Jewelry

INDUSTRIAL CODES

NAICS: 33-9911 Jewelry (except Costume) Manufacturing and 33-9914 Costume Jewelry and Novelty Manufacturing

SIC: 3911 Jewelry, Precious Metal, and 3961 Costume Jewelry

NAICS-Based Product Codes: 33-9911, 33-99111 through 33-991117, and 33-99140 through 33-99140YWY

PRODUCT OVERVIEW

Jewelry is one of the oldest forms of personal embellishment and is a part of nearly all cultures. Jewelry use includes as a currency, as a functional object, as symbolism, and as an adornment.

Jewelry has been used as a form of currency. Early cultures in Africa, the Middle East, and the Americas maintained wealth in the form of jewelry stored on their person. Jewelry in the form of currency included slave beads and wedding dowries. Wedding dowries, for instance, may contain jewelry given to a female throughout her life from the time that she is a child through the time when she is to be married. The accumulated dowry is given to the man or his family after the wedding. In other cultures, women wear all the gold and jewelry they possess at all times to symbolize their worth.

Jewelry is also highly functional. Items like broaches, pins, hair combs, seal rings, and pill and snuff boxes on chains or rings have practical uses. Viking women wore functional brooches as part of their normal dress. Viking female dress did not change much for roughly 200 years. Women wore a conservative wool pinafore over a long pleated linen shift. The pinafore had shoulder straps fastened by a pair of brooches. The design of the brooches, just as of the clothes, was standardized.

Much jewelry is worn for symbolism. Symbolic jewelry signals the membership of a particular group, religious or secular. Religious examples include the crucifix or the Star of David worn around the neck. Classic symbolic jewelry includes birthstone, engagement, and wedding rings. Jewelry is especially adept at symbolizing those that belong to the upper and ruling classes. European royalty wore their richest jewels during the Medieval and Renaissance eras to demonstrate wealth, power, and lineage. One way to demonstrate lineage is with cameos and other portrait jewelry. While European royalty wore jewelry in everyday life, jewels were prominently worn in portraits painted by royal painters so that the beauty, power, and wealth of royalty could be seen by a greater audience and praised and remembered by generations to come.

In the 1920s costume jewelry became popular. It was sold along with an outfit, or costume, with which it was meant to be worn. This introduced inexpensive jewelry to the masses. Costume jewelry tends to imitate precious stones and metals at a fraction of the cost. Base metals, such as tin and lead, were used and made to look like precious metals such as gold. To imitate expensive stones, manufacturers used cut glass, enamel, and, later, acrylic and other hard plastics. This made it possible for consumers to buy jewelry on a whim and base the choice on aesthetics and design rather than the value of the materials alone.

In the first decade of the twenty-first century, most jewelry is used for symbolism or adornment. For many consumers, time and money will be committed to purchasing rings symbolizing marital status. A common guideline is that a man should spend three months salary on a woman's diamond engagement ring.

Diamonds are graded according to four classifications, commonly called the Four Cs, for clarity, cut, color, and carat weight. Clarity is judged to be anywhere from flawless to very slight inclusions to imperfect. Cut influences diamond brilliance. Cuts with many facets reflect more light more brilliantly. Color varies anywhere from colorless to yellow, although diamonds have been known to have many colors. One of the rarest colors is pink. Carat weight denotes stone size. A larger carat weight results in a higher price.

Often consumers, mostly female, will purchase rings, earrings, and necklaces for adornment. With the advent of costume jewelry, the market offers a wide spectrum of choices. Rings, earrings, and necklaces are available in the marketplace for under $10 and for over $10,000.

MARKET

In the United States in 2002, 1,962 establishments were primarily involved with the manufacture of jewelry and 655 establishments manufactured costume jewelry. Most jewelry makers were located in New York, California, and Rhode Island, while most costume jewelry makers were located in California and Rhode Island. In 2002 jewelry manufacturers shipped $5.5 billion worth of product. Costume jewelry manufacturers shipped $797 million worth of product in 2002, down 35 percent from $1.2 billion in 1997. Jewelry manufacturer shipments increased 19 percent during the same timeframe, from $4.6 billion in 1997 to $5.5 billion in 2002.

The costume jewelry industry is divided into three categories by the Census Bureau: non-precious metal jewelry (65%), other jewelry/costume novelties (16%), and costume jewelry not-specified-by kind (19%). Precious jewelry is categorized by the primary metal with which it is made. Jewelry made of gold and platinum accounted for nearly two thirds (63%) of the precious jewelry industry based on the value of manufacturers shipments in 2005. Jewelry made of silver accounted for 15 percent, and jewelry made of other metals and types accounted for 12 percent of 2005 shipments. The remaining 10 percent was made up of shipments of stamped metal coins and jewelry not-specified-by-kind.

