Post-COVID World and the New Normal of Gem and Jewelry Business
Since the beginning of 2020, the world has faced many circumstances jarring its dynamic in different matters, including natural disasters, environmental issues, the trade war and political tensions. Also, the one that has turned the whole world upside down is the COVID-19 pandemic, which started in December 2019 and has spread to every continent.
Currently, there are over 24 million COVID-19 cases with 8.2 hundred thousand deaths. The death rate was estimated at 5% (data from www.worldometers.infoate, as of August 26, 2020). Despite the low death rate, the losses have immensely impacted the world. This is because the pandemic does not only impact health and living but it also influences economic, investment and tourism sectors as well as transforms people’s behaviors so much that it brought about the term “new normal ”1. The term is used to describe an adjustment to find new way of living in order to be infection-free and try to maintain and restore economic and business potentials. Regular perceptions, visions, management approaches and everyday behaviors have been overhauled.
According to the World Bank’s data concerning the growth rates of countries around the world after the economic crisis in 2009, 2010 was the only year when the global GDP’s growth rate reached 4.30%. In 2011-2019, the global GDP’s average growth rate was merely 2.83% yearly. In 2019, the GDP reached 2.48% growth. The growth was a result of the excessive attempts to boost economies. Consequently, many countries have massive public debts, hence their economies could not grow as much as before. They have grown at new rates or the new normal, as shown in the following figure.
COVID-19 Impacts on Business Sector
Although it has been more than half a year, there has not been any signs that the pandemic will be subsided. The uncertainties affected business sectors. Many companies went under, extensively wreaking production lines of each industrial sector. Production and purchasing were held back, reduced or postponed. Manufacturing sectors cut down production capacity, which directly undermined income and employment. Inevitably, all developed and developing countries were affected. The International Labour Organization (ILO) revealed that the most affected businesses included food and accommodation employing 144 million workers around the world; retail and wholesale employing 482 million workers, business and management service employing 157 million workers; and manufacturing industries employing 463 million workers. The total workforce of the businesses accounted for 37.5% of worldwide employment. Though agricultural, forestry and fishery sectors have the highest employment numbers, they were slightly affected. The least affected businesses were sanitation and education.
World Economic Forum has evaluated possible risks from the pandemic for the next 18 months (until the end of 2021) through interviews with over 347 analysts worldwide. The risks are divided into 5 categories as follows.
1. Economic risks: The most worrying issues are the worldwide economic recession, which will persist longer than predicted; increasing possibility of businesses going bankrupt and being merged; unlikelihood of recovery in some industrial or business sectors; the rising unemployment rates, particularly in younger generations. The issues accounted for 68.6%, 56.8%, 55.9% and 49.3% respectively.
2. Social risks: The most concerning issues include new infectious diseases, which could occur; states’ power execution, which may affect rights and freedoms; mental health due to stress and anxiety, and segregation and social inequality. The issues accounted for 30.8%, 23.3%, 21.9% and 21.3% respectively.
3. Geographical problem risks: The most troubling risks are restrictive measures for international traveling and trading; geographical exploitation from the pandemic; the lessened humanity from international aid reduction; and nationalization of private enterprises. The issues account for 48.7%, 24.2%, 19.6% and 17% respectively.
4. Technology risks: The most alarming issues are cyber-attack and disinformation, increasing unemployment rates due to automation machines, and premature transition to partial technology. The issues account for 37.8%, 24.8% and 13.8% respectively.
5. Environmental risks: The most worrisome issues is the investment failures in maintaining climate change, which accounts for 18.2%.
Although the concerns may only reflect negative factors with slim solutions, many analysts agreed that recovery approaches could be critical opportunities for a fresh beginning of systems worldwide.
Impacts on Luxury Products
Regarding impacts on luxury products, Bain & Company, a leading marketing strategic consultant company, collaborated with Altagamma, an Italian company with businesses in many industries including fashion, design and jewelry, forecasted that sales of luxury products in different markets will decrease. Sales in Europe is likely to weaken the most at 29% whereas sales in North America and Latin America will decline by 22% and 21% respectively. The contractions are caused by diminishing revenue from Chinese tourists who love buying luxury products. Meanwhile, sales in China, Japan and other Asian countries will go down by 9%, 14% and 16.5% respectively. Analysis of each product category shows that watch sales will shrink the most, following by jewelry and clothing. Sales of the products will fall by 25%, 23%, and 21.5% respectively. The declines are all resulted by declining consumption across the world. However, there are still good signs from online platforms, of which retail trade grew by 16% and wholesale trade increased by 12%. Therefore, it could be said that digital transformation is another key factor in building competitiveness to support business’ sustainability and to keep up with technology advancement to enable businesses to reclaim its top spot. In 2019, sales obtained from Chinese shoppers accounted for 35% of worldwide luxury product sales. It has been expected that in 2025 the share of Chinese shoppers will surge nearly 50% of the total world’s luxury products sales.
