33991 Jewelry Manufacturing in the US Industry Report

WWW.IBISWORLD.COM Jewelry Manufacturing in the US June 2015 1

IBISWorld Industry Report 33991Jewelry Manufacturing in the USJune 2015 Zeeshan Haider

Gold washed: Rising import penetration and volatile input costs will erode industry revenue

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

3 Additional Resources

4 Industry at a Glance

5 Industry Performance5 Executive Summary

5 Key External Drivers

7 Current Performance

9 Industry Outlook

11 Industry Life Cycle

13 Products & Markets13 Supply Chains

13 Products & Services

15 Demand Determinants

15 Major Markets

16 International Trade

19 Business Locations

21 Competitive Landscape21 Market Share Concentration

21 Key Success Factors

21 Cost Structure Benchmarks

23 Basis of Competition

24 Barriers to Entry

25 Industry Globalization

26 Major Companies26 Tiffany & Co.

29 Operating Conditions29 Capital Intensity

30 Technology & Systems

30 Revenue Volatility

31 Regulation & Policy

32 Industry Assistance

33 Key Statistics33 Industry Data

33 Annual Change

33 KeyRatios

34 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


Operators in this industry manufacture jewelry or silverware using precious or semi-precious metals and stones. Costume jewelry manufacturers, specialty coin producers and lapidaries

(artisans that form stones, minerals and other durable materials into decorative items such as cameos and engraved gems) are also included in this industry.

The primary activities of this industry are

Manufacturing bracelets

Manufacturing rings

Manufacturing necklaces

Manufacturing and engraving personal metal goods

Manufacturing silverware

Manufacturing lapidary work

Manufacturing costume jewelry

31691 Leather Good & Luggage Manufacturing in the USThis industry manufactures personal goods except metal carried on or about the person, such as compacts and cigarette cases.

32799 Mineral Product Manufacturing in the USThis industry manufactures synthetic stones and gemstones.

33221 Hand Tool & Cutlery Manufacturing in the USThis industry manufactures nonprecious and precious plated metal cutlery and flatware.

33281 Metal Plating & Treating in the USThis industry engraves, chases, and etches nonprecious and precious plated metal flatware and other plated ware and jewelry.

33299a Guns & Ammunition Manufacturing in the USThis industry manufactures nonprecious plated ware except cutlery and flatware.

Industry Definition

Main Activities

Similar Industries

About this Industry

The major products and services in this industry are

Costume jewelry

Jewelers’ materials and lapidary work manufacturing

Precious and semi-precious metal jewelry excluding gold and platinum

Precious metal jewelry and accessories made from gold and platinum

Other


About this Industry

For additional information on this industry

www.jckgroup.com Jewelers’ Circular Keystone

www.modernjeweler.com Modern Jeweler

www.nationaljewelernetwork.com National Jeweler

www.gold.org World Gold Council

Additional Resources

IBISWorld writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com


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Demand from jewelry stores

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Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2015)

46.7%Precious metal jewelry and accessories made

from gold and platinum

16.6%Other

13.7%Jewelers' materials and

lapidary work manufacturing

13.0%Precious and semi-precious

metal jewelry excluding gold and platinum

10.0%Costume jewelry


Key Statistics Snapshot

Industry at a GlanceJewelry Manufacturing in 2015

Industry Structure Life Cycle Stage Decline

Revenue Volatility Medium

Capital Intensity Low

Industry Assistance Low

Concentration Level Low

Regulation Level Medium

Technology Change Medium

Barriers to Entry Medium

Industry Globalization High

Competition Level High

Revenue

$8.5bnProfit

$406.8mExports

$8.4bnBusinesses

2,215

Annual Growth 15-20

1.1%Annual Growth 10-15

-1.6%

Key External DriversDemand from jewelry and watch wholesalingDemand from jewelry storesWorld price of goldWorld price of silverPer capita disposable incomeTrade-weighted indexHouseholds earning more than $100,000

Market ShareTiffany & Co. 28.6%

p. 26

p. 5

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33



Key External Drivers Demand from jewelry and watch wholesalingJewelry wholesalers purchase industry products such as fine and costume jewelry, silverware and lapidary work from operators in this industry and resell them to retailers. Therefore, a rise in demand from jewelry wholesalers leads to higher manufacturing demand and sales. The Jewelry and Watch Wholesaling industry is expected to decrease demand for industry products over 2015, representing a potential threat for the industry.

Demand from jewelry storesIn recent years, wholesale bypass has become a commonplace practice in this industry. Cutting out the middlemen enables industry operators to improve and sustain margins. It also enables downstream retailers to save on the markup imposed by wholesalers. Additionally, it creates a direct communication channel between retailers and manufacturers, which enables the latter to respond to changes in consumer tastes and demand more

Executive Summary

The Jewelry Manufacturing industry is making a slow recovery from recession driven drops in demand and the large fluctuations in commodity prices witnessed over the past five years. Despite an economic recovery in the United States, this industry has failed to return to growth; however, its performance has improved manifold compared with the years prior to 2010. IBISWorld expects industry revenue to decline at an annualized rate of 1.6% to $8.5 billion over the five years to 2015, including a 0.9% drop in 2015 alone.

The world price of gold exhibited significant volatility over the five years to 2015. Over the past five years, uncertainty in currency and capital markets resulted in consumers increasingly purchasing precious metals and other commodities as a store of value. However, as the dollar started gaining some momentum and capital markets normalized, demand for gold as a store of value declined, manifesting in a 15.4% decline in its price in 2013 and an additional 10.2% decline in 2014. The price of gold is expected to fall 2.1% over 2015.

Consequently, the price of gold experienced significant volatility over this period; overall, it is expected to increase at an annualized rate of 0.2% over the five years to 2015. These conditions induced volatility in industry revenue and uncertainty in profit margins, which dissuaded new operators from setting up shop and forced existing ones to exit the industry.

Nonetheless, overall performance improved in 2013 and 2014, as a decline in the price of gold and pent-up demand encouraged consumers to make jewelry purchases that they had delayed in previous years. Additionally, improving global economic conditions and rising demand for US manufactured jewelry in Asian markets sustained industry exports, which are expected to account for 99.0% of revenue in 2015.

Over the five years to 2020, this industry is expected to return to growth. IBISWorld expects industry revenue to increase at an annualized rate 1.1% to $8.9 billion. Improving economic conditions and a significant reduction in price volatility is expected to benefit this industry and will increase industry participation over the next five years. Additionally, increasing domestic demand and improving conditions will boost demand for fine jewelry, which will have a positive impact on margins.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

High prices of input materials and rising import penetration hampered revenue


Industry Performance

Key External Driverscontinued

rapidly. The Jewelry Stores is expected to increase over 2015, presenting an opportunity for this industry.

World price of goldThe world price of gold affects the production costs and price of fine jewelry. During periods of increased gold prices, production costs for jewelry manufacturers rise, causing industry operators to either incur lower profit margins or raise the prices of goods. Greater prices typically reduce demand for jewelry, adversely affecting industry sales. The world price of gold has surged in recent years, but is expected to decrease over 2015.

World price of silverMuch like gold prices, the world price of silver also drives up production costs and prices for industry products. When silver prices are high, the overall price of jewelry increases, causing demand to decline. The world price of silver is expected to decrease in 2015.

Per capita disposable incomeDuring periods when disposable income is low, retail demand declines since consumers’ purchasing power is reduced, inducing them to delay or cut back on purchases of industry products.

Subsequently, manufacturing demand falls as retailers purchase fewer items to stock inventory. Conversely, when disposable income increases and demand for industry goods rise, retailers are likely to purchase more from manufacturers, leading to higher industry demand. Per capita disposable income is expected to increase over 2015.

