Discover why the boom has hurt Irish jewellers more than the bust.
Given the parlous state of the Emerald Isle’s economy, it might seem safe to assume the bottom has fallen out of its jewellery market. While some businesses have gone bust Abby Trow discovers exorbitant rents of the pre-bust boom are to blame, not a shopper exodus.
No one is saying the jewellery sector in Ireland is having an easy ride, but it’s by no means all doom and gloom.
“Forget the EU financial bailout, what made life a bit tricky for us over Christmas was the snow, which kept people away,” says Chris Andrews, marketing director of Weir & Sons, a long-established Dublin jewellers. “And while sales are down over the past year, they’re not hugely so. On the whole we feel it’s business as normal, and we’re positive about 2011.”
Andrews says while he’s aware of competitors that have gone into liquidation – last year Dublin jewellers West of Grafton Street closed after 290 years in the city and more retailers in the city have since ceased trading – he says there’s no deck of cards scenario in the jewellery business, where one falls and they all start to go down.
The problems, it seems, haven’t been a result of the bust, but rather the boom.
“The boys over there are suffering badly but they made a fortune before the crash,” says Stuart Laing, chief executive of jewellery and watch buying group Houlden, which has a number of members in Ireland. “When we were making 5 percent to 10 percent growth on our businesses [in the UK] they were making 15 percent to 20 percent.”
Andrews concurs, saying the difference between sinking or swimming in the Irish jewellery trade has little to do with how skilled a sales team it had. He believes it was more about whether a business was unfortunate enough to have signed up in the boom years to sky-high rents with property developers that then defaulted on their loans once the global crash hit in 2008.
“In my view, it’s rents that have put people under,” he says. “Jewellery is competitive and margins are tight, but people do, in fact, keep on buying it. But that doesn’t matter if you can’t meet the rents.”
Peter McDowell of McDowells jewellers on Dublin’s north side agrees that it’s businesses such as theirs, which own their premises, that have been able to weather the recession. “It’s been hard, and we have made some redundancies over the past two years, but I do feel the downturn has bottomed out and I’m confident sales will start to increase this year, albeit slowly,” he reveals. “I do actually feel that the EU bailout has given people confidence that the economy will now be run according to strict ground rules. People say Ireland was running on credit, but there is also a huge amount of money on deposit here, some €16 billion. People have been wary of spending their savings because of the uncertainties, but I get a sense that attitudes are changing.”
Jerome Ryan runs a business consultancy in Dublin and he has worked in with jewellers that have recently gone into liquidation. “It’s a shame because it’s not that Ireland is overrun with jewellers,” he says. “The ones I feel most sorry for are those that took leases in expensive shopping centres and had to have their shops open for long hours and so employ a lot of staff. They already had very high running costs and when the property bubble burst they were still tied in to ridiculous rents.” And Ireland’s upward-only rent policy does retailers no favours, he adds.
Ryan goes on to suggest that some of the newer businesses that have met their demise may, perhaps, not have had a clear picture of their customer base, nor did they seek to attract new customers. “They might have felt it was safer to serve the over-60s market, but in fact those people are spending less on jewellery,” he explains. “Yes there is a lot of unemployment, but the younger market sees jewellery as a fashion accessory and will buy a costume piece to cheer themselves up. Look at the success of the Pandora brand here, it has really struck a chord with the younger market. So there is a need to diversify in jewellery, just doing one thing can be very dangerous, because situations change.”
McDowell agrees, and says his business has kept going through these lean times thanks in no small part to its repair service. “You do need to offer a variety of services as people haven’t had so much money to spend, so they’ve decided to get that necklace granny gave them repaired, or that broken watch mended,” he says. “Yes, the spend is smaller, but volume in the repair business is high.”
The retailer is also expanding its online offer to bolster its turnover. McDowells’ has recently increased the selection of product it sells through its online store to incorporate watches and some pieces of traditional Irish jewellery.
McDowell and Andrews point out that jewellery is, all things considered, a fairly safe business to be in because demand will probably never totally diminish. “In Ireland, people get married and before they wed they get engaged,” says McDowell. “The engagement ring is very important to Irish couples, and spend remains high at around €1,000 to €1,500. I understand the spend on an engagement ring in Ireland is about three times higher than it is in the UK.”
Andrews also notes that Ireland is experiencing something of a baby boom at the moment, which means increased demand for christening gifts. “We need to think cradle to grave and give customers what they want,” he muses. “People are no longer buying the big necklaces with diamonds or precious stones, but they are buying more sterling silver pieces or costume jewellery instead. We’re still selling watches, the TAGs and Tissots, and I’d say they are our bread-and-butter product. Sure they are fairly expensive, but people do like them, they are a status piece and they are a way to treat yourself.”
Returning to the recession, Andrews says the old adage “it’s an ill wind that blows nobody any good” applies. “Well, for us, we’ve been able to refurbish our shop because labour costs have come down massively,” he explains. “And we’ve also been able to get our e-tailing costs down, so from that point of view, we’ve benefitted from the situation.”
From the jewellery wholesaler’s perspective, the Irish business is stable at the moment, says Roger Chamberlain of fine diamond jewellery supplier Sharman D Neill. “Levels of business in Ireland have reduced, of course, since the recession started, and Ireland is a small marketplace,” he says. “The A-B socio-economic group no longer has so much disposable income and many in it may be facing negative equity. But the engagement ring market is strong – because rings are a necessity for anyone getting married – and the gift end, what you might call the lower end of the jewellery market, is also growing. It’s sales of the very top-end product that have fallen off.”
James Boyd of London-based brand Daisy sells to retailers throughout Ireland, including the Fields chain, and says he has noticed very little drop in demand for his company’s products over the past two years. “Certainly nothing that mirrors the economic disaster we’ve been hearing about,” he says. “That might be because our pieces are affordable and on-trend, with prices starting at around £20 and going up to £150. We do have a distributor in Ireland, which helps, but I think the mid-price jewellery market remains fairly constant no matter what.”
Chamberlain notes that the commodity markets are increasing in value, so putting your money in diamonds will have given you far better returns than investing in property. “From a global perspective, the jewellery industry is growing,” he explains. “Business may be down in Ireland, but overall jewellery is very resilient, with growth being led by demand from the US and China.”
Bailout headlines might be setting a grim stage for Irish retail but it seems that the confidence and price hikes of the pre-bust boom did more to damage the Irish jewellery retail market than the recession or bailout has. While fortune may favour the brave, in the case of jewellers of the Emerald Isle it has been the cautious who have prospered.