Industry Insights
Why the economics of modern jewelry are pushing mass-market and premium operators toward opposite ends of the industry
Atelier RMR
Explore 25 sections
- A market can grow while its customer base contracts
- The structural economics of the middle
- Cost disease exists in craftsmanship
- Differentiation is an economic asset
- Price sensitivity can be manufactured
- Eventually you select the wrong customer
- Gross-margin percentage can conceal the real game
- The quarterly spreadsheet has no line for desirability
- Capital allocation eventually becomes physical
- Jewelry also has an information problem
- Cheapening a product can make it expensive to sell
- Lab-grown diamonds accelerate the transparency problem
- The natural-diamond market is polarizing too
- Premium clients are economically demanding
- There are two very different ways to react to expensive gold
- There is no stable strategic position called “pretty good”
- This is also a management problem
- Manufacturers may know before investors do
- A brutal truth about craftsmanship
- The businesses that survive the middle will probably become more specific
- Pricing power is the final exam
- The industry should stop confusing affordability with value
- The middle gets engineered into irrelevance one quarter at a time
- Author's note
- Selected sources
There is a conversation happening inside the jewelry industry that deserves considerably more attention. It happens between brands and manufacturers. Some companies arrive at the table asking how to make something better. Can the proportion be improved? Can the setting become cleaner? Can the bracelet carry a little more weight? Can the clasp feel more substantial? Can the finishing be taken further? Can we develop the mechanism properly? Can this difficult design actually be manufactured without compromising what made the sketch interesting in the first place?
Other companies have a very different conversation. How much can we take out? Can we remove two grams? Can the construction be simplified? Can we reduce the stone count? Can this component become hollow? Can we reduce polishing time? Can we substitute the finding? Can you take another $40 out of the manufacturing cost? Can we hit this retail price? The second conversation is financially rational.
That is precisely why I find it dangerous. Nobody sits in a management meeting and votes to make the company increasingly irrelevant. The deterioration happens through hundreds of decisions that survive financial scrutiny individually. Procurement saves 6%. Inventory becomes easier to finance. A target price point survives. Margin improves by 80 basis points.
Manufacturing gets easier. Working capital gets released. The SKU looks better in Excel. The product becomes slightly less remarkable. Then the exercise happens again the following year. And again. Eventually management finds itself looking at weaker organic demand, increased promotional sensitivity and a consumer who seems unusually concerned about price. The conclusion follows naturally: consumers have become more price-sensitive.
Sometimes they have. Sometimes the company spent five years teaching them to be. I think this distinction matters enormously. The middle of the jewelry market is facing a structural problem. Rising material costs, labor-intensive production, radical price transparency, changing diamond economics and increasingly polarized consumer spending are putting pressure on a business model that depends on maintaining quality while remaining broadly accessible.
The response across large parts of the market has been predictable: engineer cost out of the product. Done carefully, that is good management. Done repeatedly, it can destroy pricing power. And once that process starts, the consequences reinforce one another.
The middle gets value-engineered into irrelevance one quarter at a time.
A market can grow while its customer base contracts
One of the more interesting developments across luxury has been the divergence between aggregate spending and the number of people participating in the market. Bain and Altagamma estimate that the global luxury consumer base contracted from approximately 400 million consumers in 2022 to around 340 million in 2025. They also estimate that the largest spenders accounted for roughly 45% of the personal luxury market in 2024, up from about 30% in 2019. (Bain)
Those numbers deserve attention. A market can remain enormous in dollar terms while becoming dependent on fewer people. That has major consequences for strategy. A household with substantial disposable income, significant accumulated assets and low sensitivity to everyday inflation experiences a $5,000 versus $7,000 jewelry decision differently from a household operating under a tight monthly budget.
For the first customer, the economic significance of the incremental $2,000 may be small relative to the significance of getting exactly what she wants. Design matters. Confidence matters. Craftsmanship matters. The experience matters. Availability matters. The relationship matters. The constrained customer faces a different optimization problem. Housing, food, insurance, transportation, interest expenses and childcare consume large portions of available cash flow. Jewelry belongs to one of the most deferrable categories imaginable.