Trade-weighted indexThe trade-weighted index (TWI) represents the value of the US dollar relative to foreign currencies. When the TWI is low, US-made jewelry becomes more affordable to foreign buyers because the dollar has a relatively lower value against other currencies. Conversely, when the TWI rises, US-made jewelry becomes relatively more expensive on the global market. The TWI is expected to increase during 2015, representing a threat to the industry.

Households earning more than $100,000Jewelry, watches and silverware are nonessential goods that are most often purchased by high-income earners (households in the highest income quintile). As the number of households in this group increases, so does the consumption of jewelry products. The number of households earning more than $100,000 is expected to increase over 2015.

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Industry structure Following the financial meltdown in the United States, consumer confidence in currency and capital markets plummeted. The stock market crash and the closure and declaration of bankruptcy by many financial institutions left consumers rattled with many people losing their entire savings. Consequently, people started investing in commodities that had a tangible value as currency came close to losing its function as a store of value. Two of the commodities that received substantial investment during this period were gold and silver. Therefore, the increase in demand for gold and silver resulted in a significant increase in their prices during the earlier half of the five-year period. Under normal circumstances, this would have benefited industry operators that had inventories of gold and other precious metals that they bought prior to the price hikes. However, following the economic downturn, consumers had lost interest in purchasing jewelry, which is generally sold at a markup over the total value of the precious metal contained within it. Instead, people started buying solid gold

and other precious metals to preserve and increase the value of their wealth. Consequently, industry operators had to reduce their markup; as a result, profit margins suffered.

Even though a reduction in the markup charged by industry operators, coupled with more economic certainty toward the middle of 2010, helped release some pent up demand, constant increases in the price of gold until 2012 and the weak recovery of downstream demand resulted in many operators closing shop. Over the five years to 2015, industry establishments are anticipated to decline at an annualized rate of 0.3% to 2,229 locations. A decrease in the number of establishments resulted in a decline in the amount of labor employed by this industry, which reduced the industry’s wage bill to $1.1 billion, representing a 1.8% annualized decrease over the five-year period.

Current Performance

After almost a decade of decline, revenue growth for the Jewelry Manufacturing industry has finally begun to pick up, even though revenue remains below its level in 2010. A number of factors have worked in favor of this industry over the few years, which have helped it recover from the recessionary years following the financial meltdown in the United States. There has been a resurgence in demand for domestically manufactured jewelry, aided by growth in per capita disposable income, which has improved overall consumer sentiment. A resurrection of confidence in currency and capital markets has also helped relieve some pressure off the price of precious metals,

especially gold and silver, which has reduced input costs for manufacturers and prices for consumers. Consequently, a fall in the price of industry items has once again sparked consumer interest in jewelry, which has helped industry operators recover some of the revenue they lost during the recession. However, imports still pose a significant threat to the industry, which are becoming increasingly more competitive, while the industry also loses its export revenue due to the strengthening dollar. Overall, IBISWorld expects industry revenue to decline at an annualized rate of 1.6% to $8.5 billion over the five years to 2015, with an expected decline of 0.9% in 2015.

Profit margins suffered as operators were forced to reduce their markup



Exchange rate dynamics

There is significant import penetration in this industry. The United States imports industry items from Israel, India, China and Belgium. These countries have a significant cost advantage in manufacturing jewelry because of lower labor costs. Furthermore, Belgium is known for its diamonds, while one of India’s largest exports is jewelry and precious metals. These countries have also been closing the quality gap relative to domestic manufacturers at a rapid rate, giving them a further competitive advantage in this industry. Over the five years to 2015, imports have increased at an annualized rate of 2.8% and are expected to reach $39.6 billion by the end of 2015, satisfying 99.8% of domestic demand. Import penetration has hurt industry revenue growth, especially over the past five years, because of an increasing number of price-conscious consumers and a general increase in the price of products produced by this industry. Consequently, many industry operators have closed their domestic manufacturing operations and shifted their production facilities offshore.

Conversely, exports have declined as a proportion of revenue, to 99.0% in 2015. Overall, exports are anticipated to fall to $8.4 billion in 2015, representing an annualized decline of 2.0% over the five years to 2015 thanks to an appreciation of the dollar, which has diminished export growth in this industry. Furthermore, domestically manufactured jewelry also competes with foreign goods in the international market, which enjoys proximity to the largest importers of industry goods from

the United States. Subsequently, foreign goods enjoy lower overhead costs due to lower freight costs, in addition to a more competitive cost structure, which is making it increasingly difficult for domestically manufactured products to compete in the international market. Furthermore, the dollar has appreciated against most major countries’ currencies that import jewelry from the United States, which has reduced demand for domestically manufactured industry items in these countries, resulting in exports declining faster than overall industry revenue. Nonetheless, relative to the rise of the trade-weighted index, lost export revenue is expected to be small as increasing demand from Asian markets, especially Hong Kong, sustains some export revenue. Jewelry exports to Hong Kong have increased at an annualized rate of 9.9% over the past five years and its share of exports has increased from 15.8% in 2010 to an estimated 25.3% in 2015. Hong Kong’s proximity to Asian markets, especially China, and its status as a popular shopping destination for tourists around the world has sustained demand for US manufactured jewelry in the country. For further details regarding trade, please see the International Trade section of the report.

Import penetration hurt revenue growth and many operators shifted production offshore



Industry Outlook

Revenue growth is expected to pick up over the next five years. Domestic demand is expected to increase; however, much of it will be satisfied by imports. An appreciation of the dollar will discourage exports and will likely force domestic manufacturers to concentrate on the local market. However, exchange rate appreciation will also benefit domestic manufacturers by making the imports of unprocessed and semiprocessed precious metals and minerals cheaper, which is also likely to reduce costs for domestic manufacturers. Overall, IBISWorld expects that revenue will increase at an annualized rate of 1.1% to $8.9 billion in the five years to 2020.

Decrease in exports Over the next five years, the trade-weighted index is expected to increase at an annualized rate of 3.2%. Consequently, domestically manufactured jewelry will likely become more expensive for international buyers. Coupled with the fact that largest importers of industry products are countries whose currencies have been on the decline and are not expected to rebound significantly over the next five years will further accentuate this trend. Therefore, industry exports are projected to decline over the five years to 2020 at an annualized rate of 0.3% to $8.3 billion. Consequently, exports’ share of revenue is anticipated to increase from an expected 99.0% in 2015 to 92.5% in 2020.

Conversely, imports are expected to rise at an average annual rate of 4.1% to $48.4 billion. An appreciation of the dollar is expected to make imports even more attractive for domestic consumers than they currently are. Imports’ lower price point, particularly for costume jewelry, engraved personal metal goods and silverware, will substantially reduce demand for domestically manufactured

products in these categories. As a result, industry operators are likely to move out of these product segments and more likely to target the market for fine jewelry geared toward high-income individuals. Those that choose to remain producing silverware and costume jewelry are likely to face low profit margins and tough competition.

Nonetheless, an expected improvement in demand is likely to increase industry participation. IBISWorld expects the number of industry enterprises to increase at an annualized rate of 1.1% to 2,334 companies over the five years to 2020. Operators are expected to become more domestically oriented as the US economy improves and demand for fine jewelry in the United States increases. As industry participation grows, IBISWorld expects jewelry manufacturers to hire more labor, which is expected to increase the wages paid out by this industry at an annualized rate of 0.2% to $1.1 billion. However, wages as a proportion of revenue will decrease, relieving some pressure off profit margins.

