Wed, 01 November 2023
The region’s largest jewellery and watch event, Jewellery Arabia 2023, will be taking place from November 14 to November 18. With this in mind, business expert, Pria Masson, delves into the business of jewellery, watches and wearables.
Beauty is in the eyes of the beholder. Value is in the eyes of the purchaser. Margins and good business, that’s in the hands of the entrepreneur. However, margins are a function of basic economics i.e. demand for the product at a certain price. How high that price can go, usually depends on whether it’s a want, a need, or a desire. Usually, when its desire, volumes are not very high but those that want it, are willing to pay a high margin for it. Jewellery, in almost all its forms, falls under just this very lucrative niche. Lucrative, if the cards are all played right. Let’s dive in.
What does the market look like?
As per Statista, the global jewellery and luxury watch market was worth over USD80 billion in 2022. The space includes watches and gold and diamond jewellery. In the GCC, the total revenue for 2023 is expected to be approximately USD3 billion dollars . As I always say, revenue is not the same as profits. However, in terms of margins, most jewellery, and luxury watch and wearables, will make a large margin on a unit basis – usually north of 40 percent. An established brand or higher luxury offering will allow for higher margins. So, why is it that more people do not get into this space?
The logistics and execution – not so simple
The first challenge is that the core raw material, precious metals like gold, platinum, gemstones, etc; are expensive and difficult to source at a suitable price. This means, large upfront investments. The second challenge is expertise. Jewellery making is a specialised skill and intricate work. Hand crafted work is high in demand. Machine made jewellery has a large market space but, the machines are of course expensive. Manpower is the most precious asset, and it comes at a price. Add to it inventory issues, because of no guarantee of sales, high marketing, and branding costs and of course, finding a niche market. The niche market makes marketing complicated. Jewellery is personal and preferences differ across geographies, cultures, and income levels. Figuring out who your actual audience is critical – and challenging.
What about market types and audience?
The market is very diverse. Machine-made costume jewellery is at the lower end of price points. Next comes handcrafted not very pure precious metals followed by pure precious metals and gemstones. Combinations on 18k gold with gemstones and similar combinations are also a very growing trend. International brands like Roberto Coin, Hublot, Tiffany & Co., Van Cleef & Arpels, Damas or Chopard and De Beers; most global jewellery and wearable brands are present in Bahrain. The lower prices due to tax implications and sourcing methods make the GCC an attractive jewellery market for retail. Niche products within the luxury wearables space are also gaining traction in the region. Bahrain owned Qannati for instance makes high end luxury, theme-based, customised watches and wearables. In jewellery, Tiny Om which is an established brand locally and new brands like Kyan Jewellery which make customised earthy jewellery, all seem to have found their footing.
Is it a crowded supply market?
Bahrain jewellers source their products mainly from India, France and Spain. These products are then either worked on or rebranded or sold as brands themselves depending on the underlying arrangements. The number of personalised, custom-made jewellery providers is also gaining an audience. Online channels to sell jewellery has meant that costs have become easier to manage. However, the market is very competitive and finding a dedicated audience to showcase the products is the biggest challenge. Exhibitions and regional promotional events like Jewellery Arabia become a relatively easy and essential way to reach an audience in order to raise awareness of the products and services.
How does all this tie up?
It ties up quite beautifully into a market that has a certain extent of price inelasticity. What that means is, at the higher end of luxury, demand justifies the costs of production. As we move lower on the price range, volumes start to play a larger role in profitability. Demand comes from having high levels of disposable income, a demand for personal care and beauty and an intangible element of “how it makes you feel”. The last bit is what changes the game. If a product makes you feel beautiful or wealthy, if it speaks to the people around you, that creates a sticky customer. Sticky customers are great for volume. And steady business is always good business.
Pria is the Founder of GMI Advisory WLL– a Management Consultancy that helps companies with idea assessments, feasibility studies, strategy, business plans, presentations and preparing for investors. You can visit her company website gmiadvisory.com/ to connect with her. You can follow Pria at her Instagram handle