A Glen Allen jewelry analyst says the economy is not nearly as bad as media have made it out to be. “One or two bad months of jewelry sales and change in the financial climate in the U.S. is not going to change cultural habits of the human race,” said Ken Gassman, speaking at a business economics meeting.
How much are the media to blame for shoppers shying away from the stores they love? (Gulp).
Ken Gassman, founder of Glen Allen-based Jewelry Industry Research Institute, says retail sales are slowing, especially in the luxury goods sector. But the situation is not nearly as bad as media have made it out to be, he said Wednesday at a Richmond Association for Business Economics meeting.
“Sales were down 3 percent. … When you stop and look at it, that’s 97 percent of last year’s level. That’s pretty daggone good,” Gassman said. “It depends on your point of view.”
He said the future of the jewelry industry is promising despite news that the luxury goods market is shrinking. Gassman projects a sales decrease of less than half a percent for the year. The United States accounts for 50 percent of global jewelry sales.
“One or two bad months of jewelry sales and change in the financial climate in the U.S. is not going to change cultural habits of the human race,” Gassman said.
Increasing wealth in United States has led to a growing demand for jewelry. High-income households are responsible for 64 percent of jewelry sales, and the percentage of households in the United States making more than $100,000 has risen to more than 15 percent from 4 percent in 1975. Gassman said consumers now favor custom, designer and high-end jewelry over commodity diamond jewelry, such as single-diamond rings and pendants.
But there are a number of troubling signs as well. Gassman said about 500 independent jewelry stores typically go out of business each year; this year, he said, it might be 1,000 and as many as 1,300 next year. One reason he gave is that many of them are family stores in their third generation and many of the owners aren’t interested in continuing the business.
He said most chain stores would survive the current economy, although Friedman’s and Whitehall went out of business this year.
“The recession is good for the economy,” Gassman said. “It flushes out the excess and flushes out the weak.”
After next year, he predicts the retail capacity will be reduced by about 10 percent, but those that survive the culling will benefit from fewer jewelers vying for the same piece of the pie.
Gassman said the media are making matters worse. He said news reports suggesting Americans have stopped shopping are overblown. For example, he said headlines that say mortgage delinquencies are the worst they have been since the Great Depression are erroneous because the measures used to track delinquencies have only been used since 1979. He said the Federal Reserve kept some statistics during the Great Depression that indicate delinquencies were more than 50 percent, compared with less than 10 percent today.
“The media unfortunately is guilty of straight-lining today’s trends. If you believe everything the media says about the stock market, the Dow Jones would be below zero right now,” Gassman said. “We’ve seen an awful lot of misleading news stories.”
Historically, it takes about six months after an economic shock to recover, and this one will be no different, Gassman said.
“9/11 happened and shoppers quit spending for about two months,” Gassman said. “By March of ’02, we were at it full speed, spending like there never was a 9/11.”