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Potential opportunities

While exchange rate dynamics are unlikely to benefit this industry, other structural changes taking place in the economy are likely to offset falling exports and will spur revenue growth. For example, the number of households earning more than $100,000 per year is expected to increase at an annualized rate of 0.8%, reaching 24.0% of all households in the United States by 2020. The increase in the number of households earning more than a $100,000 per year is expected to be twice as fast as it was during the previous five year period, which represents a major opportunity for this industry. This market segment is of prime importance for this industry, as it constitutes one of the largest markets for the industry’s products. People in this income group engage in more discretionary spending, are brand conscious and do not deter from paying premium prices for premium products. In fact, industry major player, Tiffany & Co., has a product segment called statement, fine and solitaire jewelry, which specifically targets high-income individuals that still purchase jewelry for its value as a status symbol. An increase in the number of people that fall in this segment is likely to help the

industry offset some of the revenue losses incurred because of an increase in the trade-weighted index, while simultaneously sustaining profit margins.

Furthermore, as economic conditions improve and consumer sentiment rises over the next five years, it is likely to encourage import substitution, whereby people that previously could not afford to buy domestically manufactured jewelry will be able to do so. Coupled with the reduced cost of imported raw materials due to exchange rate appreciation, as well as price increases of gold and silver slowing, the industry will have a new market segment to tap, which still gives this industry some hope. However, due to continued volatility in commodity prices, it remains to be seen whether the industry will be able to fully reap the benefits of these structural changes taking place in the United States’ economy.

Higher household income will likely offset some of the revenue losses and sustain profit margins


Industry PerformanceIndustry value added is forecast to lag behind US GDP

Imports are increasingly replacing domestic production

The industry’s profit margins are expected to decline over the ten years to 2020

Life Cycle Stage

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DeclineShrinking economicimportance

Quality GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

MaturityCompany consolidation;level of economic importance stable

Quantity GrowthMany new companies; minor growth in economic importance; substantial technology change

Key Features of a Decline Industry

Revenue grows slower than economyFalling company numbers; large fi rms dominateLittle technology & process changeDeclining per capita consumption of goodStable & clearly segmented products & brands

Leather Good & Luggage Manufacturing

Jewelry & Watch Wholesaling

Gold & Silver Ore Mining

Mineral Product Manufacturing

Jewelry Stores

Jewelry Manufacturing



Industry Life Cycle Jewelry manufacturing in the United States has experienced a downfall in recent years with industry value added (IVA) projected to decline at an annualized rate of 0.9% over the 10 years to 2020. This is well below overall GDP growth, which is forecast to grow about 2.5% per year on average over the same period.

Over the past five years, the number of industry enterprises has dropped annually by 0.3%. With a growing share of production being shifted overseas and import values satisfying an increasing portion of domestic demand, domestic manufacturers are losing profit margins, becoming irrelevant and being force to close up shop. Additionally, larger companies have increasingly been acquiring smaller brands. This consolidation trend has had a downstream effect on employment and

wages, with both decreasing annually over the past five years.

Staggering input prices, such as those attached to gold, silver and diamonds, have affected manufacturers, dragging bottom lines into the dirt. Intense price competition from imports has been the main driver of these declines. Today, Israel is the largest exporter into the United States and accounts for an estimated one-quarter of all jewelry exports to the United States. China and India have also emerged as fast-growing exporters, further dominating domestic demand for jewelry. Unfortunately for industry players, imports are projected to rise in the next five years, growing 4.1% per year. As slowly returning consumer sentiment sends shoppers back to jewelry stores, imports are forecast to make up a large share of their purchases.

This industry is Declining


Products & Services Precious and semi-precious metals jewelry and accessoriesThe majority of revenue for this industry comes from the sale of jewelry made primarily of precious metals and stones. Items in this category are made from gold, silver, platinum and other similar metals or alloys (a combination of metals). Additionally, stones like diamonds, rubies and emeralds are often incorporated into these designs. Jewelry made from these materials include bracelets, necklaces, earrings and rings. Accessories category includes brooches and pins, encrusted wallets and cases, watches and bands, cuff links and other accessories. Over the past five years, this segment has decreased in terms of its share in line with declining demand for fine jewelry at the retail level. Low levels of confidence in the economy coupled with a decrease in household disposable income have forced consumers to cut down on their spending on luxury items, including fine jewelry. As a result, retailers have purchased less fine jewelry

from wholesalers. The demand for bridal jewelry, however, has kept sales volume of fine jewelry afloat. Even during the tough economic times, bridal jewelry, such as engagement rings, bridal sets and wedding bands have been in demand. While many consumers have switched to less expensive items to adjust to their lower levels of disposable income during tough economic times, the necessity of bridal jewelry has prevented this product segment from experiencing a decline.

Precious metal accessories have also declined as a share of industry revenue. IBISWorld estimates that increasing input costs have pushed up the price of accessories over the past five years; during tough economic times and low income, rising prices have not been met with high consumer demand. Overall, precious metal jewelry and accessories are expected to account for 46.7% of revenue, while jewelry made made of silver, semi-precious metals and gemstones such as pearls is execpted to account for 13.0%

Products & MarketsSupply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

42394 Jewelry & Watch Wholesaling in the US Jewelry and Watch wholesalers are a major customer for this industry, regarded as the major link between manufacturers and the retail market.

44831 Jewelry Stores in the US Jewelry Stores purchase a range of merchandise directly from manufacturers.

45211 Department Stores in the US Department stores purchase industry goods like fine jewelry, fashion jewelry and silverware from manufacturers.

KEY SELLING INDUSTRIES

21222 Gold & Silver Ore Mining in the US Operators in this industry provide gold and silver for the production of fine jewelry.

21223 Copper, Nickel, Lead & Zinc Mining in the US Operators in this industry provide non-precious metals for the production of fine jewelry.

21231 Stone Mining in the US Operators in this industry provide precious stores for jewelry production.

21239 Mineral & Phosphate Mining in the US Operators in this industry provide gems for jewelry production.

Supply Chain


Products & Markets

Products & Servicescontinued

of revenue, giving this category a combined share of 59.7%.

Jeweler’s materials and lapidary workThe jeweler’s materials and lapidary work segment primarily includes engraved or etched precious metal solids. Also included in this segment is lapidary work, which is the art of making jewelry out of cut or carved stones, such as diamonds, emeralds, rubies and other precious stones and gems. Lapidaries are considered artisans or gem cutters who create standard or custom jewelry pieces with motorized equipment. This segment also includes jewelers findings and materials, which primarily includes materials used in manufacturing jewelry and other gemstone findings, which are then cut, polished and encrusted onto precious metals for the manufacturing of jewelry items. This segment also includes plated metals and other materials plated by precious and semi-preciou metals. The proportion of revenue generated by this segment has decreased over the past five years because most of the lapidary work has moved offshore. Overall, IBISWorld estimates that lapidary work will comprise 8.0% of revenue while jewelers’ materials and findings will account for the remaining 5.7% of revenue, to give this segment a combined 13.7% share.

Costume and fashion jewelryThe value of costume and fashion jewelry has increased in comparison to precious jewels. Despite decreased disposable income, consumers have continued to spend on fashion and costume jewelry because they serve as an inexpensive alternative to fine jewelry. Costume jewelry is usually made with inexpensive gemstones that are set in nickel, brass or pewter (as opposed to silver, gold or platinum). As such, the volume of production of costume and fashion jewelry has increased significantly in the past five years. This segment is expected to account for 10.0% of total revenue in 2015.

OtherThis segment includes various miscellaneous product categories including silverware and hollowware made of precious and semi-precious metals, miscellaneous jewelry items and products not categorized in jeweler’s findings and materials. This segment is expected to account for 16.6% of revenue, with the silverware and hollowware segment contributing 0.7%. This segment’s share has increased over the past five years due to increased spending by high-income earners on miscellaneous and novelty jewelry items.

