5 modern forces that shaped the jewelry industry

knows what else, collaborated over time to restructure an entire U.S. industry.

More to the point, however, will your firm skillfully navigate through future unanticipated transitions, or will the changes create the organizational equivalent of a train wreck?

1. The mushrooming gold price
In 1971, President Richard Nixon “closed the gold window” so that foreign governments could no longer redeem their U.S. dollars for gold. From that time on, the price of gold would “float” and be based on the law of supply and demand. By the late 1970s the average price of gold already was around $200 an ounce, up from $44 an ounce in 1972.  

As the price of gold quickly rose to $250 an ounce it became a challenge to maintain the important $25 retail price point. When gold reached $300 an ounce it became almost impossible.  

In those days, gold represented 20 to 30 percent of an item’s manufactured cost, labor and stones made up the rest. Assuming a retailer’s keystone (100 percent) markup, and their important low-end $25 maximum retail price, it’s no surprise, of course, that the low-end jewelry segment would change when the price of gold started on its inexorable path.

We even looked overseas for merchandise since Asia’s lower labor cost could compensate, or so it was thought, for the higher gold price. That plan was abandoned when gold topped out at $850 an ounce in 1980.

We made the rather unpleasant decision to close our doors when the Reagan-era recession added insult to injury. We were out of life boats.

So retailers went to Plan B, and gradually developed a fondness for silver jewelry with innovative designer styling, consumer acceptance and a “reasonable” cost. Silver jewelry filled the void left by low-end gold jewelry and fit nicely in many showcases.

Over the years, with the price of gold going up and down, the jewelry retailer sagaciously adjusted his product offering and found his footing.

Consumers, in general, now seek fashionable designer brands, particularly in yellow gold.  

When all is said and done, the future of the jewelry industry, at least where gold is concerned, is starting to look rosy again, or at least rosier. After years of concern and confusion, happy days could be here. More on this later.

2. Technological un-sophistication
It is unclear to me why the jewelry industry has not kept pace with the technological revolution.

For example, with an abundant amount of tech products and accessories to complement them on the market (tablet computers, laptops, smart phones and watches, etc.), why aren’t some of these also sold in jewelry stores? With the increase of disposable income, jewelry stores seem to be a natural distribution channel, especially to the tech-loving youth market.  
I called few technologically advanced friends from Microsoft, Stanford, Harvard and NYU along with a pair of clever marketing geeks from a local high school. I was confident they could shed some light on blending technology with jewelry without altering jewelry’s natural beauty.

After spending a few days thinking about practical technological applications (PTA), the team presented some very preliminary, yet quite innovative, concepts. They’ve found a footing.

-- Micro engineering. It is quite simple to apply micro-engineering principles to jewelry so a pendant, watch, earring, ring, brooch, etc. can change color, look or even character without anything having to come off. A small movement, like watch movements, are virtually invisible and are simple to use. Without getting too technical here, all that is needed is a strategically placed mechanical bearing so a watch, for example, can have a watch face on one side and a lapis stone on the back side. Additional costs are negligible. The Eclipse brand successfully pioneered this concept in silver.

-- iPod technology. iPod technology is becoming smaller and smaller. The largest part of an iPod Nano is, of course, the case. The team estimates that a medium-sized pendant, particularly a locket, could be designed so an iPod Nano can fit inside the locket. The locket’s chain will act as the wire with subtle extensions for ear plugs.   

-- GPS/camera tracking. It is only a matter of time before GPS miniaturization will allow expensive jewelry, especially pieces with laser-engraved diamonds, to be tracked. The small GPS systems are not on the market yet, but the team estimates they will be in a year or so.

-- PTA miniature applications that haven’t been developed yet. The team reported that cameras, speakers, recorders and the like could be integrated into jewelry; if not now, then in the near future. The jewelry designer can simply work with technology-trained innovators to create techno-pioneering designs.

A good example is Galatea, which has developed the Momento pearl jewelry brand that contains an embedded chip that uses near field communication (NFC) technology. The wearer can record messages that later can be played on mobile devices.

All of these technological developments need an important ingredient for stardom, says Harvard’s Jim Gilliam, namely a loud voice and a kumbaya product.

I don’t necessarily agree. Truth be told, of course, any pioneering product usually needs a persuasive “rainmaker,” a company who bangs their drum the loudest. But it’s clear to me when it comes to risk- taking, innovation always trump noise.

Did I hear that Apple Inc. is quietly looking for salesmen to sell their smartwatch to jewelry stores? A perfect example of innovation over noise.

Please stay tuned for my three remaining factors.