An engagement creates a purchase occasion. An anniversary can create one. A significant birthday can create one. Most jewelry purchases still contain enormous timing flexibility. A client can wait six months. She can buy something smaller. She can choose another material. She can trade down. She can decide the purchase is unnecessary. The economic environment therefore does more than affect total demand. It changes the composition of demand.
And composition may matter as much as volume. The high end can remain remarkably resilient under conditions that hurt the middle badly because affluent buyers retain substantial purchasing capacity. Recent industry results illustrate the point. Richemont's Jewellery Maisons — which include Cartier, Van Cleef & Arpels, Buccellati and Vhernier — increased sales by 14% at constant currencies for the year ended March 2026. In the quarter ending June 2026, Jewellery Maisons sales accelerated another 24% at constant currencies, with double-digit growth across the group's jewelry houses. (Richemont)
The luxury jewelry customer clearly still exists. Meanwhile, the broader jewelry market faces cost pressure and an increasingly demanding consumer. Signet, whose portfolio spans a much broader range of price points, reported average unit retail up approximately 7% in fiscal 2026 while total sales grew only 1.6%. (Signet Jewelers)
Those companies are obviously different businesses, and the numbers cannot be compared mechanically. The direction is still interesting. The distribution of spending is changing. And when demand polarizes, the middle becomes a difficult place to operate.
The structural economics of the middle
The traditional middle-market jewelry proposition is easy to understand. Good quality. Accessible pricing. Recognizable design. Competent service. A degree of aspiration. Enough craftsmanship to feel valuable. Enough scale to keep the price reachable. Enormous businesses have been built around variations of that formula. The problem emerges when the costs underneath it begin moving faster than the customer's willingness to pay.
Consider gold. The World Gold Council reports that the average gold price for 2025 reached approximately US$3,431 per ounce, 44% above the prior year's average. In the second quarter of 2026, the average LBMA PM gold price reached about US$4,506 per ounce, another 37% above Q2 2025. (World Gold Council)
That is not a subtle input-cost change. A jewelry company has only a finite number of responses available. Raise the retail price. Accept lower margins. Reduce gold weight. Alter construction. Change the product mix. Improve manufacturing productivity. Move production. Use different materials. Increase average transaction value. Some combination eventually becomes necessary.
Scale helps the bottom of the market. High-volume manufacturing can remove extraordinary amounts of labor from the product. Components become standardized. Production is optimized. Procurement gets ruthless. Distribution becomes highly efficient. Service expectations are reduced. A mass-market operator can build an excellent business by embracing those economics fully.
The upper end has another advantage. It can charge enough. A customer purchasing a $30,000 bracelet allows the company to spend money on things that become impossible inside a $900 bracelet. More gold. Better stones. Additional finishing. More complicated assembly. More design development. More prototypes. More quality control. Higher service levels. Skilled sales talent.
Better packaging. Repairs. Inventory. Beautiful physical environments. The middle lives inside a much narrower equation. It still needs enough substance to justify a premium. Its customer frequently remains sensitive to the absolute ticket price. Its gross profit dollars per transaction provide considerably less room for service and complexity. High material prices hit immediately.
Then an uncomfortable operational reality appears. Something has to give. A few grams disappear. The construction is simplified. The stone quality moves slightly. The finishing cycle gets compressed. A custom component becomes standard. A technically ambitious design gets rejected because development cost is difficult to recover. Inventory moves toward safer pieces.
Product differentiation declines a little. No individual decision destroys the company. Collectively, they can erase the reasons the customer was willing to pay a premium.
Cost disease exists in craftsmanship
There is an economic concept particularly relevant here: Baumol's cost disease. William Baumol and William Bowen originally developed the idea while studying the performing arts. Certain activities have limited capacity for productivity improvement because the human time required to perform them remains intrinsic to the output. A string quartet cannot continuously reduce the number of musicians required to play a quartet.
A 45-minute performance still consumes roughly 45 minutes. The broader economy becomes more productive. Wages rise. Labor-intensive activities must compete for those workers. Their costs therefore rise even when their own productivity improves slowly. Fine jewelry contains many activities with similar characteristics. CAD and modern manufacturing have transformed our industry.