Products and services segmentation (2015)

Total $8.5bn

46.7%Precious metal jewelry and accessories made

from gold and platinum

16.6%Other

13.7%Jewelers' materials and lapidary

work manufacturing

13.0%Precious and semi-precious

metal jewelry excluding gold and platinum

10.0%Costume jewelry



Products & Markets

Major Markets ExportsExport figures counted by the US International Trade Commission account for 99.0% of industry revenue. Stone setting and assembling of small pieces is intricate work that requires high levels of labor. Manufacturers often send half-finished products to countries like Hong Kong and India, where the cost of labor is much lower than in the United States, to be fully finished. Final products are then imported back into the United States for sale to downstream markets domestically and internationally. Industry exports have remained high over the past five years due to a weak dollar; however, the dollar has regained a lot of its lost value recently and exports’ share of revenue is expected to decline over the next five years.

OtherThe Jewelry Manufacturing industry primarily serves the jewelry wholesaling industry in the domestic market, which is characterized by intense competition. Retailers are increasingly engaging in wholesale bypass, though, in order to score cost savings over the increasing prices of precious metals and stones. Producers, likewise, are incorporating much of the wholesaling activity within their own operations so they can earn a higher margin on their product by cutting out the middleman. Increased efficiency in transportation and computerized order systems have made this possible over the past 10 years. While the wholesale market has shrunk during the past five

Demand Determinants

The downstream demands of jewelry retailers and wholesalers are the main demand determinant of the Jewelry Manufacturing industry. This is because demand at the retail and wholesale level directly translates to demand for the industry operators; upstream retailers and wholesalers adjust their inventory purchases according to their performance. Jewelry retailers’ and wholesalers’ downstream demands are sensitive to the following: expenditure by households in the highest income quintile, consumer confidence, and household disposable income.

Most products offered in the industry are considered luxury items since they are traditionally expensive and are not staple goods. Consequently, the households in the highest income quintile, who are able to afford such luxury products, are the industry’s key consumers that determine demand. Although the expenditure by the highest income quintile has dropped during the recession, it is expected to reverse its downward course. This anticipated

increase in expenditure by the highest income quintile will in turn increase the demand for jewelry retailers, wholesalers and manufacturers.

The demand for the industry is also subject to the level of consumer confidence in the economy and household disposable income. The nonessential nature of the industry’s goods allows consumers to postpone their purchases of expensive items in uncertain economic times. This has been the case over the past five years, as Americans without jobs have been forced to cut down on their discretionary spending. As a result, the retail and wholesale demand for jewelry and watches have fallen significantly.

Because the Jewelry Manufacturing industry’s products are often given as gifts, demand for these products tends to be highest in the lead-up to special occasions, such as Christmas and Valentine’s Day. Additionally, national commemorative events and sporting events (e.g. the Olympics) can drive demand for collectable coins, medals and medallions.


Products & Markets

International Trade ImportsImports are expected to account for 99.8% of domestic demand in 2015. Over the past five years, imports have grown at an annualized rate of 2.8% to $39.6 billion. The United States imports most of its jewelry from India (26.1%), Israel (25.9%), China (11.1%) and Belgium (8.8%). Producers in Israel, India and China enjoy significant cost advantages over producers in the United States. That is because they industry operators in the aforementioned countries have access to low-cost labor and are much closer to some of the largest exporters of precious metals and gemstones. Consequently, they face lower freight costs and have to pay lower overheads. Belgium, on the other hand, is known for its high quality and rare diamonds. An appreciation of

the dollar has also encouraged imports. The trade-weighted index (TWI), which measures the value of the dollar against the United States’ major trading partners,

Major Marketscontinued

years, it is the dominant buyer for jewelry manufacturers.

Jewelers also sell their products to retailers. As input materials become more expensive, retailers choose to source directly from manufacturers in order to bypass the cost of incorporating a wholesaler. Jewelry manufacturers, thus, take on an increasing amount of

wholesaling activity within their regular operations and take on more retail outlets as buyers. While the retail sector has been struggling with intense competition over the past five years, it has been a growing market segment for the Jewelry Manufacturing industry. IBISWorld estimates retailers have increased as a market during the past five years.

Major market segmentation (2015)

Total $8.5bn99%

Exports

1%Other


Level & Trend Exports in the industry are High and Decreasing

Imports in the industry are High and Increasing

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Products & Markets

International Tradecontinued

has increased at an annualized rate of 3.7% over the past five years. However, that does not tell the whole story related to exchange rate dynamics and their consequences for industry revenue. For example, the Indian Rupee has depreciated 17.3% against the US dollar, between 2009 and 2014, making imports from India significantly less expensive for domestic consumers. Likewise, the Euro has depreciated 1.1% against the dollar, between 2009 and 2014, having a similar impact on the price of foreign goods for domestic consumers. Over the next five years, IBISWorld expects industry imports to follow a similar trend, increasing at an annualized rate of 4.1% to reach $48.4 billion by the end of 2020.

ExportsExports have emerged as an important market segment for this industry. The data sourced from the Annual Survey of Manufacturers (ASM) and the United States International Trade Commission

(USITC) indicates that export values exceeded industry revenue between 2010 and 2013. While a mathamtical anamoly, it may be so because of significant volatility in prices, which altered the final revenue received by traders from the time that it was recorded by USITC and ASM. Additionally, re-exporting of semi-finished and finished imported products to other countries could also be an explanation for why export values exceed industry revenue.

Nonetheless, according to IBISWorld analysis, industry exports have declined at an annualized rate of 2.0% over the past five years. Exports are expected to total $8.4 billion in 2014, accounting for 99.0% of industry revenue. Major export destinations for US manufacturers include Hong Kong (25.3%), Mexico (6.7%), Canada (6.4%) and Switzerland (4.9%). Other countries account for the remaining 56.7% of industry exports. US manufactured jewelry is in high demand on the international market because of

Imports From...

Total $39.6bn

8.8%Belgium

11.1%China

25.9%Israel

26.1%India

28.1%All others

Exports To...

Total $8.4bn

56.7%All others

25.3%Hong Kong

6.7%Mexico

6.4%Canada

4.9%Switzerland

Year: 2015SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC


Products & Markets

International Tradecontinued

premium brands like Tiffany’s, which command global recognition and respect because of their high-quality and appeal as a status symbol. Additionally, US manufactured fine jewelry gives customers the peace of mind because of the perceived surety that it is manufactured using conflict free raw materials and contains the stated amount

of precious metals, gem stones and other items of stated quality. The rise in the trade-weighted index over the past few years has harmed industry exports. IBISWorld expects this trend to continue as the dollar appreciates further over the next five years and anticipated that exports will account for 92.5% of revenue in 2020, down from 99.0% in 2015.


