Luxury Jewelry Market Feels Shoppers' Pain

Consumers scale back their diamond-buying as the economy slows.


If the diamond ring you were lusting after didn't show up in your Christmas stocking, take comfort in the fact that you're not alone. In another indication of the slowing consumer economy, jewelry retailers reported disappointing sales for November and December, suggesting that shoppers resisted the temptation to load up on pricey gemstones.

Tiffany & Co. and Zale Corp. reported 2 and 9 percent declines, respectively, in comparable-store sales for November and December from the same period in 2006. Zale also announced this week that it will close 60 retail locations within the next 90 days. Jewelry retailer Finlay Enterprises similarly announced that comparable-store sales for November and December declined 5.9 percent, and at Signet Group, U.S. sales were down 8.1 percent for the period.

"Luxury is the first thing to go because it's totally discretionary," says Pam Danziger, president of Unity Marketing, a market research firm, and author of Let Them Eat Cake: Marketing Luxury to the Masses as Well as the Classes.

According to her research, spending on jewelry in the fourth quarter was down 23 percent to $2,655, compared with $3,468 in the fourth quarter of 2006. The percentage of wealthy households that purchased luxury jewelry was also down, to 13 percent in the fourth quarter of 2007 versus 25 percent during the same period in 2006.

There is one hot spot in the field of ice, however: Blue Nile. The online retailer, which prides itself on offering quality jewelry for good value, reported that fourth-quarter revenues increased 24 percent, largely because of strong holiday sales. If consumers were in the market for bling, it appears they wanted to comparison-shop online in an effort to get their money's worth.