By Hedda T. Schupak
Fine jewelry is one of the few retail categories still dominated by independent multigenerational stores. There are nearly 21,300 specialty jewelers in North America. Many are third-, fourth-, and even fifth- and sixth-generation businesses.
But that is changing. In 2014, 612 retail jewelry stores went out of business; in 2015, 760 closed; and by mid-December 2016, 981 more had shuttered, says the Jewelers' Board of Trade, the industry's Warwick, R.I.-based credit bureau. Of those 981, only 16 went bankrupt. Seventy were sold or merged; the rest just bid customers farewell and, with varying degrees of fanfare, went away.
It's not that people aren't buying jewelry: Total U.S. jewelry and watch sales were more than $75 billion in 2015, and early reports suggest the 2016 figure will exceed $80 billion. Nor is the Internet putting brick-and-mortar stores out of business. Only about 6% to 7% of total industry sales are made online, says Edahn Golan, a jewelry industry research analyst.
What's happening to America's jewelry stores?
In a word, demographics. The jewelry industry is getting old. Industry experts estimate the average age of jewelry store owners in the United States at 58. Many store owners either don't have children or have children who don't want to operate the family business.
"The kids have watched the parents work a minimum of six days a week, morning to night, with little or no time off, and they see what their folks have given up for it," says Jeff Gordon, principal of The Gordon Co., a Florida-based financial and liquidation consultant. Millennials typically have different goals and want a more balanced life, so unless they're already entrenched in the business and love it, they're not going to take over the family store, he says.
Although jewelers get to share in the happiest moments of their customers' lives, that's not enough to keep stores from closing. While not decimated by category-killers the way independent hardware stores were, or by Amazon (yet), the jewelry industry is changing. The Baby Boom generation is aging out of the market and Millennials don't yet have the disposable income to fill the void.
Despite low online sales penetration, targeting Millennials still means being digitally savvy and merchandising differently—adding more designer brands and selling a greater volume of lower-priced goods—things many older jewelers just don't want to do.
"I don't blame them," says Michelle Graff, editor-in-chief of National Jeweler, an industry trade publication. "If you're in your mid-50s or 60s and staring down the last five or 10 years of a long career, would you be willing to put in the time and energy to completely change your business if you had the means to retire? I wouldn't." Mature store owners don't have decades to recoup the losses of a major misstep, either, she points out.
Also, American culture has become more casual. That means relatively few people—even people who can afford expensive products—are wearing lavish jewelry today. Dorfman, a tony store in Boston, was renowned for the kind of ultra-high-end jewelry seen on the red carpet at Hollywood premieres or at galas like the Metropolitan Museum of Art Ball in New York City. But outside New York, today most women go to charity balls dressed more like the museum curator than a Hollywood starlet, says third-generation jeweler Jonathan Dorfman.
Jonathan and his brother, Douglas Dorfman, founded and still run Connoisseurs, a manufacturer of consumer jewelry-care products. With their own successful business—a global leader in its category—neither planned on taking over the luxury jewelry store their grandfather founded, but they stepped in when their father got sick. The brothers closed Dorfman in early 2015, barely a year after an extensive remodel.
Most Boomer-age jewelers just want to retire, even if it means closing a highly successful store. Selling it, even to other jewelers, rarely is an option, says Gordon. "Unless [the buyer] has cash to purchase a successful store and its inventory, I know of no banks willing to enter the retail jewelry business without a strong guarantee against assets beyond the jewelry business," he says.
Hedda T. Schupak is a business writer and jewelry industry editor and analyst.
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