Shipment data detailed enough to track changes in the trends for different types of jewelry are collected by the Census Bureau every five years in its economic census cycle. Using data for the two years 1997 and 2002, growth of 19 percent is seen for shipments of fine jewelry, from total industry shipments of $4.6 billion in 1997 to $5.5 billion in 2002. Jewelry made of gold and platinum grew 12 percent, from $3.2 to $3.5 billion. Most of the gold and platinum jewelry growth was for wedding rings. Most Americans will marry and many will re-marry. Manufacturers' shipments of gold and platinum wedding ring sets rose sharply between 1997 and 2002, from $419 million to $729 million, or 74 percent.

Jewelry made of silver grew 93 percent between 1997 and 2002, from $399 million to $767 million. Silver is valued for jewelry. It is comparatively scarce, brilliantly silver-white colored, malleable, and resists oxidation. Silver jewelry grew in popularity in part because it is more affordable than gold and platinum, for which it often substitutes. Most silver jewelry sports a numeric hallmark, which indicates metal content. For instance, sterling silver is defined as containing 92.5 percent silver and 7.5 percent of an alloy metal, usually copper to make it stronger. Sterling silver products therefore tend to sport a tiny hallmark number of 925 on the back or inside of the piece to denote its extremely high quality. Jewelry silver is defined as containing 80.0 percent silver and 20 percent copper. Silver jewelry products tend to therefore sport a small hallmark number of 800, or higher, to attest to its high percentage of the more valuable metal.

Jewelry made of other metals and types grew 43 percent between 1997 and 2002, from $452 million to $648 million. While the three major categories of jewelry each grew 12, 93, and 43 percent, respectively, notable was the doubling in value of shipments of silver jewelry and of wedding ring sets.

KEY PRODUCERS/MANUFACTURERS

Tiffany & Co.

In 1837 Tiffany and Young started selling stationery and fancy goods on Broadway Avenue in New York, New York. Every item was sold at a non-negotiable selling price, a radical business model that made headlines in local newspapers. By the 1850s Tiffany silver designs captured the attention of people around the world and Charles Tiffany assumed control, renaming the company Tiffany & Co. Tiffany designs, such as the Tiffany diamond setting, are American standards. Tiffany contributed to the establishment of the 925 sterling silver standard. It has long attracted some of the world's foremost designers.

In 1867 Tiffany became the first American firm to win a medal for the excellence of its silverware at the Paris Exposition Universelle. Tiffany products have been purchased by museums across the world since the Boston Museum of Fine Arts first did so in 1873. In 1956 Parisian master jeweler Jean Schlumberger started designing for Tiffany, and in 1995 a retrospective of his work was on display at the Louvre museum in Paris, France. Other famous designers include Elsa Peretti, Paloma Picasso, and Frank Gehry. Frank Gehry, arguably the world's greatest living architect, designed six collections priced from $100 to $7,800.

Jewelry represents the majority of Tiffany sales at 82 percent, with silverware, watches, and other categories rounding out the balance. The United States represents the bulk of Tiffany sales, with 60 percent of sales in 2005. Japan is the next largest market for Tiffany at 20 percent. The Asia Pacific and European regions amount to 8 percent and 6 percent respectively. The flagship store in New York represented 10 percent of total company sales in 2005. In the 1987 initial public offering, Tiffany stock was offered at $23 per share. In September 2007 shares of Tiffany stock hovered around $50 per share.

De Beers Institute of Diamonds

Prolonged battles during the 1880s over the diamond fields on the southern portion of the African continent contributed to the formation of De Beers Consolidated Mines Limited. The company was established in 1888 and listed in 1893 on the Johannesburg Stock Exchange. De Beers grew both organically with energetic mine production levels and through aggressive acquisition tactics of other firms in the region. In its early years De Beers controlled 90 percent of worldwide production. In later years De Beers created the well-known "A Diamond is Forever" advertising campaign.

With a workforce of almost 23,000 employees and 10,000 contractors in 25 countries, De Beers in 2007 accounted for roughly 40 percent of worldwide diamond production and 45 percent of worldwide diamond distribution. More than 19,000 employees work in Africa. In 2005 De Beers posted a pre-tax profit of $1.07 billion.

