Jewellery Outlook

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Market Commentary

Brands cope well in tough times
By James Clatford

Damiani, Colonial ring

LONDON, October 12, 2008 – When times are hard, brands do well because people want something meaningful and with lasting power that will reassure.

Financial turmoil and deepening fears of a global recession can present opportunities for established brands and give incentives to jewellery manufacturers to become brands.

Uncertainty drives people towards top-quality products and diamonds are well-positioned.

So far, the signs are that the world’s top luxury groups will withstand the global economic slowdown well.

Richemont’s chairman Johann Rupert gave reassuring messages to investors last week when he said the company, whose brands include Cartier, Piaget and Constantin Vacheron, would remain focused on the fast-growing markets of China and India, which combined will have a bigger middle class than Europe in the next 10 years.

Companies with deep pockets and low debt are best placed to take advantage of opportunities that will inevitably emerge after asset prices bottom out and consumer confidence returns.

As the luxury retail sector nervously eyes prospects for Christmas sales, expectations are for softening demand in a number of key retail jewellery markets, but the top tier brands are best placed to weather the impact of the global financial storm.

The New York-based Luxury Institute sees some softness even at the highest level of jewellery, but notes that if companies are globally diversified, they should do much better.

The risks are much greater if a company depends solely on one market.

Brands like Cartier are much better protected against economic downturns because of their presence across a wide selection of markets, and the quality that their name inspires.

Despite the slowdown, bridal jewellery sales in the United States have been performing well as people look to established brands that they trust.

Visitors to Bond Street and Fifth Avenue from the commodity-rich emerging economies are a vital source of buying power for the top jewellery brands.

Bond Street jewellers say footfall has slackened since Ramadan but they are confident that buying will pick up again in the run-up to the end of the year.

Even the wealthiest people are being more cautious as financial markets gyrate wildly amid a lack of confidence in the present financial structure, Bond Street jewellers say.

The fabulous diamond jewellery in the shop windows at De Beers on Old Bond Street is clearly aimed at the powerful oil-rich Arab market.

Despite the recent falls in the oil price, the Gulf Arabs have built up a vast nest-egg that will no doubt fund some spectacular purchases of branded jewellery in the months ahead.

The Luxury Institute has observed robust demand for the rarest luxury items, such as vintage brands.

In hard times, people will scramble to get on waiting lists to buy unique or limited-edition pieces.

At the other end of the market, where brands are absent, demand for mass market jewellery in the United States is subdued as middle incomes are squeezed.

The brand is a comforting refuge in chastened times.