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The fine jewellery market globally and in the UK may be roughly divided into three sub-markets based on the price segment brands operate in: the affordable segment (prices up to $1500), luxury segment (prices up to $10 000), and high-end segment (prices higher than $10 000). The largest segment is the one of affordable jewellery, which accounts to almost 60% of the total market (Pandora, 2018). In what concerns product portfolio of the fine jewellery companies, the fine jewellery market covers such categories of products as rings, earrings, neckwear, and wristwear (Euromonitor, 2018).

Jewellery industry and UK market in particular have a relatively established structure where the key focus in placed on brands developing lasting relationships with the limited customer base (Kurth, 2011). At the same time, jewellery retail market is traditionally grounded on the large number of small and medium-size physical retailers where the customer experience and emotional aspect of shopping are the key factors affecting purchasing behaviour.

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The fine jewellery market is highly dependent on several economic forces, the most important of which include:

-  consumers’ per capita consumption power shaped by the overall economic situation in the country;

-  global prices on materials and precious metals as well as shipping costs due to the economic barriers and tariffs;

-   national currency stability and US dollar strength since all prices for the materials are calculated in USD in the global market.

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Fine jewellery market accounts for 4-5% of the total global jewellery market is expected to grow globally by 10% by 2020 (Euromonitor, 2018).

In what concerns the UK fine jewellery market, it has shown the successive growth four years in a row reaching £3.2 billion in 2017 and forecasted to reach £3.3 billion in 2018 (Hailes, 2018).

Among all product categories within the fine jewellery market necklaces show the most impressive growth of approximately 10% annually (Hailes, 2018). Yet, rings is still the largest category in the UK fine jewellery market in terms of sales worth almost £1.40 billion in 2017 with prediction to reach £1.44 billion in 2018 (Hailes, 2018).

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Such positive forecasts are supported by data on consumer spending on jewellery, clocks and watches in the UK from 2005 to 2017 in million GBP provided by Statista (2018) and data complementing the graph on sales value of watches and jewellery in the UK from January 2016 to August 2018 (Statista, 2018).

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Consumer spending on jewellery, clocks and watches in the UK from 2005 to 2017 in million GBP

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Sales value of watches and jewellery in Great Britain from January 2016 to August 2018, based on index number of sales per week

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- Jewellery industry consumers and especially the Millennials are tired of the basic and predictable design of the established jewellery brands that do not innovate and hence search and opt for online shopping from the local small jewellery companies and niche designers that differentiate (Patnaik and Cavale, 2016; Hill, 2018);
- Great customer services is no longer a point of differentiation but a must (Hill, 2018);
- Millennials have become the key target consumers for the jewellery brands while they make a complicated audience since they know what they want and how much they are willing to pay for that (Sharma and Shen, 2017);
- New trends in customer segmentation with larger number of women purchasing jewellery for themselves and not men buying jewellery for their women (Pandora, 2018);
- Changing jewellery product preferences – for example, now watches are more popular than the brooches or bracelets (Sharma and Shen, 2017);
- Increased demand for customised jewellery products (Pandora, 2018);
- Changing marketing channels to address the consumers with the growing popularity of social media and influencers’ opinions (Kapner, 2017);
- Overall trend of growing e-commerce in all industries including the jewellery industry.

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- Changing legislation on taxation and import create unstable business environment aggravated by Brexit and currency fluctuations.

- Brexit and the pound decline created competitive advantages for the high-end fine jewellery brands since the demand for such products among the foreign customers increase due to the actual price decline (Euromonitor, 2018)

- Brexit has negatively affected the purchasing power of the middle class in the UK what resulted in lower sales for the jewellery companies operating in affordable segment (Euromonitor, 2018)

- Changing legislation on taxation and import create unstable business environment aggravated by Brexit and currency fluctuations.

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- With economic stabilization after the crisis the consumer demand for jewellery is forecasted to grow annually (Dauriz, Remy, and Tochtermann, 2014);

- Trading regulations for imports and exports related to Brexit are expected to negatively affect domestic UK jewellery producers who used to source materials from abroad (Daily Business, 2018);

- Strengthening of dollar what will result in lower profitability of the American brands in the UK jewellery market (Rupp and Prang, 2015; Lahiff, 2018).

- Slowdown of the Asian markets' growth what means that the brands may refocus on the EU markets (Lahiff, 2018).