As markets across the world have been weakened during the crisis, what luxury brands should focus on are digital media, sanitation, creating good experience, and sustainability. These are 4 key elements driving businesses forward.
How can we pass on the 4 elements to customers of gem and jewelry sector?
1. Digital media: In 2020, there are more than 4 billion Internet users around the world. Over 51% of them use the Internet for online shopping through their smart phones. Brands should consider using digital media innovations to connect with consumers. During such circumstance, restricting selling and shopping in physical stores, virtual networking is a success, which has been used for communication with customers via globally popular mainstream online media such as Instagram, Facebook or Youtube. They can even use their websites to feature products through video clips or live streaming without customers’ visits to physical stores. Distinct growth of live streaming activities in China shows that they have become the pivotal factor of Chinese e-commerce’s sharp growth. Moreover, India’s fashion jewelry tradeshow (Indian Fashion Jewelry & Accessories Show) was held through online format for the first time instead of the conventional tradeshow format, which was not allowed.
2. Sanitation: Sanitation and safety have become important issues which people in general have increasingly become aware of. Small shops or large brands should not neglect the issues. They may provide jewelry cleaning steps through online platforms and recommendation on how to choose easy-to-care jewelry. In addition, they should always keep their stores clean. Doing so could build brand value and awareness during the crisis. Moreover, the world’s major brands use sanitation matters for their CSR strategies to build brand value amid the pandemic. LVMH group converted its perfume brands such as Christian Dior and Guerlain to produce hand sanitizer gel for French medical workers. They also turned their Louis Vuitton factory in France into a face mask factory. Meanwhile, Italian leading brand, BVLGARI, and the UK’s Burberry helped society by producing hand sanitizer gel for hospitals.
3. Creating good experience: There is an example from Objet d’Emotion, a high-end jewelry platform. The platform has been successful in attracting niche customers by directly sending carefully selected online catalogs to potential customers. The service has received positive feedback from domestic and international customers because the demographics feel that the brand value and place importance on them. Apart from that, brands can offer a service, allowing customers to try on or browse through different jewelry styles at their places or appointed locations to make a good impression. Brands’ service hour extension to be more flexible and free delivery service will create good experience. With these approaches, brands can maintain consistent relationship even after the crisis is over.
4. Sustainability: At present, consumers have been increasingly cared about environmental issues. Naturally, they always look for environmentally friendly jewelry. Consequently, many brands feature ecological elements in their products to show their being responsible to society. De Beers and other 9 diamond producing companies have collaborated in setting up a substantial plan to reduce carbon release in production. Selling jewelry products with certified standards from Responsible Jewelry Council (RJC), an organization specifying standards for jewelry with responsibility throughout supply chains from gem mining to processing and putting them on sale. These approaches will raise consumers’ confidence. According to the image shown, the primary element that consumers in many countries take into consideration is healthy and hygienic packaging. However, other matters are related to sustainability and being environmentally responsible.
Understanding Consumers’ Changing Behaviors
There is no doubt that the pandemic has accelerated changes in consumer behaviors on various aspects. According to the survey by McKinsey & Company, consumers in many countries have changed their way of thinking in spending since the beginning of the pandemic. They have become more careful in spending their money and reduced buying expensive products to save money for emergency needs. Before buying a product, they will search for information on the brands and the products. Regarding their expectation on their countries’ economy, people in India and China have higher expectation on their countries’ economic recovery than people of other countries. The expectation rates of people in the US and Germany followed those of the two countries. On the other hand, most people in other countries are greatly concerned due to economic impacts from the pandemic. Additionally, as people of many countries have to use online media more for every aspect of life, online shopping has boomed during the pandemic. Jewelry has been a popular choice for online shoppers. Sales in the US, the UK, France, Germany, Spain, Italy, India, South Korea and China are likely to grow. The details are as follows.