Anyone who has ever done a back-of-the-envelope calculation of the US fine jewelry market in the past few years arrived at figures that were far below the official numbers published by the US government. The differences were so wide that the government figures were downright puzzling. Recently, the US government has revised ten years of market estimates, dating all the way back to January 2008, shaving off more than $16.5 billion in jewelry sales in 2017 alone.
There is no need to be surprised at the revision, or by this radical reduction. The US government revises its jewelry figures every few years, usually downwards. The last time it did so was in 2015. But unlike the 2015 revision, this one was far-reaching. There is no point being shocked by the old figures for being so out of whack. We have been stating that for a few years. In fact, the current figures are still somewhat inflated.
Why is this important?
Knowing the true size of the market has great importance for the industry. It impacts bank lending, manufacturers’ planning and even assessments of investments in the industry. Therefore, tracking these figures, understanding what they represent, and having confidence in their accuracy is central to understanding the business.
For example, most people believe that the jewelry sales figure represents only fine jewelry sales, while, in fact, it is jewelry in general. Both high-end diamond jewelry and $4.99 silver earrings set with CZ are counted in these figures, as well as pewter figurines. So to understand the jewelry figures, remember that even if all sales are counted correctly, we still need to apply a certain discount.
How and why this happened
There are a number of ways to calculate the size of the US retail jewelry market. If you are the US government, the easiest would be to start collecting sales figures of public specialty jewelry retailers such as Tiffany, Sterling (the US arm of Signet) and Blue Nile, and by measuring sales of privately held retailers, which all report their sales to, you guessed it, the US government.
Next, it should have collected jewelry sales from the rest of the market – department stores, discounters, online retailers, etc. This is not easy, I know because I have done it myself (checkout the National Jeweler’s State of the Majors for some of my estimates), but the US government has great resources that should make this task a lot easier.
So how did the US government get it so wrong? Simply by not measuring sales. Instead, it estimates local jewelry manufacturing, adds to it some import data, runs the figures through a calculation, and presto! It gets the wrong numbers. Worse, it adds several additional components that only throw off the figures even more.
Over the years, I have spoken more than once with the government agency that puts out these figures (the Department of Commerce’s Bureau of Economic Analysis). They were kind enough to share with me their methodology and discuss it, but were steadfast that they have it right.