GOLD JEWELRY REACHES NEW HIGH

Prospects never looked brighter for your gold jewelry business, based on a recent World Gold Council report that shows 18 consecutive quarters of sales growth. In fact, gold jewelry sales rose 10% in both dollar and unit volume in the first quarter of 1996, the highest percentage increase since the council started to track sales in 1988.

First-quarter sales totaling 17.6 million units valued at nearly $1.6 billion followed a record-setting $10.7 billion in gold jewelry sales for all of last year.

Increases were reported in every channel of distribution and merchandise classification, says the council. The explosive growth of discount stores in recent years is one catalyst for the growth of gold jewelry sales (they remain the smallest channel, but reported gains of 23% in dollars and 18% in units in the first quarter). Independent jewelers, the second largest channel in terms of dollars, reported gains of 8.4% in dollar volume and 4.6% in unit volume.

The results from other channels: sales rose 5.8% in dollars and units for chain jewelers (the largest channel), 17.6% in dollars and 16.8% in units for department stores (third largest) and 1.5% in dollars and 2.1% in units for catalog showrooms (fourth largest).

By merchandise category, gold neckchains (the largest category) showed an 11% increase in dollar and unit volume in the first quarter. Earrings (second largest) had increases of 10.5% in dollar volume and 10.2% in unit volume. Bracelets (third largest) rose 10.4% in dollar volume and 9.6% in unit volume.

In other categories,sales rose 10.8% in dollars and 9.6% in units for wedding rings, 8.3% in dollars and 11.8% in units for non-wedding rings, 11.9% in dollars and 10.1% in units for charms, and 12.9% in dollars and 11.1% in units for non-chain necklaces.

These figures and recent consumer research show a trend toward higher karat and designer or brand name gold jewelry — especially among independent jewelers, says the council. For example, 18k gold jewelry now generates 20% of retail dollars vs. 11% two years ago. “Women, who account for almost 70% of all gold sales, see gold as an important part of their everyday wardrobe,” says Michael Barlerin, the council’s regional chief executive for the Americas. “Retailers who have expanded their assortments of gold are increasing their sales volume and profits.”

The council’s quarterly sales surveys cover jewelry in which the gold content is the primary value. The figures in this report do not include electronic and direct mail sales.

World Gold Council, 900 Third Ave., New York, NY 10022; (212) 688-0005, fax (212) 371-5466.

INTERNET: SURF’S UP IN JUST ONE YEAR

Apparel and jewelry manufacturers and retailers are busy sorting out just how they can benefit from the Internet. For now, most users limit their activity to marketing initiatives through the Internet’s World Wide Web. Just how many will use the Web for actual sales remains to be seen, but it’s clear the number of users has grown substantially in the past year.

Many jewelry industry organizations and hundreds of jewelers have joined established sites on the Web in the past year (see “Jewelers Join the Internet,” JCK, May 1996, pp. 206-213). The same is true in the apparel industry, based on a May 1 panel discussion hosted by the Fashion Roundtable in New York, N.Y. Participants at a Roundtable discussion just one year ago said Internet fashion marketing was far off in the future. Since then, however, hundreds of major brand names such as Donna Karan, Guess, Pendleton, Sigrid Olsen and Cole-Haan have gone on-line. Some report a monthly average of 15,000 hits (the number of times someone “visits” their Internet site).

“Branding and positioning are the keys to marketing on the Internet, and market share is being taken rapidly,” says Ben Narasin, president and fashion director of the Internet Fashion Mall, the first commercial site dedicated to marketing better fashion. “Eventually, there will be two kinds of marketers on the Internet: leaders and those who got on too late.”

Narasin points out the Internet has a global audience of 50 million people. In the U.S., he says, people who use the Internet have average household income of $60,000. They tend to be educated and sophisticated consumers; about 40% are female. Narasin adds that Generation X users have particularly positive attitudes toward the Internet. They tend to read fewer newspapers and shop less in traditional malls than their forebears. What Internet marketers won’t get, he says, are lower-income women age 40+.

Some advantages of on-line shopping:

• Services can be personalized to fit the user.

• Out-of-stock styles drop off the screen, eliminating the frustration of back orders.

• The user can plug in his or her tastes and price range so only appealing merchandise comes on-screen.

In the future, the technology of virtual reality (which will allow consumers to “try on” merchandise by applying it to a photo scan of themselves on the computer screen) will become an integral part of on-line shopping, says John B. Mackenzie, a Roundtable panelist and director of creative systems for the Donna Karan Co. But he sees this having more practical applications for jewelry design than jewelry sales. No matter how good the graphics, he says, a computer screen still won’t capture the color and sparkle of a gemstone or the richness and texture of metal. But it can help to draw consumers into jewelry stores by giving them a general idea of what’s inside, he adds.

JEWELRY PACES DEMAND FOR SILVER

It has been a traditional gift for anniversaries and weddings, a favorite for corporate gifts and a precious family treasure passed down through generations. But solid silver flatware, tableware and household decorative items are decreasing in popularity, while the world is turning its attention to light, modern silver jewelry.

