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Liquid assets have helped jewel retailers

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During the economic turmoil of 2008, the luxury jewelry business experienced a cataclysmic shift. Ancillary spending began to dry as consumers' perceived net worth decreased considerably as a result of the housing crisis and the impending stock market crash.

Some jewelry retailers hosted "going out of business" sales and began closing their doors. Many other retailers who were able to weather the economic storm had to shift to an alternative model for earning revenue during the crisis — selling higher volumes of less-expensive goods and generating income through the purchase of precious metals and diamonds.

During the recession, when consumer wealth was tied directly to property, many consumers recognized the value of their jewelry and turned to jewelers to sell their available liquid assets for immediate payment. In this mutually beneficial relationship, consumers were able to allocate their new funds towards mortgage payments and essential purchases, while jewelry retailers found a new source of income for sustaining their business.

The upward trend of precious metal prices has led consumers to realize that gold and silver are truly liquid assets with appreciating value. Over the past five years, the price of gold has increased 56.89 percent, and it has increased 290 percent in the past 10 years. A similar trend exists in the silver market, with the price of silver increasing 29.64 percent over the past five years and 401.26 percent in the past 10 years.

The same can be said of the diamond market; the commodity has seen double-digit price increases in the international marketplace because of limited supply and increased wealth and buying power from Far East markets such as China and India. This is coupled with high demand in the U.S., accounting for 37 percent of the diamond market, with a growth rate last year upwards of 7 percent. The value of diamonds has increased approximately 33 percent in the last nine years, and analysts predict that the positive trend will continue.

Though many areas saw the devastating effects of the recession, the economy in Central Pennsylvania remained relatively stable. The peaks and valleys were not as severe as in other markets in the U.S. or even other areas of Pennsylvania. Corporate headquarters and strong small businesses, coupled with the vast number of workers in the government sector, were driving factors in keeping economic spending relatively stable in the region. Our company was able to retain its employees during the recession and even hired throughout 2008 and 2009.

Even in the most turbulent of times, consumers have seen precious metals and diamonds maintain and, in some cases, exceed in value. Now that the unemployment rate and economy are stabilizing, there is greater demand for jewelry, timepieces and purchases in the luxury goods sector.

The past five years have given consumers a greater respect for the significance of items in their jewelry boxes and, in turn, has allowed retailers to continue fostering relationships with clients by offering varying services. The next time you shop at a jewelry store and choose a beautiful piece of jewelry, you can have a better appreciation of the value of your purchase.

Ronald M. Leitzel is president and CEO of Mountz Jewelers. The family-owned and -operated retailer has three locations in Central Pennsylvania.

Write to the Editorial Department at editorial@cpbj.com

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