The consolidation of retailing firepower in the hands of just a few companies, including LVMH, but also Richemont, among whose brands can be found Cartier, Chloé, Dunhill, and Van Cleef & Arpels, and Kering, in whose stable can be found Gucci, Boucheron, and Pomellato, among others, gives credence to concerns in the industry that the viability of smaller companies to compete over the long terms is limited. Among a public that is increasingly brand conscious, will there come a day when smaller diamond jewelry manufacturers become extinct?
But a growing phenomenon, underpinned by new technologies and in particular the social media, is helping level the playing field, enabling smaller companies compete with relative equanimity against the big boys. It is microbrands, which generally are owned by businesses of limited size. They have the trappings of a regular brand but are produced in limited numbers and marketed to closely defined target audiences.
OVERCOMING MARKETING AND LOGISTIC CHALLENGES
One of the primary challenges faced by smaller companies when it comes to competing with the major brands is the cost of marketing. LVMH, for example, increased its total marketing spending in 2018 to 5.6 billion euros ($6.3 billion), which was the equivalent of 12 percent of total group revenues. The ability of smaller firms to penetrate the consciousness of consumers with budgets equal only to a small fraction of that would seem an overwhelming task.
So have been sales infrastructure and logistic provided the bigger platers with substantial advantages. Major brands either own or control retail networks that ensure their ability to distribute product in the market, sometimes through their own stores or through the outlets of well-known jewelers.
Online marketing, by which small manufacturers can reach directly to members of carefully defined target audiences, and communicate with them the essential elements of their brands, is leveling the playing field on which the larger companies also play.
To get their products into the display case, smaller manufacturers traditionally have had to go directly the jeweler to pitch their merchandise, be it in the marketplace itself or at trade shows. With their limited resources and leverage they have been more vulnerable to being squeezed on price.
Online marketing, however, is helping change the equation, not only allowing the small manufacturer to develop a brand identity with limited cost, but also to create personal relationships with members of target audience and also to bypass the traditional retailers by going straight to the consumers.
Initially microbrands were sold in relatively confined geographic markets, but ecommerce and the ability to deliver goods safely to almost any point on the globe has meant they are going international as well.
A selection of watch microbrands. Given the similarity of the markets, their success is providing hope to smaller jewelry manufacturers.
MAKING A SPLASH IN THE WATCH MARKETS
To date microbrands have been eating up market share mainly in the watch business. These typically involve timepieces that are designed and manufactured by an individual or small team and then marketed directly to the consumer over the brand’s own website. They frequently present themselves as a more cost-effective alternative to major watch brands
“The watch market is saturated and the distribution channels in the upper-price segment are closed,” said Patrick Hohmann, CEO of German microbrand Werenbach, in conversation with GQ magazine. “It is almost impossible for young brands to establish themselves alongside well-known brands. In the lower price segment, the market is still dynamic.”
Instagram is the favored medium for the growing community of watch microbrands. “If a user has been lusting after a new dive watch, then a sponsored post for an affordable microbrand alternative may be well received,” stated GQ in its feature article. “Don’t underestimate, either, Instagram’s ability to display a life-size photograph of a watch. The consumer gets a proxy of an in-store experience – they can hold the screen over their wrist and imagine what it would look like to wear.”
Another favored tool for the watch microbrands has been Kickstarter, the global crowdfunding platform that focuses on creativity. According to the Swiss-based consultancy Mercury Project, during the first half of this year 183 watch projects were launched on Kickstarter and 48 percent of them succeeded.
The watchmakers are the ones currently making a splash with microbrands. But, given the similar structure of the jewelry trade and the corresponding markets and marketing platforms, it would seem reasonable that this novel approach that could be successfully adopted in jewelry.