This ensures a continuing demand for silver, according to The Silver Institute’s “World Silver Survey 1996.” While fabrication of silver rose 2.9% overall in 1995, the amount used for silverware fell while the amount used for silver jewelry rose says the report. (For details about sterling silver jewelry sales and design trends, see “Cool Silver = Hot Sales,” JCK, July 1996, pp. 74-80.)

The reason for the changing balance between silverware and silver jewelry lies in changing needs and economic limitations of some countries that specialize in the metal. Italy, the second biggest manufacturer of silver products after India, has long been famous for its elegant and expensive silver dinner services and gifts. In recent years, however, price fluctuations and political and economic strife in the country have chipped away at the popularity of expensive silverware. Corruption scandals have decreased the demand for corporate gifts, and household items of silver are increasingly plated or combined with other materials to save money. As a result, Italy’s silver fabrication fell 6% to 40.4 million ounces in 1995 (see table for statistics by region).

The story was more positive in India, which remained the biggest silverware and silver jewelry producer with an 8% increase to 62.7 million ounces (the Indian subcontinent showed a 9.3% increase to 65.9 million ounces). The strength of India’s silverware and silver jewelry fabrication is due in large part to mass production of bangles, armlets and payals (ankle chains that Indian women acquire by the dozens throughout their lifetime).

Silver jewelry production is booming also in the U.S. and Mexico, where sterling is a popular choice among younger consumers and designer sterling is making inroads among the rest.

The fabrication of official coins decreased dramatically in 1995, dropping 46% to 22.9 million ounces. Mexico, the largest manufacturer of silver coins in the past two years, dipped into existing stocks of pesos instead of manufacturing new ones last year. That cleared the way for the U.S. to become the leading manufacturer of official silver coins (including U.S. veteran and Olympics commemorative coins). Several European countries, including Spain, Germany and France, introduced new legal-tender silver coins.

Overall, jewelry and silverware accounted for 228.2 million ounces or 30% of total silver fabrication in 1995. Coins and medals totaled 22.9 million ounces or 3% of the total. Other silver fabrication categories — industrial/decorative, electrical/electronic, brazing alloys/solders and photographic — accounted for the rest.

Prices, supplies: Silver prices have risen 20% in the past three years, though the 1995 average of $5.19 per ounce was down slightly from 1994.

Several primary silver mines opened or reopened last year. In Mexico, the world’s largest silver producer, the reopening of the major Real de Angeles mine and the introduction of several new base metal operations increased production by 5%.

More dramatically, the first year’s output from the Eskay Creek gold-silver mine boosted Canada’s production 63%.

The increase in supply has narrowed the weak-supply/high-demand gap, which has plagued the silver industry in recent years and forced suppliers to draw down their stocks to meet growing demand.

The Silver Institute, 1112 16 St. NW, Suite 240, Washington, DC 20036; (202) 835-0185; fax (202) 835-0155.

HIGHKARAT, HIGH TECH

Increased demand for high-karat gold jewelry has boosted demand for ways to keep it scratch- and dent-free. Several recent developments were demonstrated in the Gold Technology showcase at Basel ’96.

The developments include a new scratch-resistant surface treatment, a harder 24k gold and 24k gold electroformed jewelry. Here are the details:

• The first development involves incorporating diamond powder into gold electroplate to improve wear-resistance of 24k gold jewelry. The technology was developed by FEM of Germany in conjunction with the World Gold Council. The use of diamond dispersion at low concentrations adds little to the cost of making jewelry, and the process coats complex shapes uniformly. In addition, good “as-plated” color eliminates the need for a final finishing stage.

• Experiments in a new microalloying process for 24k gold, tried particularly in Japan, have yielded gold with enhanced strength and hardness. The process yields gold with a fineness of 999, the rich yellow of 24k and the durability of 18k.

• A new process developed by Degussa of Germany with support from the World Gold Council allows the traditional use of wax cores in the creation of 24k gold electroformed jewelry. Once the wax is melted out, the resulting forms are hard enough to be soldered and polished with ease. Dr. Christopher Corti, manager of technical information and development at the World Gold Council in London, says the development of reliable higher karatages of electroformed jewelry will affect all markets, but will be especially important in the Middle East and Far East, where consumers demand 22k and higher. Corti says research also is under way on creating high-karat electroformed shapes with angles and edges, not just curves. However, the process can’t be used in colored gold because the alloys that create the color would adversely affect the electroform baths.

SILVERWARE AND SILVER JEWELRY FABRICATION
(millions of oz., including use of scrap)

	’91	’92	’93	’94	’95
Europe	83.9	84.5	78.8	73.5	69.5
North America	19.5	20.8	21.3	21.6	24.7
Central & South America	5.7	4.8	5.3	5.3	6.1
Middle East	10.4	12.5	12.9	13.8	15.7
Indian Subcontinent	24.4	38.5	81.6	60.3	65.9
Far East	33.3	43.9	53.2	43.3	42.5
Africa	1.3	1.3	1.2	1.3	1.3
Australia	0.5	0.5	0.6	0.6	0.6
CSC/Soviet Union	3.5	2.7	1.8	2.1	1.9
Total	182.2	209.7	256.7	221.8	228.2
Source:”World Silver Survey 1996,” The Silver Institute