Products & Markets

Business Locations 2015

MO0.8

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Rocky Mountains Plains

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VT0.6

MA3.2

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DC0.1

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NV0.4

OR1.5

WA1.7

MT0.4

NE0.3

MN1.5

IA0.4

OH2.1 VA

1.3

FL4.5

KS0.3

CO2.3

UT1.2

ID0.5

TX4.9

OK0.2

NC1.5

AK0.2

WY0.0

TN0.7

KY0.3

GA0.9

IL2.7

ME0.8

ND0.0

WI1.1 MI

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NY24.9 5

67

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321

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Mid- Atlantic

Establishments (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

Great Lakes


Products & Markets

Business Locations According to data from the US Census Bureau’s County Business Patterns report, this industry’s most concentrated regions by number of establishments include the Mid-Atlantic, West and New England regions. Together, these areas account for 62.7% of total industry establishments. By locating in these regions, manufacturers are closer to the majority of their clients (wholesalers), reduce transportation costs, improve delivery times and service response rates. These regions are also closer to international trade ports, which play a vital role in this industry. The vast majority of jewelry items are exported and imported at least once during various stages of production. Manufacturers are also located in states that have the highest per capita income because people with high disposable incomes generally purchase more jewelry and silverware. New England, the West and the Mid-Atlantic are expected to be the regions with the highest median household incomes, parallel to the spread of industry establishments. Nonetheless, they are closely followed by the Southeast, Southwest and Great Lakes, which are expected to account for 10.9%, 10.3% and 8.0% of industry revenue, respectively.

The Mid-Atlantic regionThe Mid-Atlantic region accounts for an estimated 31.8% of all industry locations. The region dominates every product segment except costume jewelry and novelty manufacturing. The region’s dominance stems largely from New York, which is home to 24.9% of all US jewelry manufacturing locations. Industry leader Tiffany’s is based out of New York City and has several manufacturing facilities around the region.

The West regionNext, the West region accounts for an estimated 19.0% of all industry locations.

California (13.9% of all industry establishments) ranks second behind New York as the most densely concentrated state by share of industry establishments. Widespread access to ports along that state’s ample Pacific coastline helps it garner such a high share of industry activity. California leads the nation in its share of silverware and hollowware manufacturing.

The New England regionThe New England region accounts for an estimated 11.9% of all industry locations. The region dominates the costume jewelry and novelty product segment with almost one-quarter of all related locations. The region also ranks second by share of establishments for jewelers’ material and lapidary work manufacturing. Rhode Island registers 6.3% of industry establishments despite its small size (contains only 0.3% of the US population), due largely due Tiffany’s locating some of its manufacturing facilities in that state. Massachusetts also contributes to this region’s third-place ranking by share of establishments.

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EstablishmentsPopulation

Distribution of establishments vs. population



Key Success Factors Having an extensive distribution/collection networkEstablished links and contracts with retailers and distributors are an important factor in sales.

Access to niche marketsNiche markets can provide profit for the expertise in design skills that a company may have in a particular field.

Management of seasonal productionJewelry can be a seasonal purchase, so supply control over peak demand periods is vital for success.

Ability to pass on cost increasesPassing on price increases in the cost of raw materials to clients ensures profitability is maintained.

Effective quality controlQuality checks and standards for manufactured products protect the reputation of the company.

Access to highly skilled workforceA highly skilled workforce is essential to producing good designs that facilitate product differentiation and promote quality attributes.

Market Share Concentration

Market share refers to the percentage of single firm revenue derived from jewelry manufactured in the United States and excludes US revenue from jewelry produced in overseas factories. As such, IBISWorld estimates that Tiffany’s, the industry’s largest enterprise, accounts for about one-third of industry revenue, indicating a low level of industry concentration. The concentration level remains low as US firms divert manufacturing offshore and focus local operations on distribution and marketing.

The Jewelry Manufacturing industry is characterized by a large number of small operators. As a result of this low concentration, the industry is highly price

competitive, and local firms compete with low-priced Asian imports. According to data from the US Census Bureau’s Survey of US Businesses, small firms dominate this industry. Nearly 80.0% of operators employ fewer than 10 people, and only one employs more than 1,000. Market share concentration is forecast to increase as company numbers continue to dwindle due to external competition and ongoing consolidation. As weaker firms continue to struggle with overseas competition, rising input costs and the pricing power of the largest US companies, they will become acquisition targets for larger players looking to expand their geographical distribution and marketing capabilities.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Low

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:

Cost Structure Benchmarks

Costs presented in this discussion are industry averages. Cost structures vary widely among industry players depending on their size, production scales, access to production inputs, use of technology and capital investment. Large companies can vertically integrate, taking on more marketing and distribution activities. By expanding their economies of scope, these players can spread costs over a

larger base, reducing per unit costs. The following segmentations are based on data from the US Census Bureau’s 2013 Annual Survey of Manufacturers (ASM) and the 2012 US Census.

ProfitIBISWorld estimates that industry profit (defined as earnings before interest and taxes) accounts for nearly 4.8% of the


Competitive Landscape

Cost Structure Benchmarkscontinued

average jewelry manufacturer’s revenue. The industry is highly competitive with a high level of imports and low market concentration. As this industry has struggled with competition from low-priced imports, jewelers have been forced to mark down their prices, therefore receiving lower returns on their products. At the same time, the cost of gold has been rising an average of 0.2% per year during the past five years. The combination of high purchase costs mixed with downward pricing pressure has led firms to lay off employees to reduce wage costs and salvage profit. According to RMA data, the strategy has been effective, and profit has increased steadily since 2010.

PurchasesAbout half (48.9%) of an average firm’s revenue, purchases consistently form the largest industry expense. Purchases

include precious metals and stones such as platinum, gold, diamonds and pearls. The skyrocketing price of gold has negatively affected the industry. Due to already declining downstream demand, manufacturers have found it difficult to pass on cost increases to downstream industries (e.g. jewelry wholesalers and retailers). Meanwhile, cheaper imports have increased price-based competition and sent more poorly performing firms out of business.

WagesWages and salaries have consistently declined as a share of an average jewelry manufacturer’s cost structure during the past five years. Jewelry manufacturing is a labor-intensive industry due to its high-skilled nature. High wage costs result from the experience in designing and manufacturing jewelry required by employees, as there are a limited number

Sector vs. Industry Costs

n Profi tn Wagesn Purchasesn Depreciationn Marketingn Rent & Utilitiesn Other

Average Costs of all Industries in sector (2015)

Industry Costs (2015)

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7.0 4.8

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48.9

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2.8 1.02.5

56.6

10.8



Basis of Competition The Jewelry Manufacturing industry is a highly competitive industry due to the low barriers to entry and large number of firms competing with each other. Firms within this industry spend large sums on advertising and store displays to differentiate themselves from their competitors. According to its latest annual report, major player Tiffany & Co. spent $247.4 million on advertising in 2013, representing nearly 6.1% of net sales. There is little product differentiation between firms in the industry. Competition within the industry is increasing as the industry faces tougher competition from the overseas imports.

Internal competitionThe Jewelry Manufacturing industry is highly price competitive because the industry’s products are homogenous and

major clientele demographics are similar. Price influences the competitive position of US manufacturers relative to imports. Machinery can assist in reducing costs and end-product prices, while the industry has also increasingly moved manufacturing offshore to take advantage of lower labor costs. High precious metal and stone prices have reduced manufacturers’ margins and have led to price increases. To counter the price rises, manufacturers hedge their supplies to limit the risk.

A recognizable name such as Tiffany & Co. is important in an industry dominated by products embodying an exclusivity that may be denoted by brand. Brand recognition can be achieved through the provision of quality products over time and exclusive advertising exposure. Promotion enhances the ability

Level & Trend Competition in this industry is High and the trend is Steady

of jewelers with the appropriate experience. Also, the delicate nature and labor-intensiveness of assembling gemstones and diamonds contributes to high wage costs. As mentioned, operators have sought to reduce wages costs in light of soaring purchase costs, heightened import competition and weak downstream demand. Wages are expected to fall at an annualized rate of 1.8% and total an estimated $1.1 billion during the five years to 2015.