Laser welding changed production. CNC equipment changed it. Casting technology improved. Automation improved. Digital inventory systems improved. AI will improve portions of the business further. Yet someone still has to execute a difficult pavé job. Someone still has to polish an intricate object properly. Someone still has to inspect the setting. Someone still needs the judgment to identify a proportion that looks wrong even when the CAD file says it is correct.
Someone still needs to speak intelligently to a client making an emotionally and financially significant purchase. The time involved does not collapse indefinitely. Craftsmanship eventually runs into a productivity frontier. This creates pressure as wages rise. The mass market responds through industrialization. The high end responds through price. The middle has less room on either side.
That is one reason I believe the pressure is structural. It is embedded in the economics of making good things with skilled human labor.
Differentiation is an economic asset
Businesspeople talk about differentiation so frequently that the word has nearly lost meaning. The economics underneath it are much more useful. Differentiation reduces substitutability. A highly interchangeable product invites comparison. A genuinely distinctive product makes comparison harder. Think about a standard investment-grade gold bar. The identity of the bar matters within certain boundaries. Once quality and legitimacy are established, price becomes an overwhelmingly important variable because one acceptable bar substitutes easily for another.
Now consider a one-of-one piece of jewelry made by a designer whose work the client specifically wants, executed by a workshop she trusts, designed for her proportions, attached to an important moment in her life and supported by a relationship with a jeweler she knows. There is no clean comparison table. That matters. Economic textbooks describe these relationships through concepts such as elasticity and substitutability.
Retail operators see them every day. How easily can the customer replace you? That may be one of the most important questions a jewelry company can ask. A customer who can replace you with twenty competitors in ten minutes possesses enormous bargaining power. A customer who wants your object, your design, your expertise or your execution behaves differently.
Every removal of meaningful differentiation can therefore have an economic cost. The customer opens several browser tabs. The rings begin to look similar. The certificates look similar. The metal specifications look similar. The guarantees look similar. The websites make the same claims. “Exceptional craftsmanship.” “Timeless.” “Ethically sourced.” “Made with love.”
“Uncompromising quality.” “Designed to last a lifetime.” Eventually every brand sounds like it hired the same copywriter. The consumer searches for objective variables. Carat. Color. Clarity. Gold purity. Warranty. Delivery time. Price. The comparison becomes easier. The easiest variable wins disproportionate attention. Price. The company then discovers that its customers are highly price-sensitive.
The outcome should surprise nobody.
Price sensitivity can be manufactured
This deserves emphasis because companies frequently speak about price elasticity as though it were something imposed on them by consumers. Companies influence it. A consumer becomes intensely price-sensitive when alternatives become easy to compare. That behavior is economically rational. Give her ten nearly interchangeable products and she should care about price.
Present ten diamonds using the same grading vocabulary, the same certificates and nearly identical mounting styles and she should search for the cheapest acceptable combination. Provide little incremental expertise and she should place little economic value on the salesperson. Offer designs available everywhere and she should comparison shop. Remove visible craftsmanship and she should refuse to pay for invisible craftsmanship.
Fail to establish trust and she should rely on standardized information. Build no meaningful brand and she should refuse the brand premium. Consumers are not behaving irrationally when they do this. They are responding to the information architecture the industry gave them. This produces a dangerous feedback mechanism. Cost pressure reduces differentiation. Reduced differentiation increases substitutability.
Higher substitutability raises price sensitivity. Higher price sensitivity creates pressure for lower prices. Lower prices intensify cost pressure. Then management begins another round of value engineering. The loop can continue for years.
Eventually you select the wrong customer
The next stage is even more consequential. Every commercial strategy selects customers. A business built around promotions disproportionately attracts customers who monitor promotions. A business built around convenience attracts customers who value convenience. A business built around expertise attracts customers willing to pay for expertise. A business built around exclusivity selects customers willing to pay for access.
The composition is never perfect. Human beings are messy. Markets overlap. Customers move between segments. The direction still matters.
The customer you optimize for eventually becomes the customer you have.
Consider the middle-market company experiencing pressure. Traffic weakens. The company increases promotions. Conversion improves temporarily. Management adds more entry-price products. Acquisition campaigns begin emphasizing value. Product development receives tighter cost targets. Price matching becomes common. Marketing optimizes aggressively around immediate return on ad spend.