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- Change in consumers’ behaviour after the economic recession resulted in consumers preferring now to invest into the precious stones and metals (jewellery) rather than keeping their money on deposits (Kothiwal and Goel 2012);

- Increased competition for talents in the jewellery and design industry and for the top executive professionals (Lutz, 2017);

- Millennials have become the key consumers group of jewellery and their perception of luxury and status products differ from the one traditionally favouring jewellery industry (Euromonitor, 2018).

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- Lack of innovations in terms of technologies of production and design in jewellery industry (Hill, 2018);

- Advanced technological devices like the smart watches became one of the key competitors of the jewellery brands in what concerns the products consumers are willing to spend their money on (Lutz, 2017);

- Communication technologies and the development of e-commerce provided consumers with access to the wider choice of jewellery brands (Patnaik and Cavale, 2016);

- New production technologies such as, for example, 3D printing or multi-functional jewellery, may change the competition in the market.

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- Brexit will affect labor market and regulations which would reduce the possibilities of the UK jewellery companies to source talents from other EU countries (Daily Business, 2018);

- Taxes on precious metals are high in the UK with 20% value-added tax on silver and 28% Capital Gains tax on profits from precious metals (Precious Metal Tax, 2015);

- Environmental regulations may create additional challenges for the UK jewellery producers.

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- Increased interest and awareness of the consumers on the responsible jewellery stones sourcing in terms of the environmental and broader ethical impact of their mining (Sharma and Shen, 2017);

- Contamination of the watersheds caused by various processes associated with precious metals extraction and mining: according to data only 20% of jewellery companies adhere to sustainable practices in this regard (Kaye, 2011);

- Possible toughening of environmental regulations by the UK government, which would directly or indirectly affect jewellery manufacturing and sourcing.

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First of all, it is important to evaluate the overall level of rivalry in the UK fine jewellery industry and Porter’s Five Forces framework seems to be particularly useful in this regard (Porter, 2008).

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Threat of the new entrants is moderate for the UK fine jewellery market mainly due to the high investment needed to launch the business especially so that to compete with large established brands (Euromonitor, 2018). Besides, despite the growing interest of consumers to the new niche brands, it is the brand image, which would still influence their decision to purchase expensive piece of jewellery.

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Threat of substitutes is high for the UK fine jewellery market because of the growing competition in the industry and the new groups of products which are now preferred by the consumers instead of jewellery (IT devices, smart watches, etc.) (Lutz, 2017). Besides, the smaller brands and costume jewellery producers may serve as a cheaper alternative for consumers who are now more price sensitive following the financial crisis aftermaths.

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Bargaining power of customers is high due to several reasons. Primarily, the maturity of the market means there are many similar alternatives especially in what concerns the products of classical design (like wedding or engagement rings, for example). This results in low switching costs for the consumers who may easily select other brand to make a purchase from. Besides, with the growing popularity of e-retail in the UK fine jewellery market (Patnaik and Cavale, 2016) provides the consumers with broader access to alternatives increasing their bargaining power even more.

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Bargaining power of suppliers for the UK jewellery companies is now medium but may increase after Brexit. Currently, the UK companies have access to different foreign suppliers at relatively low shipping costs so they may choose. However, after the Brexit, the UK companies will most probably have to refocus on domestic suppliers or to select the most reliable and still affordable international suppliers what make the bargaining power of suppliers higher (Daily Business, 2018).

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As it follows from the factors discussed, it might be argued that the overall level of rivalry in the UK fine jewellery industry is high and is expected to increase even more with the industry growing as it is predicted by Euromonitor (2018). The detailed analysis of competition is provided separately.

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5Ws framework asks five questions about the competitors the answers to which will help to better understand the current competitive environment in the industry of interest.

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- Traditional apparel brands like Dior, Chanel, or Saint Laurent introducing their jewellery collections (Dauriz, Remy, and Tochtermann, 2014);

- Young independent jewellery brands positioning themselves as “demi-fine” jewellery brands offering more affordable prices and cool design what makes them attractive for the Millennials (brands like Gaia Repossi, Jennifer Meyer, Delfina Delettrez and others) (Mau, 2017);

- New direct-to-consumer fine jewellery brands that launch sales on social media and sell online only (brands like Catbird, Grace Lee) (Mau, 2017);

- IT companies producing “smart” accessories like Apple Watch, fitness trackers, etc. since this is now the alternative option for the consumers to spend their money on instead of the jewellery (Lutz, 2017).

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What are their strengths and weaknesses?

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What are their strengths and weaknesses?