Swarovski Group

Headquartered in Wattens, Austria, Swarovski had worldwide sales in 2005 of $2.14 billion with 17,000 employees. It had production facilities in 16 countries, including the United States. In 2005 it operated 565 Swarovski Own Shops.

In 1892 Daniel Swarovski perfected a design for a machine that cut crystal faster and with greater precision than the manual process of the time. Over time Swarovski business units grew to include Tyrolit (abrasive tools and cutting tools), Swarovski Optik (optical instruments), Swareflex (reflective and luminous road markings), and Signity (genuine and synthetic gemstones). Swarovski crystals for consumers are produced under two distinct labels. The Daniel Swarovski couture collection includes jewelry, accessories, and home accessories. Swarovski, the international brand, produces jewelry and accessories of cut crystal, gifts, and interior décor pieces made of elaborately faceted crystal.

MATERIALS & SUPPLY CHAIN LOGISTICS

Jewelry is generally categorized based on the material from which it is made: gold, platinum, or silver. Gemstones are typically embedded into or mounted upon the gold, platinum, or silver jewelry. By general consensus, precious gemstones are diamonds, rubies, emeralds, and sapphires. Everything else is considered semi-precious. This includes gemstones like amethyst, citrine, and garnet. Turquoise is considered semi-precious, as is onyx, aquamarine, and pearls. Synthetic gemstones and pearls are used in costume jewelry.

For fine jewelry, precious metals represent 32 percent of the cost of materials purchasing, while precious, semi-precious, and synthetic gemstones and pearls represent 22 percent. Two preferred materials for fine jewelry making are gold and diamonds. Gold and diamonds are the standard bearer for wedding ring sets. Both gold and diamonds are mined.

Gold Mining

Gold is found in its metallic form in various geological formations. Since it does not tarnish, it is easily identified. Gold is mined primarily in South Africa and Russia. Gold mining companies mine gold in one of two ways. Open-pit mining, also called cyanide heap leaching, requires blasting rock from the earth. The broken rock, or ore, is hauled to a processing facility where it is crushed. Crushed ore is sprayed with cyanide, which seeps through the pile to dissolve gold particles. The gold liquid is collected from the bottom of the heap and smelted, which removes remaining impurities by applying intense heat. Open-pit or cyanide heap leaching mining is cost effective. It is estimated that two-thirds of mined gold is obtained by open-pit mining. The remaining third is shaft-mined.

Shaft-mining is the traditional, and more costly, mining technique for gold. It is less invasive, more time consuming, and not widely used by modern gold miners. Shaft-mining requires life support (pumping in cool air, pumping out gasses and water), complex logistics, and high risk levels. Shafts are carved from rock to locate rich gold veins. Gold is extracted from the vein by digging, hammering, or small-scale blasting.

Gold is also mined in the United States; total 1989 production was 363 million ounces. Approximately 15 percent of U.S. gold comes from copper, lead, and zinc mines. Where these base metals are deposited, either in veins or as scattered mineral grains, minor amounts of gold are commonly deposited with them. When the predominant metal is mined, the gold is recovered as a byproduct. The largest single source of byproduct gold in the United States is the porphyry deposit at Bingham Canyon, Utah.

Diamond Mining

In the eighteenth century diamonds had been found only in India and Brazil and were very rare. In the mid-nineteenth century, diamond mining began in Africa extensively throughout the southern part of the continent. Although the rarity of diamonds diminished due to a greater amount of stones mined, diamonds retained value due to the tightly controlled selling and trading practices of DeBeers.

Diamonds are commonly mined by a method called pipe mining and are extracted from volcanic pipes. Approximately 250 tons of ore, or broken pieces of rock, must be mined in order to produce a one-carat gem-quality polished diamond. Once the rock that bears diamonds is located, it is transported to a processing facility where it is separated from the rock. Alluvial mining of diamonds is also possible but it is generally not as profitable for large mining companies. Alluvial mining involves extracting diamonds from riverbeds or ocean beaches. Once the diamond is separated from the surrounding mineral formation, it is cut and polished.

Cutting can reduce the size of a diamond by half. Diamonds are typically cut across the grain by a thin metal disc coated with diamond dust. Facets are ground individually. Facets are applied by a revolving mechanism made of iron and coated with oil and diamond dust. It is held against the revolving machine, or turntable, as it revolves at a high speed. A faceted diamond has an average of fifty-eight facets, depending on the cut. Facets are valued when they are clean, symmetrical, and sharp.