Discount events become increasingly important to quarterly performance. Every decision makes sense individually. The company gradually begins attracting a different customer. That customer may have higher price elasticity. Lower switching costs. Higher comparison behavior. Greater promotional sensitivity. Lower tolerance for premium pricing. Lower attachment to the brand.
Potentially higher acquisition costs because every competitor is bidding for the same demand on the same digital platforms. The company becomes exceptionally efficient at attracting people who are exceptionally difficult to make money from. That is an ugly equilibrium. At the same time, customers possessing high willingness to pay remain in the market. Some migrate toward propositions offering stronger design, better service, greater expertise, better materials, personalization, brand equity, provenance, scarcity and trust.
The resulting customer populations have radically different economics. One customer visits once, spends $1,200 after seeing an advertisement, asks for the promotional price and disappears. Another spends $15,000, returns two years later, buys an anniversary piece, sends her sister, introduces a colleague and eventually comes back for an important custom project.
Both appear as one customer in a transaction report. They are not remotely equivalent economic assets.
Gross-margin percentage can conceal the real game
Jewelry companies love gross-margin percentages. They should. Margin discipline matters. The obsession becomes dangerous when percentage margin replaces economic reasoning. Consider a simplified example. Sell a $1,000 piece at a 60% gross margin and the transaction produces $600 of gross profit before operating expenses. Sell a $10,000 piece at a 50% gross margin and it produces $5,000.
The second transaction carries a lower margin percentage. It creates vastly greater economic capacity. Those gross-profit dollars finance the ecosystem surrounding the product. Better design. Better talent. Better clienteling. Better presentation. Better after-sales service. Better repairs. Better photography. More inventory. More sophisticated production. More experimentation.
More time with the client. A nicer environment. Higher acquisition costs when necessary. That creates the possibility of a reinforcing loop. High gross profit per relationship funds better execution. Better execution strengthens differentiation. Differentiation increases willingness to pay. Higher willingness to pay creates additional gross profit. The business gains resources to improve execution again.
The premium operator can compound. A squeezed mid-market operator can experience the same mechanism in reverse. Low gross profit per relationship limits investment. Limited investment weakens the proposition. A weaker proposition raises substitutability. Substitutability increases price sensitivity. Higher price sensitivity constrains gross profit. Management returns to cost reduction.
Two companies can both sell jewelry while operating under fundamentally different economic regimes.
The quarterly spreadsheet has no line for desirability
This is where management systems become dangerous. Cost is extremely easy to measure. Desirability is not. A purchasing director can tell you exactly how much three grams of gold cost. An ERP system knows the price of every stone. Production software can record manufacturing time. The CFO can calculate gross margin to two decimal places. Nobody can tell you precisely how much economic value disappears when a bracelet starts feeling cheap in the hand.
There is no clean accounting entry for: “Customer wanted it 8% less.” There is no balance-sheet impairment charge because the new collection is 12% more boring. Nobody creates a provision because a salesperson has 15% less confidence showing the piece. The benefits of cost reduction therefore appear quickly and precisely. The damage to desirability appears slowly and ambiguously.
Suppose a design change saves 7% in manufacturing cost and reduces perceived value by 10%. The 7% becomes visible immediately. The 10% leaks into the business over time. Full-price sell-through becomes slightly weaker. Salespeople rely on promotions a little more. Organic referrals soften. Conversion at higher price points declines. Marketing has to work harder.
Paid acquisition becomes more important. Repeat purchasing weakens. Customers compare more. The brand requires more advertising to generate the same amount of desire. Eventually the financial cost becomes visible. By that point, the original decision is ancient history. The merchandise team may have changed. The economy may have slowed. A competitor may have entered the market.
Gold may have moved. Marketing may have a new agency. Management can easily blame external forces. The product also became less compelling. Accounting systems are extraordinarily good at recording the cost of quality. They are considerably slower at recording the cost of mediocrity.
Capital allocation eventually becomes physical
Jewelry makes this especially interesting because management decisions become tangible.
Capital allocation eventually becomes physical.
