An extremely dynamic market, boosted by the growth of exports
The craze for costume jewellery continues unabated, even though precious jewellery is struggling. Better than that, profitability is on the rise: the operating margin of the players has increased by an average of 13% per year for the last five years.
This solid growth will continue in the coming years, for the following reasons:
- The market is booming, boosted by a plethoric offer: Precepta estimates that there are about 250 brands of costume jewellery in France. The low barriers to market entry (both in terms of manufacturing and distribution) explain the proliferation of brands and the appearance of new players, including international names (Salviati, Snö of Sweden, etc.).
- The wearing of costume jewellery has become very commonplace in all social classes. Costume and silver jewellery currently account for nearly 70% of jewellery sales in France. Costume jewellery is no longer a substitute for precious jewellery, but a fashion accessory in its own right.
- The range of costume jewellery has increased considerably in value in recent years. To such an extent that the price criterion is no longer relevant in distinguishing between costume and jewellery. The increasing use of silver by costume brands is a perfect example of this trend.
- Growth is partly based on exports, a major development axis for the brands: international sales represent nearly 20% of the turnover of manufacturers on average. Some even derive their main source of income from this (Les Néréides, Camille et Lucie).
A segmented offer, disseminated by expanding distribution networks
A sign of the structuring of the market is that it is becoming segmented. It is indeed imperative to differentiate oneself in order to emerge. Brands are refining their identity and, in so doing, their target and their positioning. Moreover, all targets are addressed, from little girls (Moa) to men (Côté Mecs): the market is expanding. The range of styles on offer is growing and becoming more refined, while the price range is expanding considerably.
The study distinguishes four price segments, on which the brands are positioned :
- The entry level is particularly dynamic. The Anglo-Saxon Claire’s is far ahead of the historical leader Agatha in the ranking of operators, thanks to the multiplication of its points of sale and the trend of “accessorising” fashion. Its model is being emulated: Miss Coquines, Monsoon, etc. are all contributing to the growth of this segment.
- The mid-range is the segment occupied in particular by the “historic” brands of the market: Clio Blue, Agatha, etc. rely on their wide distribution and their notoriety, but are facing much more intense competition today.
- It is also important to underline the sometimes insolent health of the top-of-the-range brands, a segment in which more and more operators are competing, notably by making greater use of silver or other “noble” or semi-precious materials. Numerous designer brands, more or less confidential, are launching themselves. For example, Claire de Divonne, Eric and Lydie.
- Finally, competition is intensifying in the “high-fantasy” segment, in which the luxury players have been present for a long time. Diversification into jewellery allows them to exploit the reputation of fashion brands (Louis Vuitton, Chanel), or to offset the slowdown in their original market (Christofle, Baccarat, etc.).
This vitality is reflected in the distribution networks. The study counted 2,800 specialised outlets, of which only a little more than a quarter are national brands. This situation offers opportunities for expansion to organised networks, which are abandoning the franchising solution, which is nevertheless easier than the branch system. In head-on competition, the non-specialist circuits are even more numerous, and no less offensive: they account for a third of the market in value. This is illustrated by the abundant offer of department stores, which are accelerating the development of confidential brands (Les Bijoux de Sophie, etc.), following the example of e-commerce sites (Winaretta.com, etc.).
Exploiting market growth: moving from craft creation to business model consolidation
The challenge now is to consolidate and exploit this growth potential and, above all, to maintain its profitability. An analysis of commercial and financial performance reveals three types of players, depending on their stage of development.
For the very large number of artisan-creators (60% of operators) with a turnover of less than 2 million euros, the challenge is to go beyond the artisan stage. The majority of companies in the sector are very small businesses headed by a designer wishing to market his or her jewellery. As they develop their business, too many founder-managers remain more involved in the creation of models than in the management of the company. When success is achieved, it is imperative to manage growth, at the risk of jeopardising the company’s sustainability.
Medium-sized companies, which account for a third of all companies, have a turnover of between 2 and 10 million euros. They need to optimise – or even rationalise – their operational management. The challenge is to finance their development in order to compete with the heavyweights of the sector.
As for the leaders (Agatha, Réminiscence), their turnover exceeds 10 million euros. These brands are characterised by a structured and controlled development, which allows them to conquer foreign markets more quickly. The level of management is superior both in terms of monitoring operations and the operation of the brand or the commercial structure (exclusive boutiques with careful merchandising).
Towards a concentration of the sector
While operators are tempted by the costly model of exclusive distribution (witness the TOO concept of the leader GL Bijoux), investments are increasing and the net margin is dangerously stagnant. Although many “small” brands are succeeding in breaking through, the criterion of the size of the business remains decisive.
It is therefore to be expected that there will soon be a consolidation of the sector in which many brands are competing and too few industrialised multi-brand groups have the capacity to develop them. Initiated in March 2007, the merger of Lollipos and Rand Frères is a harbinger of other movements.
It should be noted that until now this sector has seen very few external growth operations. However, many companies (particularly in the middleweight category) are potential targets.
It is among the leaders that we find the most companies controlled by investors, most often foreign ones. After the takeover of Agatha by the Thai King Power, it is now the turn of Claire’s Inc. to be controlled by the Appolo fund… The French have to be careful.