How a 280-billion-dollar market turns

Gemstones, diamonds and jewelry used to be sold primarily through brick-and-mortar stores. But the potential for online sales is enormous. Is an entire market about to undergo a fundamental change?

11 October, 2022

This piece of jewelry made movie history. Remember the scene in the classic movie “Pretty Woman” where Julia Roberts enters a vast room wearing a bright red dress and white gloves, clearly ready to make her big entrance?

Richard Gere smiles and tells her something is missing as he opens a jewelry box. She gasps when she sees what’s inside: a fabulous diamond collier with sparkling rubies. As she reaches for the necklace, he snaps the jewelry box shut on her fingers. Her laugh helps make this iconic scene epic.

More than 30 years later, the world is as much in love with Julia Roberts as ever, but also arguably more enthusiastic about gemstones, diamonds and jewelry in general than ever before. The price for Burma rubies from Myanmar passed a key milestone in 2021, increasing tenfold over their 2015 value. In addition to the price of rubies, prices for emeralds and sapphires from certain countries also soared to new record highs, establishing the gemstones as trendy jewelry worn on necks, fingers and wrists everywhere. Apart from their origin, the value of individual gemstones is mainly based on the “four Cs”: carat (weight), color, cut and clarity. The most expensive ruby ever sold, the “Sunrise Ruby”, was described as “a unique treasure of nature” and auctioned off for around 30 million US dollars – more than three times the price of the hitherto most expensive ruby. For some years now, rubies have increasingly been catching up to diamonds, even if they have not yet reached the prices of the king of precious stones.

This increase in the price of rubies, however, is only a tiny indicator of a much larger trend. Because after the slump in sales during the pandemic, the market for luxury jewelry and watches is now resurging. Experts anticipate annual sales growth of three to four percent between 2019 to 2025. One channel in particular is gaining traction with an increasingly younger clientele: e-commerce.

The COVID-19 pandemic, as evidenced by the figures published by the German trade association of jewelers (BVJ, Handelsverband Juweliere), devastated the industry. In 2020 alone – the first year of the crisis –, sales of jewelry and watches declined by eleven percent. Surprisingly, the then-languishing e-commerce segment was able to make solid gains. In fact, running counter to the larger trend, online sales increased by nearly 10 percent, soaring to 1.2 billion euros – an important indicator of what to expect in years ahead.

Because its heft underscores its value, and its true beauty is often difficult to fathom in images, precious jewelry is generally not easy to sell online. At least that is what one might think looking at the share of e-commerce in the jewelry and watch trade in the past. According to a sampling of German retailers, e-commerce made up less than 10 percent of the jewelry and watch trade for a long time, a tiny share compared to other channels. In a joint study with “The Business of Fashion”, management consultancy McKinsey calculated the share of e-commerce in the jewelry trade at around 13 percent in 2019. For watches, according to the experts who authored the study, the share was much smaller still – and that was before sales tanked during the pandemic.

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But an index published by Munich-based jewelry trade fair Inhorgenta demonstrates that the younger generation is likely to change that. According to these figures, even before the pandemic, 37 percent of 18- to 35-year-olds made their purchases of high-end jewelry and watches in the manufacturer's online store, and an additional 38 percent in a retailer’s online shop. A mere 44 percent preferred local brick-and-mortar stores. So while there is still a strong discrepancy between the on- and offline trade in the overall market, a significant shift is occurring in the younger generation, which grew up using smartphones, tablets and laptops. In addition, the main attributes that determine the value of a gemstone – its origin and the aforementioned “four Cs” – are easy to convey online. This allows consumers to compare jewelry and reduces barriers for online purchases.

The potential impact of this development becomes evident when we look to the future: In the long term, experts such as those at McKinsey anticipate nothing less than a multi-billion e-commerce market for jewelry. They expect to see the e-commerce revenue share increasing from 13 to 21 percent, which could add up to 60 to 80 billion US dollars in the long term (total market value: 280 billion US dollars). If this all comes to pass, maybe Julia Roberts will start buying her jewelry online, too.

Sebastian Klumpp

I support you in making confident e-commerce decisions through digital shelf analytics.