A piece of jewelry contains a company's priorities. Its weight reflects a decision. Its construction reflects a decision. Its stones reflect decisions. Its tolerances reflect decisions. Its finishing reflects a decision. Its clasp reflects a decision. Its originality reflects a decision. The amount of development work reflects a decision. The skill of the people who built it reflects years of recruitment and compensation decisions.
The person presenting it to the customer represents another set of capital-allocation decisions. Training. Compensation. Culture. Store environment. Time allowed with the customer. After-sales support. Walk through a jewelry store and you are effectively looking at the company's capital-allocation philosophy rendered in gold, diamonds, furniture and people. That is why manufacturing conversations fascinate me.
Manufacturers see those decisions before the customer does. Before a bracelet becomes lighter, someone asks the manufacturer to take weight out. Before finishing deteriorates, someone compresses the finishing budget. Before a design becomes generic, someone decides development expense is too high. Before quality control weakens, someone changes the economic threshold.
The customer sees the result months later. The financial statements may reveal the consequences years later. The manufacturer heard the strategy at the beginning. Supplier conversations may therefore contain one of the industry's most underappreciated leading indicators. Listen to what brands repeatedly ask their suppliers to optimize. Eventually that is what the brand will become.
Jewelry also has an information problem
Fine jewelry contains enormous information asymmetry. The seller usually knows considerably more about the object than the buyer. Most consumers cannot examine pavé under magnification and meaningfully judge the work. They cannot independently evaluate every polish. They cannot determine structural durability from an Instagram image. They cannot inspect a complex setting and immediately know whether it was engineered intelligently.
They cannot reliably price unusual gemstones. They cannot easily determine whether a design required genuine technical sophistication or came out of a standard catalog. They need signals. Reputation becomes a signal. Expertise becomes a signal. Physical environment becomes a signal. Consistency becomes a signal. Craft becomes a signal. Service becomes a signal.
Weight can become a signal. Precision becomes a signal. Client history becomes a signal. Price itself can sometimes become a signal. That last point matters in luxury. Thorstein Veblen's name gets thrown around far too casually in discussions about expensive products. The useful insight is narrower: price in certain markets carries informational and social meaning. Consumers can interpret a high price as one signal among many regarding scarcity, status, confidence, quality or desirability.
Jewelry amplifies that mechanism because objective quality is difficult for the average buyer to assess completely. This creates a strange situation. A company can remove costly signals because they appear peripheral to the core object. Then willingness to pay declines. Management concludes that the expensive signals were unnecessary because customers became price-sensitive.
The causality can run the other way.
Cheapening a product can make it expensive to sell
One of the most underappreciated relationships in retail is the connection between product strength and customer-acquisition cost. An extraordinary product creates its own distribution. People talk about it. They show it. They send photographs. Salespeople enjoy presenting it. Customers refer friends. Editors notice it. Collectors come back. Organic search develops.
The object creates attention. Weak product requires external energy. Paid social. Search advertising. Influencers. Retargeting. Discount codes. Affiliate commissions. More email. More promotions. More content. More media. The company saves $50 making the product and spends $200 finding someone willing to buy it. This should terrify operators. A manufacturing saving appears in gross margin.
The incremental marketing requirement appears somewhere else on the income statement. The connection between the two is easy to miss. That separation can generate bizarre corporate behavior. Procurement receives a bonus for reducing cost. Marketing receives a larger budget because demand softened. Both teams achieve their departmental objectives. The enterprise becomes less valuable.
Optimization at the level of the function can produce deterioration at the level of the company. Optimization at the level of the SKU can produce fragility at the level of the brand.
Lab-grown diamonds accelerate the transparency problem
Laboratory-grown diamonds deserve serious treatment because their effect on jewelry economics extends well beyond the debate over natural versus synthetic stones. They changed the economics of size. A visually dramatic diamond can now be purchased for a fraction of what an equivalent natural diamond historically required. That creates genuine consumer value.