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The companies from each competitor group have their own strengths and weaknesses but the most common of them include the following:

Strengths:

- For the new young brands that sell and promote mainly online the main strengths is that they start using social media as point-of-sale right away from their launch while the traditional jewellery companies struggle to reposition and to incorporate digital marketing and e-commerce into their established business model (Mau, 2017);
- Increased interest of consumers to niche small brands that may customise products;
- New companies are more flexible in adapting to trends and modifying marketing and product strategies than the large companies;
- Smaller brands often successfully compete on price by offering the same quality of products at more affordable price tag.

Weaknesses:

- New and smaller brands are often limited in financial terms what reduce their ability to compete in marketing with large brands;
- Smaller and niche brands to not have recognizable and trusted brand image;
- New companies do not have well-developed network of suppliers and often pay higher for production because of the smaller quantities they order;
- New or small companies commonly have limited industry experience and knowledge and less professional management team.

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What are their strategic objectives and thrust?

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What are their strategic objectives and thrust?

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- To increase their market share and brand awareness particularly among the Millennials;
- To establish collaborations with celebrities and influencers who would endorse the brand
- To differentiate in terms of design and new technologies of production;
- To expand presence online considering the growing popularity of e-commerce in the jewellery industry;
- To ensure the consistent customer experience both offline and online by using advanced sales and marketing technologies.

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- Integration of online and offline sales channels;

- Broader use of social media for advertising and promotion purposes;
- Collaboration with celebrities and influencers;
- Focus on the Millennials as the key target audience;
- Constant improvement of production technologies and design.

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In the mature markets like the fine jewellery market, the typical response of the competitors that wish to increase their market share will consist in price cut. Another typical response to growing competition challenges is adoption of advanced technologies that would allow differentiate in terms of product or reduce manufacturing costs. Finally, the change of sales and marketing strategy by larger incorporating of digital instruments is another typical response from the competitors irrespective their size.

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- Clear identification of the target consumer group: price segment should be selected and the niche of market in this segment to focus and to develop the relevant business and marketing strategies (Tyagi, 2018);

- Trendy design and flexibility in adapting to consumer trends: modern jewellery clients want to see the design that fits the latest trends and is modern but still reveal the level of craftsmanship (Tyagi, 2018);

- Elaborated marketing strategy covering both online and offline sales and promotion channels: it is important to effectively combine both platforms irrespective of the target group a brand focuses on (Mau, 2017);

- Collaboration with the celebrities and influencers: this has become one of the main KSFs for modern jewellery brands and the choice of celebrities is crucial in reaching and attracting the desired target audience of consumers (Mau, 2017);

- Diversified supply chain: this would allow reducing risks of economic vulnerability in the UK or in other markets the jewellery companies purchase materials from.

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Daily Business (2018). Brexit and the UK jewellery market. Daily Business Group [online]. Retrieved from: https://dailybusinessgroup.co.uk/2018/02/brexit-and-the-uk-jewellery-market/ [accessed: 23 October 2018].

Euromonitor (2018). Jewellery in the United Kingdom. Euromonitor International [online]. Retrieved from: https://www.euromonitor.com/jewellery-in-the-united-kingdom/report [accessed: 21 October 2018].

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Hill, A. (2018). The Jewelry Industry's Design Dilemma. Forbes [online]. Retrieved from: https://www.forbes.com/sites/andreahill/2018/08/17/the-jewelry-industrys-design-dilemma/#1f4661df65ea [accessed: 23 October 2018].

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Lahiff, K. (2018). The US dollar is surging, and that could spell trouble for markets. CNBC [online]. Retrieved from: https://www.cnbc.com/2018/07/13/the-us-dollar-is-surging-and-that-could-spell-trouble-for-markets.html [accessed: 21 October 2018].

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Sharma, A. and Shen, V. (2017). How Tiffany & Co. Is Adapting to a Shifting Luxury Market. The Motley Fool [online]. Retrieved from: https://www.fool.com/investing/2017/10/09/how-tiffany-co-is-adapting-to-a-shifting-luxury-ma.aspx [accessed: 23 October 2018].

Statista (2018). Consumer spending on jewelry, clocks and watches in the United Kingdom (UK) from 2005 to 2017 (in million GBP) [online]. Retrieved from: https://www.statista.com/statistics/290127/expenditure-on-jewellery-clocks-and-watches-in-the-united-kingdom-uk/ [accessed: 22 October 2018].

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