgets, the result is the same:lower income shoppers 42% of U.S. households who make less than $30,000 annually will feel the pinch, but their very modest spending on jewelry 12% of the industry total simply won't be missed by most jewelers."
But Gassman says there is one factor which cannot be quantified: the impact of perception. "Even if jewelers' best customers those earning over $50,000 annually can afford jewelry, will they continue spending at their current rate?" He says there are at least two arguments which suggest that they may not only continue to spend on jewelry, but that spending might rise modestly. Those arguments are that consumers may cut back on driving, rather than forego jewelry and other luxury purchases. They might also step up jewelry spending, as the ultimate "feel-good" product behavior that was also noted after the terrorist attacks of Sept. 11, 2001.
"Culturally, most Americans believe they were born to shop," says Gassman. "Shopping in America is a social and recreational experience first and foremost.That's not about to change."