Developments Shaping Costume Jewellery Competition in 2013

Frequent shifts in precious metal prices over 2012 and 2013 have influenced real jewellery prices much more than those of costume jewellery. However, the global economic slowdown has caused leading costume jewellery players to adapt their global strategies. We explore some of these prominent shifts in 2013, as well as the forecast landscape for costume jewellery.

Return of Pandora

After two consecutive years of negligible growth, Pandora is expected to record a significant increment in global company sales over 2013. Since its streak of unprecedented organic growth was halted in 2010, the company has overhauled its long-term strategy. This comprises an increased focus on its self-operated retail network (concept stores), differentiating itself from the luxury price segment, and renewed marketing campaigns in its biggest markets. There is also increasing consumer awareness about Pandora’s ring collections.

The above initiatives have steered the company to surprising growth rates in the US and UK over 2013, where it recorded second quarter (April–June 2013) increases of more than 50% compared to the same period in 2012. As demonstrated by its reported sales, Pandora’s global results are still tied to its presence in Western Europe and North America.

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However, relatively new markets in Eastern Europe and Asia Pacific are essential for sustaining long- term growth. Several direct competitors such as Thomas Sabo, Links of London and Trollbeads enhanced their geographical reach as well as their charm collections over the review period. As such, a failure to leverage its brand recognition over the forecast period could cost Pandora in emerging markets.

New Facets of Swarovski

Drawing nearly all of its sales from its flagship brand, Swarovski AG commanded 4% of global costume jewellery sales in 2012. A substantial presence in Asia Pacific gives the company a distinct advantage over many of its global competitors. However, brands such as Pandora, Fossil and Accessorize have all grown faster than Swarovski since 2008. Perhaps this knowledge has spurred the industry leader into investing in both inorganic and organic growth over 2013.

In May 2013, Swarovski acquired US-based brand Chamilia. Although it was already a supplier of Swarovski crystals to Chamilia, the strategic move signals a willingness to compete in the fast growing customised jewellery segment. As it looks to retain its leadership position in costume jewellery and enters new markets, Swarovski is likely to acquire more regional brands over 2014/2015.

On the other hand, the company’s organic growth is likely to be directed by two factors – a heightened retail presence and innovative marketing campaigns. While its store-based retail network is likely to be boosted in relatively small Swarovski markets such as India and Turkey, an emphasis on online retailing is expected to contribute significantly to the company’s growth across developed markets. Another aspect of the company’s organic growth is its marketing campaigns. In July 2013, Swarovski used the new Instagram video feature by encouraging contestants to submit videos inspired by ‘light reflections’, as exhibited by its famed crystals. The brand’s Instagram and Facebook pages are key drivers of its social media strategy, and will see more consumer engagement initiatives in 2014. In addition, Swarovski introduced supermodel Miranda Kerr as its brand ambassador in October 2013. With Kerr being one of the most renowned faces in the fashion world, this development is not only likely to help the brand’s Christmas sales but also attract partners for its business-to-business sales.

Future of Non-Specialists and New Markets

Competition in costume jewellery regularly features brands which draw a significant proportion of their sales from apparel. Claire’s and Accessorize are two leading examples of such brands, and the phenomenon is becoming more pronounced with the increasing costume jewellery portfolios of apparel leaders such as H&M, Zara and Banana Republic. Over the review period, even watch brands such as Fossil and luxury brands such as Prada and Gucci invested significantly in their jewellery portfolios. Numerous brands among those mentioned above already enjoy a global retail presence, giving their costume jewellery products substantial reach. As such, the forecast period is likely to see intense global competition between non-specialist brands and traditional leaders.

In terms of markets driving global growth of costume jewellery, Russia, Canada and Mexico are expected to join China and India over the forecast period. Apart from Canada, all these markets remained fairly fragmented in 2012. This presents an opportunity for global costume jewellery manufacturers as they search for new markets to support long-term growth in global sales.