Depreciation, rent, utilities, marketing and other costsDepreciation is consistently a small part of industry costs compared to labor. Depreciation costs invariably fluctuate among operators depending on their size and number of assets involved. Depreciable assets include buildings, storage equipment, machinery for producing jewelry and computer systems. Next, creating a brand is an important part of running a successful

business for operators within this industry. As competition intensifies along with the growing value of imports, advertising will become increasingly important and will likely grow as an expense. According to Tiffany & Co.’s annual report, “A significant amount of advertising is required to both reinforce the Brand’s association with luxury, sophistication, style and romance, as well as to market specific products”. Tiffany spent 6.1% of the company’s total revenue on advertising, however, the average amount spent on advertising for the industry is 1.1% Rent and utilities costs have fluctuated between 1.5% and 1.8% of the average firm’s revenue during the past five years and is expected to account for 1.7% in 2015. Lastly, Other costs relate to general administration expenses such as communications, insurance, freight, legal and security services and employee fringe benefits. Cumulatively, they are expected to account for 29.9% of industry revenue.

Cost Structure Benchmarkscontinued



Barriers to Entry The level of product differentiation between players in this industry varies. Larger players benefit from their economies of scale and are able to offer consumers a broader range of merchandise. High technical skills are required to provide differentiated products. The preexistence of distribution networks between operators and suppliers may in some cases be viewed as a barrier to entry. Existing operators benefit from the relationships they have built with suppliers over a period of time. Therefore, establishing sales and distribution channels and relationships with new customers is essential. Some manufacturers have established their own retail outlets, including duty-free stores.

Likewise, some manufacturers benefit from contractual arrangements with primary source suppliers, which can create a barrier to entry for potential firms. Manufacturers are

increasingly hedging their purchases because of the volatility in precious metal and stone prices. Also, certain trademarks and copyrights can exist, which cover the design of certain products. Establishing a brand that generates repeat purchases can be very expensive. Many companies in this industry have spent considerable money on establishing their name. A well-known brand can maintain high margins and be more profitable for a company.

Basis of Competitioncontinued

of retailers to compete against other industry participants.

Jewelry manufacturers compete with each other on the basis of product differentiation. They aim to carry a minimum quantity of the broadest possible product range. Manufacturers attain a competitive advantage through their ability to supply a broad range of products. This not only satisfies most consumer tastes but also appeals to a wide income-earning spectrum and is an important basis on which to compete within this industry.

External competitionCompetition from imports is very high. Imports account for the bulk of domestic demand. Major producers in countries

like Israel, China and India are steadily replacing domestic production. These countries have low labor costs that reduce the overall price of jewelry pieces. High levels of imports result in higher competition and, therefore, lower profit margins for manufacturers. Additionally, competition from internet retailers puts price pressures on manufacturers. These outlets often offer wholesaler prices directly to consumers. The ease of access and attractive price points make internet retailers a threat to the traditional jewelry supply chain. While this threat is still relatively small, it has increased significantly over the past five years and will continue to put revenue and profit constraints on industry participants.

Barriers to Entry checklist

Competition HighConcentration LowLife Cycle Stage DeclineCapital Intensity LowTechnology Change MediumRegulation & Policy MediumIndustry Assistance Low


Level & Trend Barriers to Entry in this industry are Medium and Steady



Industry Globalization

The Jewelry Manufacturing industry has a high level of globalization due to increasing import penetration and the rising importance of exports. This trend is expected to continue with further rise in international trade. Imports account for 99.8% of domestic demand for the industry. Additionally, exports have increased significantly over the past five years because of international demand for American-made luxury items. Major operator Tiffany & Co. earns the majority of its revenue outside the United States.

Low labor costs overseas make outsourcing production attractive to domestic firms. Outsourcing and offshoring are expected to continue over the next five years, while large vertically integrated jewelers continue to cut costs and focus on high-value activities domestically. Because of this factor, jewelry manufacturing is a highly globalized industry with raw materials converted into items that are exported internationally. Most large operators in this industry have subsidiaries in foreign markets. These subsidiaries are manufacturing plants and sales offices.


Trade Globalization Going Global: Jewelry Manufacturing 2005-2015

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Imports/Domestic Demand Imports/Domestic Demand0 040 4080 80120 120160 160

International trade is a major determinant of an industry’s level of globalization.Exports offer growth opportunities for fi rms. However there are legal, economic and political risks associated with dealing in foreign countries.Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local fi rms would otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocal


2005

2015

Level & Trend Globalization in this industry is High and the trend is Increasing


Player Performance Tiffany & Co. was established in 1837 by Charles Lewis Tiffany and is a manufacturer and retailer of fine jewelry, including diamonds, timepieces and silver products. The company prides itself on its sophisticated brand image, which it created through excellent customer service and elegant store environments. The company currently operates 79 US retail stores and also has operations throughout the Americas, Asia and Europe. It employs a total of 12,000 workers worldwide, 5,700 of which are employed in the United States. Tiffany & Co.’s headquarters is located in New York City. The company’s extensive online store also reaches customers worldwide.

Tiffany participates in this industry through its three company-owned manufacturing facilities in Cumberland, RI; Mount Vernon, NY; and Lexington, KY. The company also operates one leased plant in Pelham, NY. Goods

manufactured in these plants account for about 60.0% of the company’s jewelry currently sold. The remaining manufacturing activities are outsourced to trusted third parties, which allows Tiffany to reduce the cost of capital investments. The company’s annual report indicates that the company may increase the percentage of internally manufactured jewelry in the future, with considerations to product quality, gross margins and access to jewelry-making skills and technology.

Financial performanceIn the five years to fiscal 2016 (year-end January), IBISWorld expects Tiffany’s industry-relevant revenue to increase at an annualized rate of 8.3% to $2.4 billion. Supported by a rebounding economy and increasing demand for fine jewelry, especially from consumers in the highest income quintile, the company recorded

Major CompaniesTiffany & Co. | Other Companies

71.4%Other

Tiffany & Co. 28.6% SOURCE: WWW.IBISWORLD.COM

Major players(Market share)

Tiffany & Co. (US manufacturing) - fi nancial performance*

Year**Revenue

($ million) (% change)Operating Income

($ million) (% change)

2010-11 1,625.8 N/C 267.0 N/C

2011-12 1,851.2 13.9 361.1 35.2

2012-13 2,276.5 23.0 418.3 15.8

2013-14 2,418.7 6.2 182.6 -56.3

2014-15 2,549.9 5.4 536.7 193.9

2015-16 2,424.7 -4.9 434.9 -19.0

*Estimates; **Year-end January SOURCE: ANNUAL REPORT AND IBISWORLD

Tiffany & Co. Market share: 28.6%


Major Companies

Other Companies Aside from Tiffany & Co.’s 28.6% share of the Jewelry Manufacturing industry, a large number of small operators constitute the remaining amount. In fact, IBISWorld estimates that there are currently 2,215 jewelry manufacturers operating in the United States, of which more than half are small businesses with four or fewer employees that cater to local demand. Furthermore, only 5.0% of total industry operators are estimated to have more than 50 workers. Large retail jewelers, such as Blue Nile, Signet Jewelers (brand names include Kay and Jared) and Zale Corporation (brand names include Zale’s and Gordon’s), do not manufacture a majority of the merchandise sold. It is important to note that these corporations purchase a majority of their goods in finished form from a network of trusted manufacturers who are mostly located in India, Southeast Asia and Italy.

Jostens Estimated market share: 3.5%Owned by a string of holding companies, Jostens operates in the industry through its manufacture of class rings and jewelry products. Founded in 1897 and based out of Bloomington, MN, the company operates 13 retail locations across the United States. The company purchases substantially all precious, semiprecious and synthetic stones from a single supplier located in Germany. Producing

class rings often involves a high degree of customization, so the company maintains product-specific tooling and a library of school logos and mascots that can be used repeatedly for specific school accounts over time. In addition to its class ring offerings, Jostens designs, manufactures, markets and sells championship rings for professional sports and affinity rings for specialty markets. In 2015, Jostens’ industry-specific revenue is expected to total an estimated $296.6 million, giving it a market share of 3.5%.