It also accelerates commoditization. De Beers itself, while obviously an interested participant in the natural-diamond market, has repeatedly acknowledged continuing declines in laboratory-grown diamond pricing. In July 2026 it reported that retail prices for synthetic lab-grown diamonds were continuing to fall and expected competitive pressure to continue affecting margins. The company had already announced in 2025 that it would close its Lightbox lab-grown jewelry business and expected both production costs and jewelry-sector prices for lab-grown stones to fall further. (De Beers Group)
This creates an important strategic question for retailers. If everybody can source increasingly similar stones, display the same certification information, manufacture comparable solitaire mountings and advertise through the same digital channels, where does sustainable margin come from? Size alone has limited defensive value when size becomes abundant. Specifications have limited defensive value when specifications are searchable.
Price transparency becomes intense. The strategic burden migrates toward everything surrounding the stone. Design. Setting quality. Proportion. Craftsmanship. Brand. Trust. Service. Customization. Curation. Experience. That should push serious jewelers toward greater differentiation. A race toward ever-cheaper carats moves in the opposite direction.
The natural-diamond market is polarizing too
There is another interesting signal in natural diamonds. De Beers reported in 2026 that the average price paid for natural diamond jewelry in its U.S. consumer research rose to $4,063 in 2025 from $3,242 in 2023, alongside an increase in average carat weight. Its financial reporting also noted that stronger performance in higher-end U.S. natural-diamond categories helped offset reduced demand at the lower end. (De Beers Group)
De Beers has an obvious commercial interest in the natural-diamond category, so those figures should be interpreted in that context. The directional observation is still relevant. Higher-value buyers continue to spend. Lower-end demand is more vulnerable. The same basic pattern appears across several corners of luxury. Bain's 2025 analysis describes a shrinking luxury customer base, fewer purchases among many buyers and a much greater share of market spending concentrated among major spenders. (Bain)
Jewelry executives should pay attention to what that means operationally. The growth opportunity may increasingly sit with customers who demand considerably more from the product and considerably less from the price. Serving those customers requires a different organization.
Premium clients are economically demanding
There is a tendency to imagine affluent customers as easy customers because they can afford the product. That is naive. High purchasing power increases choice. A wealthy client can buy jewelry in Montreal, New York, Paris, Geneva, Dubai or online. She can buy from a major maison. She can commission a private jeweler. She can buy vintage. She can buy at auction.
She can work directly with a designer. She can simply keep her money. That customer needs a reason to choose you. Expertise matters enormously. Execution matters. Speed can matter. Discretion matters. Taste matters. Sourcing matters. Confidence matters. Personalization matters. The ability to say no to a bad idea matters. A premium business earns pricing power through accumulated competence.
The fortunate part is that competence compounds. A great client brings difficult projects. Difficult projects create expertise. Expertise creates confidence. Confidence attracts better clients. Better clients allow greater investment in people and capability. Capability generates better work. Better work generates reputation. Reputation reduces acquisition friction.
That is another reinforcing equilibrium. It takes years to build. Cost cutting can dismantle it surprisingly quickly.
There are two very different ways to react to expensive gold
Gold prices provide an almost perfect strategic stress test. When the material cost rises sharply, every operator feels the pressure. One response asks: How do we preserve the retail price? Another asks: How do we preserve the customer's reason to pay? Those two questions lead organizations into very different places. Preserving the retail price can mean reducing weight, modifying specifications and simplifying construction.
Preserving willingness to pay can mean improving design, explaining value better, increasing service, moving the assortment upward, introducing products where craftsmanship contributes a larger share of perceived value, or accepting a higher ticket. Both approaches may be necessary at different moments. The danger appears when cost reduction becomes the default intellectual framework.
Eventually the company becomes excellent at making cheaper versions of yesterday's products. Competitors can do that too. Usually somewhere cheaper.
There is no stable strategic position called “pretty good”
The middle often relies on a proposition built around being pretty good at everything. Pretty good design. Pretty good quality. Pretty good service. Pretty good pricing. Pretty good branding. That position works when customers possess limited information and competitive options are geographically constrained. Digital commerce changed the search environment. A customer in Montreal can discover a designer in Los Angeles in thirty seconds.
She can compare diamonds across continents. She can look at thousands of rings before arriving at an appointment. She can read reviews. She can find production videos. She can watch jewelers critique setting quality on social media. AI will accelerate this. Search costs are collapsing. As search costs fall, generic offerings become harder to defend. The customer can find cheap.