Less than half of mined diamonds are gem quality. Those that are not gem quality are often used for cutting tools and abrasives. World diamond production figures are presented in Figure 117, which depicts the proportion of mined diamonds used as gemstones and the proportion used in industrial applications. One example of an industrial application is Swarovski's Tyrolit business unit. It makes abrasive and cutting tools that involve diamond dust.

DISTRIBUTION CHANNEL

After gold and diamonds are mined, they are shipped to jewelry manufacturers throughout the world, including many of the 1,962 U.S. establishments that make fine jewelry. Manufacturers cast gold, platinum, and silver, and set diamonds and other stones into jewelry like rings, earrings, bracelets, necklaces, and watches.

The retail distribution channel for finished jewelry is bifurcated into jewelry retailers and specialty jewelry retailers. Some companies, including Tiffany & Co., overlap into both categories.

As of 2000, jewelry stores represented the chief distribution channel for jewelry, accounting for 60 percent of all jewelry sales in that year. Large U.S. jewelry retailers with national chains are Kay Jewelers (with origins as far back as 1916) and Zales (1924). Kay Jewelers operates 868 stores and is known by its advertising slogan, "every kiss begins with Kay." Jared Galleria of Jewelry and JB Robinson are both under the Kay umbrella. Zales emerged from bankruptcy in 1993 to post $2.8 billion in 2000. Zale Corporation operates approximately 2,250 retail locations throughout the United States, Canada, and Puerto Rico. Its brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Bailey Banks & Biddle Fine Jewelers, Peoples Jewelers, Mappins Jewelers, and Piercing Pagoda.

The U.S. retail jewelry distribution channel is broad. Market Share Reporter 2007 reported the jewelry and watch sales figures of 15 companies. The channel included, in order of sales: Wal-Mart, Sterling, Zale, QVC, Tiffany & Co., JCPenney, Sears Roebuck & Co., Finlay Fine Jewelry, Helzberg Diamond Shops, Fred Meyer Jewelers, Costco, Home Shopping Network, Target Stores, and two television retailers. In 2006 Wal-Mart had $2.7 billion in jewelry sales.

Online jewelry sales are increasing. According to Market Share Reporter 2007, online sales increased from $2.8 billion in 2004 to a projected $6.0 billion in 2008. Zales, for instance, operates online at www.zales.com, www.gordonsjewelers.com, and www.baileybanksandbiddle.com.

KEY USERS

In 1999, 43 percent of the U.S. adult population bought jewelry. Compared to men, women have a slightly higher purchase rate, 48 percent for women and 36 percent for men. Men have a lower purchase rate incidence, but they spend considerably more money on their jewelry purchases than women do. Most of the jewelry purchases by men are gifts. The highest jewelry purchase rate is among younger adults 18 to 24 years old.

Key users of jewelry are people planning to wed who want to symbolize their love with wedding ring sets, typically gold and diamond. Other key users of jewelry include groups who are marking life transitions. For instance, class rings symbolize the completion of high school, college, or university. Identity and medical bracelets are used to help people in the medical profession care for people in a prompt and appropriate manner.

ADJACENT MARKETS

Gold is a valuable metal. It is a stable chemical that does not easily combine with other substances, nor does it tarnish or corrode. This makes it ideal for a number of industrial uses. More than 80 percent of the gold mined worldwide is used for jewelry. The remaining 20 percent is used in industrial applications. World gold prices increased 45 percent between 2005 and 2006. Rising prices often indicate increased demand in an adjacent market. The adjacent market for gold used in jewelry is gold used in industrial applications. Industrial uses for gold include fine wire for electronics, as a protective coating for spacecraft and satellites, and in industrial and medical laser systems.

India is the largest worldwide consumer of gold. Demand in India for gold is anticipated to increase from 800 tons per year in 2000 to 981 tons by 2010 and 1,152 tons by 2015. The United States is the second largest worldwide gold consumer.

The fashion industry and the jewelry industry are closely adjacent markets. Trends in apparel lead to trends in jewelry. New jewelry collections are rolled out as often as new apparel collections, sometimes four times per year.

RESEARCH & DEVELOPMENT

Research and development in jewelry relates primarily to gemstones. Gemstones are artificially manufactured and artificially farmed.

Artificially manufactured gemstones are either synthetics or simulants. Synthetic manmade gemstones are laboratory grown. They are of the same or extremely similar chemical composition as their natural equivalents. Most synthetic stones are produced using a high temperature process. Synthetically grown gemstones have, in essence, the same appearance as well as the same optical, physical, and chemical properties as the naturally occurring gemstones they represent.