The Richline Group Estimated market share: N/AThe Richline Group, formed in 2007 from the merger of Bel-Oro International and Aurafin LLC, is a leading manufacturer and importer of fine and gold jewelry in the United States. Headquartered in Mt. Vernon, NY, the company manufactures and distributes necklaces, bracelets, earrings, charms, pendants and rings under various brand names: Alarama, Andin, Aurafin, AuraGem, Bel-Oro, Michael Anthony, Sadelli and Tru-Kay. Goods are then sold to wholesalers and retailers, such as independent and guild jewelers, department stores, TV and electronic shopping networks and mass merchandisers.

Since Berkshire Hathaway owns the company, financial data is limited. However, IBISWorld estimates that the

Player Performancecontinued

strong growth in fiscal 2011 and 2012. However, the high-end jeweler grappled with weak demand during the recession. With low confidence in the economy and reduced disposable income, many consumers refrained from making luxury purchases. Since Tiffany’s manufacturing activity is directly linked to retail sales, the decline in consumer demand led to a decline in the company’s domestic

production levels. Falling sales volumes negatively impacted advantages the company gained through large economies of scale during the recession, which meant lower fixed costs per unit of merchandise. Currently, per-unit fixed costs are higher and have led to volatile profit margins, even though overall profitability has been on an upward trajectory since 2010.


Major Companies

Other Companiescontinued

company has experienced strong revenue growth over the past five years through numerous acquisitions. In 2011 alone, the Richline Group acquired Italian jeweler

Rosato and Canadian jeweler Finecraft Fine Jewellery of Toronto. In 2015, the company is estimated to generate roughly $72.1 million in consolidated revenue.


Capital Intensity IBISWorld analysis reveals that the Jewelry Manufacturing industry exhibits a low level of capital intensity, which reflects the importance of manual labor over the need for automation machinery. For every dollar spent on wages, industry operators spend $0.08 cents in capital investment. The industry requires craftsmen, laborers and apprentices for the assembly and design of jewelry. A skilled workforce is required to perform time-consuming, labor-intensive activities, such as the intricate assembly of jewelry. The Jewelry Manufacturing industry also consists of many small- to medium-size firms that cater to specific client needs. These privately owned small businesses are often more labor intensive, allowing

them to be flexible in serving client needs. At the same time, the industry strives to implement technology that

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


Labo

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veCapital Intensive

Change in Share of the Economy

New Age Economy

Recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional Service Economy

Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old Economy

Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment Economy

Information, Communications, Mining, Finance and Real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Leather Good & Luggage Manufacturing

Jewelry & Watch Wholesaling

Gold & Silver Ore Mining

Mineral Product ManufacturingJewelry Stores


Capital intensity

0.5

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SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit


ManufacturingEconomy

Level The level of capital intensity is Low


Operating Conditions

Revenue Volatility The volatility score is calculated as the average of the absolute differences in the year-on-year revenue growth rate. The Jewelry Manufacturing industry is sensitive to changes in consumer jewelry purchasing patterns and household expenditure. The US economy experienced a long period of

expansion until the recent recession in 2008 and 2009. Revenue is also sensitive to the price of inputs, but this factor is weathered by the increasing level of production outsourcing and cost-cutting strategies in other areas such as wages. Revenue within the past five years has fallen by as much as 9.7%

Technology & Systems In this industry new technologies are applied in developing new products and new systems to manufacture products. New technologies can render existing products obsolete in a short period of time. For example, advances in computer-aided design (CAD) and computer-aided machining (CAM) have enabled jewelry designers to develop new products by reducing material waste and speeding up the design process. This technology gives manufacturers a large competitive advantage over others who do not use it.

Since its inception in the 1980s, CAD has become more user friendly and artisan intuitive. Similarly, small-shop, multi-axis CAM systems allow more jewelers to experience the technology’s potential and create innovative, contemporary designs. Jewelers utilizing CAD and CAM can make it easier, faster, and more efficient than without. CAD software prices have come down over the years to the point where the investment warrants only slight consideration. Prices range from about $850 for an entry-level program to more than $7,000 for a system that combines software with subscription-based services such as tech support, training, and regular upgrades.

Manufacturers are increasingly using computer-aided design to develop new product innovations and modifications. They use computerized information systems to service customers, process orders, and control inventory. Electronic data interchange (EDI) is also used to service customers. In the past, shipments to stores were made in several bulk shipments prior to the main selling seasons, and during the selling seasons a number of small fill-in shipments were made. With EDI, however, companies now make smaller bulk shipments just prior to the primary selling seasons and many subsequent fill-in shipments during these seasons.

The types of materials used as inputs to the manufacturing process are also changing. For example, natural diamonds can undergo a process to improve the color of the diamond without reducing its all-natural content. The process is permanent and irreversible and it does not involve treatments such as irradiation, laser drilling, surface coating or fracture filling. Colored stones are increasingly being made using artificial processes. These synthetic stones are reducing material costs and providing consumers with high quality jewelry at affordable prices.

Capital Intensitycontinued

reduces labor costs, which will increase capital intensity. As employment levels fall and wages are reduced accordingly,

capital intensity will likely rise as more machinery is put in place to offset reduced employee head counts.

Level The level of Technology Change is Medium

Level The level of Volatility is Medium



Regulation & Policy Companies are subject to federal, state and local environmental, health and safety laws and regulations that impose workplace standards and limitations on the discharge of pollutants into the environment. Laws are established to regulate standards for the handling, generation, emission, release, discharge, treatment, storage and disposal of certain materials, substances and wastes. Facilities in this industry are subject to extensive environmental legislation and regulations affecting the discharge of waste.

Financial Crimes Enforcements Network (FinCEN) enforces the industry to comply with the money laundering activities. This includes incorporating policies, procedures, and internal controls based upon the assessment of the money laundering and terrorist financing risks associated with line of business, designation of a compliance officer, providing on-going education and training of personnel and

independent testing to monitor and maintain an adequate program. Apart from this, the Clean Diamond Trade Act is designed to prohibit the import of “conflict diamonds”, those that are mined in African nations that help to fund human rights abuses. This legislation was passed in Congress on April 10, 2003.

Companies within this industry group are required to comply with environmental laws and regulations, such as The Clean Air Act. The US Nuclear Regulatory Commission has established regulations governing the operation of nuclear reactors and the storage of radioactive material. This is because nuclear reactors are used to irradiate clear topaz stones. Imports into the United States are affected by import duties, quotas and tariffs and are collected by the US Customs Service. Companies are also subject to occupational health and safety, wage, overtime and other employment laws.

Revenue Volatilitycontinued

in 2012 but has also increased by 17.3% in 2010. Because of this, IBISWorld analysis reveals the industry exhibits a moderate to high level of volatility, with

losses during and after the recessionary period mostly offset by subsequent gains as the economic conditions started improving.


Volatility vs Growth

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A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.


Level & Trend The level of Regulation is Medium and the trend is Steady



Industry Assistance The rates for key tariffs refer to the 2008 NTR rate, i.e. the normal trade-relations rate. It is worth noting that rates may differ greatly once trade is categorized by a non-NTR nation. Rates range from 0.0% to 10.5% of the value of the piece.