She can find exceptional. The economic territory between those poles requires a very clear reason to exist. “Good quality at a fair price” is becoming inadequate as a strategy. Everybody says that. The company has to answer a much more uncomfortable question: What are we unusually good at that the customer actually values? And then allocate capital aggressively around the answer.
This is also a management problem
The deterioration of the middle cannot be blamed entirely on macroeconomics. Management choices matter. Public companies operate under quarterly pressure. Private businesses have their own forms of short-term pressure. Payroll has to clear. Inventory has to turn. Banks have covenants. Partners want distributions. Owners want returns. Those pressures are real.
The managerial mistake appears when protection of the current economics consumes the assets responsible for future economics. A business can harvest brand equity. It can harvest reputation. It can harvest employee competence. It can harvest customer trust. It can harvest product quality. For a while, the financial statement can improve. Harvest enough and eventually there is nothing left to harvest.
That is why the chronology matters. Brand deterioration often looks financially rational during the early stages. Costs decline before demand does. Margins improve before pricing power disappears. Employees compensate for weaker product through selling effort. Promotions conceal softer demand. Paid acquisition replaces organic demand. Inventory tactics postpone recognition.
The final deterioration can feel sudden. It rarely is.
Manufacturers may know before investors do
This brings me back to the original manufacturing conversation. I think suppliers deserve much more attention as strategic observers of an industry. They hear management intent with unusual clarity. A supplier sees whether customers are asking for innovation or extraction. They see which companies invest in prototypes. They see which companies obsess over tolerances.
They see who pays for additional quality. They see who repeatedly renegotiates every component. They see which design teams arrive with ambitious ideas. They see which companies are reducing everything to a target landed cost. Any single conversation means little. A five-year pattern can mean a great deal. Imagine listening to two brands for a decade. One repeatedly asks:
Can we improve this? Can you make this harder thing possible? Can we develop something proprietary? Can we get the surface exactly right? Can we put another day into finishing? Can you source the unusual stone? The other repeatedly asks: Can we take 8% out? Can you match this competitor? Can we reduce the weight? Can we use the standard component? Can we shorten production time?
Can we move this somewhere cheaper? Ten years later, nobody should be surprised when those businesses have different customers, different margins, different pricing power and different reputations. The supplier heard the strategy becoming tangible long before the market valued the consequences.
A brutal truth about craftsmanship
There is an uncomfortable idea underlying all of this. Craftsmanship is expensive. Originality is expensive. Excellent people are expensive. Inventory is expensive. Time is expensive. Service is expensive. Trust is slow. There is no clever management framework that makes those facts disappear. A company can remove the expense. The corresponding capability often disappears with it.
The obsession with eliminating inefficiency can therefore become intellectually lazy. Some inefficiencies are waste. Some are the cost of excellence. The job of management is knowing the difference. A goldsmith spending unnecessary time because the workflow is poorly organized should be fixed. A goldsmith spending necessary time because an exceptional finish requires it belongs to a completely different category.
A showroom sitting empty because scheduling is poor is waste. A client receiving ninety minutes of expert attention during a complex purchase can create enormous lifetime value. Inventory nobody wants is waste. A rare stone held because the right customer appears infrequently may represent strategic inventory. Efficiency requires judgment. Without judgment, cost optimization becomes subtraction.
The businesses that survive the middle will probably become more specific
I do not think every jewelry company needs to become ultra-luxury. That would be absurd. There is enormous demand at many price points. There will continue to be successful mass-market companies, digital companies, bridal specialists, fashion jewelers, independent ateliers, regional chains and major luxury houses. The vulnerable position is strategic ambiguity.
A company needs to know what economic system it is building. The scale player should pursue scale ruthlessly. Automate. Standardize. Simplify. Turn inventory. Use procurement power. Make the customer's value proposition brutally obvious. The craftsmanship business should pursue craftsmanship seriously. Invest in people. Protect technical competence. Develop distinctive products.
Increase expertise. Build relationships. Charge enough to finance the system. The design business should own design. The service business should become extraordinary at service. The customization business should build capabilities that standardized competitors cannot reproduce. The dangerous strategy is spending luxury-level money to produce something customers perceive as a commodity, then trying to recover the economics through marketing.