Simulated stones are also manmade, but of a lesser quality than synthetic gemstones. Simulants have an appearance that is similar to a natural gemstone, but different optical, physical, and chemical properties. Simulant gemstones produced in the United States include coral, cubic zirconia, turquoise, malachite, and birthstones such as garnet, amethyst, aquamarine, emerald, ruby, peridot, sapphire, and topaz.

Consumer acceptance of synthetic and simulant gem-stones has increased in recent years. The recognition of synthetics and simulants for their own merits and not as inexpensive substitutes is perhaps the main reason. United States law requires that synthetic and simulant gemstones be clearly marked so that they are not confused for natural gemstones. The value of synthetic gemstone production in 2004 was $30.4 million and $100 million for simulants.

Human intervention is also used to produce cultured pearls. Most pearls used for jewelry today are cultured pearls. Research and development related to cultured pearls is attributed to Japanese researchers. Cultured pearls are developed through pearl farming. Cultured pearls are generally larger and of a more consistent size and color. They are made through the insertion of an artificial nucleus or shell bead directly into the tissue of an oyster. This process is referred to as grafting.

Pearl farming is a relatively simple form of aquaculture because oysters do not require artificial nourishment. Pearl farming, does, however, require a long-term investment of time and money. Only 5 to 10 percent of each pearl crop will be the high quality gems that generate 90 percent of the profit. Pearls are farmed throughout the world. In the United States, pearls are farmed in Tennessee, Arkansas, Louisiana, and Alabama.

CURRENT TRENDS

The current trend is greater concern about social and environmental aspects of diamond and gold mining. The plot of the 2006 movie Blood Diamond, starring Leonardo DiCaprio, brought issues surrounding conflict diamonds to the attention of the general public. Conflicts in Sierra Leone during the 1990s resulted in the coining of the phrase blood diamond.

Conflict diamonds come from regions that are controlled by forces, splinter groups, or factions that are opposed to the legitimate and internationally recognized governments in the areas. Conflict diamonds are sold to generate funds to support illegal activities, such as rebel military forces, and their profits contribute to prolonged brutal wars in parts of Africa. Legitimate diamonds play a role in the prosperity and economic development of many parts of Africa.

The United Nations, the diamond industry, and other organizations created a system to prevent conflict diamonds from entering the legitimate diamond supply chain. The system, known as the Kimberley Process Certification Scheme (KPCS) was implemented in 2003. KPCS participating governments guarantee that shipments of rough diamonds are exported in secure containers accompanied by a uniquely numbered, government validated certificate stating that they are conflict free. KPCS participating governments also agree not to import rough diamonds without approved KPCS certificates.

Two diamond industry programs supplement KPCS with self-regulation. These are the International Diamond Manufacturers Association and the World Federation of Diamond Bourses. These two bodies effectively represent all diamond processors and traders. Self-regulation involves warranties that accompany invoices covering the sale of rough diamonds, polished diamonds, and finished diamond jewelry. Warranties apply to rough diamonds mined after 2002 and the products fabricated from them.

In 2005 the Council for Responsible Jewelry Practices (CRJP), a non-profit organization, was founded in part by the Jewelers of America, a trade organization. CRJP promotes and develops responsible social, ethical, and environmental business practices throughout the gold jewelry industry. It held its first meeting in London, United Kingdom, in 2006. The Council believes gold should be extracted and processed in a manner that respects the needs of current and future generations. It supports transparency in gold mining, procuring, and selling.

TARGET MARKETS & SEGMENTATION

The market is segmented into a low-end and a high-end. On the low-end, manufacturers produce costume jewelry. Stores such as Wal-Mart cater to consumers who may be interested in costume jewelry. On the high-end, manufacturers produce luxury jewelry items and target consumers who have enough disposable income to purchase them.

RELATED ASSOCIATIONS & ORGANIZATIONS

British Jewelers Association, http://www.bja.org.uk

Council for Responsible Jewelry Practices, http://www.responsiblejewellery.com

Diamond Facts, http://www.diamondfacts.org

Gemological Association and Gem Testing Laboratory, http://www.gem-a.info

International Diamond Manufacturers Association, http://www.worlddiamondcouncil.com

Jewelers of American, http://www.jewelers.org

Jewelers Vigilance Committee, http://www.jvclegal.org

The National Craft Association, http://www.craftassoc.com

No Dirty Gold, http://www.nodirtygold.org

Society of American Silversmiths, http://www.silversmithing.com

Society of North American Goldsmiths, http://www.snagmetalsmith.org

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