A number of associations and groups assist and support operators within this industry. Manufacturing Jewelers and Suppliers of America, Inc (MJSA) represents the interests of those who are connected to the manufacturing or sale of jewelry. MJSA lobbies the government on behalf of members as well as keeps members informed and conducts training. The Gemological Institute of America (GIA) was established in 1931 and is a nonprofit institute of gemological research and

learning. GIA is also the creator of the 4Cs of diamond value (color, clarity, cut and carat weight). A number of informational resources, such as Ganoskin, are also available to jewelers.

Other associations in the jewelry industry include the American Gem Society, American Gem Trade Association, Jewelers of America, The Jewelers Board of Trade, Jewelry Design Professionals’ Network, Jewelry Information Center and the Jeweler’s Security Alliance. The Jewelers Vigilance Committee, Society of American Silversmiths, Society of North American Goldsmiths, Women’s Jewelry Association and World Jewelry Confederation (CIBJO) are also relevant industry associations.

Level & Trend The level of Industry Assistance is Low and the trend is Steady


Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments Enterprises EmploymentExports

($m)Imports

($m)Wages ($m)

Domestic Demand

World price of gold per troy ounce

($)2006 11,394.5 2,243.6 2,773 2,747 39,739 9,736.2 36,422.5 1,653.5 38,080.8 604.72007 11,045.2 2,137.7 2,695 2,672 37,373 11,839.5 37,641.1 1,571.5 36,846.8 696.92008 9,913.6 1,853.8 2,501 2,484 32,437 12,579.4 36,382.3 1,378.0 33,716.5 872.52009 7,820.7 1,478.9 2,400 2,382 27,829 7,753.8 26,197.9 1,142.6 26,264.8 972.12010 9,173.0 1,695.1 2,266 2,252 26,045 9,296.6 34,459.5 1,172.2 34,335.9 1,225.52011 9,004.2 1,635.0 2,198 2,184 25,843 10,129.5 39,869.3 1,148.8 38,744.0 1,569.62012 8,126.1 1,551.1 2,119 2,108 24,436 9,747.7 36,213.8 1,128.5 34,592.2 1,668.52013 8,333.4 1,587.5 2,134 2,122 25,010 8,629.2 40,570.9 1,129.2 40,275.1 1,410.82014 8,550.9 1,607.7 2,253 2,239 26,655 8,465.4 40,703.7 1,118.5 40,789.2 1,266.32015 8,474.0 1,563.1 2,229 2,215 26,027 8,389.3 39,581.3 1,070.8 39,666.0 1,240.12016 8,147.5 1,562.0 2,150 2,138 25,063 8,095.6 39,940.1 1,064.9 39,992.0 1,270.12017 8,311.1 1,561.7 2,168 2,155 25,318 7,877.5 42,177.5 1,074.5 42,611.1 1,320.22018 8,703.9 1,548.3 2,284 2,269 26,986 7,801.7 44,420.8 1,072.0 45,323.0 1,330.22019 8,908.3 1,547.3 2,342 2,326 27,750 8,053.7 46,647.0 1,079.2 47,501.6 1,340.32020 8,946.7 1,547.4 2,350 2,334 27,906 8,276.0 48,395.4 1,081.8 49,066.1 1,349.6Sector Rank 157/407 177/407 55/407 52/407 133/407 38/375 13/375 157/407 56/375 N/AEconomy Rank 693/1370 823/1370 715/1370 636/1370 749/1370 46/430 15/430 773/1370 64/430 N/A

IVA/Revenue (%)

Imports/Demand

(%)

Exports/Revenue

(%)

Revenue per Employee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2006 19.69 95.65 85.45 286.73 14.51 14.33 41,609.00 0.022007 19.35 102.16 107.19 295.54 14.23 13.87 42,049.07 0.012008 18.70 107.91 126.89 305.63 13.90 12.97 42,482.35 0.012009 18.91 99.75 99.14 281.03 14.61 11.60 41,057.89 0.012010 18.48 100.36 101.35 352.20 12.78 11.49 45,006.72 0.012011 18.16 102.90 112.50 348.42 12.76 11.76 44,453.04 0.012012 19.09 104.69 119.96 332.55 13.89 11.53 46,181.86 0.012013 19.05 100.73 103.55 333.20 13.55 11.72 45,149.94 0.012014 18.80 99.79 99.00 320.80 13.08 11.83 41,962.11 0.012015 18.45 99.79 99.00 325.58 12.64 11.68 41,141.89 0.012016 19.17 99.87 99.36 325.08 13.07 11.66 42,488.93 0.012017 18.79 98.98 94.78 328.27 12.93 11.68 42,440.16 0.012018 17.79 98.01 89.63 322.53 12.32 11.82 39,724.30 0.012019 17.37 98.20 90.41 321.02 12.11 11.85 38,890.09 0.012020 17.30 98.63 92.50 320.60 12.09 11.87 38,765.86 0.01Sector Rank 315/407 4/375 4/375 264/407 232/407 368/407 339/407 177/407Economy Rank 1099/1370 4/430 4/430 566/1370 939/1370 730/1370 877/1370 823/1370

Figures are in inflation-adjusted 2015 dollars. Rank refers to 2015 data.

Revenue (%)

Industry Value Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

Domestic Demand

(%)

World price of gold per troy ounce

(%)2007 -3.1 -4.7 -2.8 -2.7 -6.0 21.6 3.3 -5.0 -3.2 15.22008 -10.2 -13.3 -7.2 -7.0 -13.2 6.2 -3.3 -12.3 -8.5 25.22009 -21.1 -20.2 -4.0 -4.1 -14.2 -38.4 -28.0 -17.1 -22.1 11.42010 17.3 14.6 -5.6 -5.5 -6.4 19.9 31.5 2.6 30.7 26.12011 -1.8 -3.5 -3.0 -3.0 -0.8 9.0 15.7 -2.0 12.8 28.12012 -9.8 -5.1 -3.6 -3.5 -5.4 -3.8 -9.2 -1.8 -10.7 6.32013 2.6 2.3 0.7 0.7 2.3 -11.5 12.0 0.1 16.4 -15.42014 2.6 1.3 5.6 5.5 6.6 -1.9 0.3 -0.9 1.3 -10.22015 -0.9 -2.8 -1.1 -1.1 -2.4 -0.9 -2.8 -4.3 -2.8 -2.12016 -3.9 -0.1 -3.5 -3.5 -3.7 -3.5 0.9 -0.6 0.8 2.42017 2.0 0.0 0.8 0.8 1.0 -2.7 5.6 0.9 6.5 3.92018 4.7 -0.9 5.4 5.3 6.6 -1.0 5.3 -0.2 6.4 0.82019 2.3 -0.1 2.5 2.5 2.8 3.2 5.0 0.7 4.8 0.82020 0.4 0.0 0.3 0.3 0.6 2.8 3.7 0.2 3.3 0.7Sector Rank 339/407 362/407 323/407 324/407 367/407 254/375 336/375 384/407 346/375 N/AEconomy Rank 1196/1370 1243/1370 1154/1370 1137/1370 1269/1370 293/430 380/430 1304/1370 390/430 N/A

Annual Change

Key Ratios

Industry Data



Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

Industry Jargon

IBISWorld Glossary

ALLOY A mixture containing two or more elements that dissolve into each other when molten.

BRIDAL SETS A set of rings that includes an engagement ring and a matching wedding ring or band.

COSTUME JEWELRY Jewelry that is made of less precious stones and metals, therefore having a lower price point.

LAPIDARY A precious metal worker whose skills involve cutting and engraving; also, any work involving precious metal cutting or engraving.


Jargon & Glossary

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

IBISWorld Glossary continued

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33991 Jewelry Manufacturing in the US Industry Report

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Transcript of 33991 Jewelry Manufacturing in the US Industry Report