That becomes expensive quickly.
Pricing power is the final exam
There are dozens of financial metrics that matter in jewelry. Inventory turn. Gross margin. Sales per square foot. Average transaction value. Conversion. Customer acquisition cost. Return rate. Repeat rate. Payroll ratio. Repair expense. Working capital. All useful. Pricing power captures something deeper. Can the company increase the economic value it captures without causing demand to collapse?
Strong pricing power usually reflects accumulated differentiation. Brand. Scarcity. Trust. Design. Capability. Switching costs. Customer relationships. Exceptional execution. A company that constantly worries whether a $100 increase will destroy conversion has received important information about its competitive position. The answer does not necessarily involve increasing the price.
The information lies in the fragility itself. Something about the proposition has made $100 extremely important to the customer. That deserves investigation.
The industry should stop confusing affordability with value
Affordability matters. There is nothing intellectually sophisticated about pretending otherwise. Price matters intensely for millions of consumers. But value is broader. A $700 ring worn twice can be expensive. A $7,000 piece worn for thirty years can generate extraordinary utility. A poorly designed product at a low price can represent weak value. A beautifully executed object at a high price can represent strong value to the person who genuinely wants it.
Businesses therefore need to understand the specific value they create instead of assuming that reducing the ticket automatically improves the proposition. Sometimes a customer needs cheaper. Sometimes she needs better. Sometimes she needs certainty. Sometimes she needs taste. Sometimes she needs expertise. Sometimes she needs the experience to feel worthy of the event being celebrated.
Jewelry exists unusually close to human emotion. Engagement. Marriage. Birth. Death. Achievement. Identity. Love. Memory. Status. The industry's fixation on unit cost occasionally seems bizarre when considered against what customers are actually buying. A client does not walk into a jewelry store because she developed an urgent need to consume 11.8 grams of 18-karat gold and 1.42 carats of diamonds.
She wants an object to mean something. Our economics eventually depend on how well we deliver that meaning.
The middle gets engineered into irrelevance one quarter at a time
No dramatic meeting announces the end. There is no memo. No executive says: “We will begin destroying our pricing power this fiscal year.” The decline arrives quietly. Two grams here. One quality level there. A cheaper finding. A safer design. A smaller training budget. A lost senior employee. A little more promotional activity. Another performance-marketing campaign.
A reduced repair allowance. Another round of supplier negotiation. A target margin achieved. A quarterly number protected. And eventually the business reaches a strange place. It sells products that look increasingly similar to products available everywhere else. Its customers are increasingly price-sensitive. Its salespeople need promotions to close. Its marketing costs keep rising.
Its best clients migrate upward. Its cost structure remains too sophisticated to compete with true mass-market operators. Management concludes that the category has become difficult. The category probably has. The company also spent years removing the reasons anyone should choose it. Meanwhile, elsewhere in the market, another operator invested. Better people.
Better products. Better service. Better design. More expertise. More trust. More capability. That company now has a different customer. The customer spends differently. The economics behave differently. The organization can invest differently. The divergence compounds. And eventually we stop looking at a single market with a low end, a middle and a high end.
We start looking at separate economic systems occupying the same industry. One is built around extracting cost. Another is built around creating willingness to pay. The uncomfortable territory lies between them. That is where much of traditional jewelry retail lives. And that is why one small observation from a manufacturer matters so much. Listen carefully to the questions companies ask upstream.
They tell you what management values. Management priorities become manufacturing instructions. Manufacturing instructions become products. Products determine customer perception. Customer perception determines willingness to pay. Willingness to pay determines margins. Margins determine what the business can invest in next. That loop eventually becomes the company.
The middle rarely collapses overnight.
It gets value-engineered into irrelevance one quarter at a time.
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Selected sources
The empirical observations in this essay draw principally on the 2025 Bain–Altagamma Luxury Goods Worldwide Market Study; Richemont's FY2026 and Q1 FY2027 results; Signet Jewelers' FY2026 results; World Gold Council Gold Demand Trends; and recent De Beers Group consumer and financial reporting. (Bain)