Last year was tough for the world’s luxury groups. China’s clampdown on corporate gift-giving, political unrest in Hong Kong, the west’s friction with Russia and the effects of falling oil prices on the Russian and Middle East economies took their tolls on sales and profits.
But one category of luxury has withstood the upheavals better than many others: fine jewellery.
Over the past 12 months, sales by the leading groups have grown in the high single digits - compared with low single-digit growth in the luxury watch market.
“High-end jewellery has captured the imagination of luxury goods clients,” says Jon Cox at Kepler Cheuvreux in Zurich. “The overall demand dynamics are quite positive.”
Central to this performance is China, which, together with Hong Kong, Macau and other places where Chinese consumers buy luxury items, is estimated to account for as much as 40% of global sales, says Mr Cox.
He believes that jewellery has largely avoided Beijing’s clampdown on corporate gifts because it is more discreet than wristwatches when worn, and is less recognisable as being from a well-known brand.
“When you wear a Patek Philippe, everyone knows how much it costs but it is much harder to know with high-end jewellery,” says Mr Cox.
“You could be wearing an expensive item by Cartier or Tiffany, but not everyone will discern it from an artisanal piece.”
Luca Solca, luxury analyst at Exane BNP Paribas, says that one of the potential upsides of the jewellery sector is that it is still relatively “unbranded”, with big-name producers accounting for about 20% of total sales.
In addition, the big three groups – Paris-based LVMH, Switzerland-based Richemont and US-based Tiffany & Co. – account for about two-thirds of that branded market, he says.
“It’s an oligopoly,” says Mr Solca. “That allows you to have attractive economics as well as your own stores, which makes distribution quite simple.”
Contrast that with the high-end luxury fashion market, about 70% of which is already branded and where producers rely for much of their sales on multi-brand stores, which makes distribution more challenging.
Fine jewellery has even begun to attract clients for its long-term investment value. Over the past year auction houses have seen some older pieces selling for more than new jewellery.
“People know fine jewellery is a good diversification of assets,” says Philippe Léopold-Metzger, chief executive of Richemont’s Piaget. “The products are interesting and beautiful, and there is an investment value attached.”
Boucheron, which is part of the Paris-based Kering group, says the tougher economic climate globally has made high-end clients place increasing value in the top brands. “Authentic houses [brands] and creations are perceived as safe investments,” it says.
Russians have shown increased appetite for fine jewellery over the past year, during which the rouble lost about 40% of its value against the euro.
Mr Léopold-Metzger says Piaget’s recent push into the fine-jewellery market was designed to take advantage of potential – but also of the brand’s existing expertise in fine watches.
“We are still pretty new to this area, but we were already known as the jeweller of watchmaking so it was a natural step.”
He says Piaget is expanding its 30-person facility in Geneva and is opening larger stores, such as a 500 sq m location in Paris, to give more visibility to its jewellery line.
Mr Solca says the challenge for the world’s leading brands is to build their image as producers of fine jewellery, while maintaining a range that includes items accessible to less affluent customers. “You need to have advertising to build brand image. But the bread and butter will always be the normal consumer,” he says.
Cartier, for example, focuses its advertising on its most expensive pieces. Walk into a store, however, and there are plenty of items on offer for about €500. When it comes to sales, however, few people doubt the momentum will continue to come from Chinese consumers – whether at home or as tourists abroad.
“Local retailers are taking care of the lower price points,” says Mr Luca. “But when you look at the high end, the big international brands dominate.”
Copyright The Financial Times Limited 2015