As the competition gets deeper and wider, retailers in China seek out and promote all possible events and opportunities, including Christmas. Although December 25 is not an official Chinese holiday, not endorsed by the government and not religiously significant for most people in China, it has gotten more and more popular over the years in major cities, due to the increasing recognition of Western culture and the commercial promotion by retailers. Christmas decorations and songs are popular in all kinds of retail stores, including jewelry stores, along with holiday sales promotions.
As a result, a sales season has been created that extends from Christmas Eve to New Year’s Day. Although China’s Christmas is not as big as the Christmas season in Western countries, the holiday atmosphere makes people more likely to spend, after a whole year of hard work. That is then followed by the much bigger sales season of the Chinese New Year. Many young couples will get married during the seven-day Chinese New Year holiday, starting on February 14, 2010, which happens to also be Valentine’s Day this year. In preparation for the extended sales season, the diamond wholesale market awakes after the National Day holiday in October, becomes busy in the second half of December and stays busy until the end of January.
Franchising Becomes Popular AgainThe franchising of diamond and jewelry stores has been contributing to the expansion of many brand names at relatively lower costs. From 2007 to 2009, many jewelry brands held off their franchising plans, but it is expected large-scale franchising might start again in 2010. Hong Kong–based jewelry brand 3D-Gold, with around 220 stores in Hong Kong and Mainland China, has just announced its plan to expand to 500 stores in Mainland China by 2012, mainly through franchising. Chow Tai Fook, also Hong Kong–based, plans to open 100 new stores in Mainland China and reach its goal of “1,000 stores” in 2010, employing around 30,000 people and selling approximately $1.5 billion yearly.
Currently, the China jewelry market basically consists of three types of brand names: the Europe-America–based, such as Cartier and Tiffany’s, the Hong Kong–based, such as Chow Tai Fook and Chow Sang Sang, and the local-based, such as Lao Feng Xiang. Many brands pursue franchising as a strategy of rapid expansion in light of increasingly fierce competition. The jewelry industry is generally optimistic about the domestic market in 2010 and the three subsequent years, and regards 2010 as a good year for branding and expansion.
According to estimates by the China Gems & Jewelry Trade Association, by the year 2010, 250 million Chinese people will be able to afford luxury goods and jewelry consumption could reach $38 billion. The jewelry retail in China in 2009 was hardly affected by the global financial crisis and the big brands are confident enough for more expansion in 2010.
Hong Kong Exports to Mainland China SoarThe data from the Hong Kong Trade Development Council (HKTDC) shows that Hong Kong’s exports of fine jewelry to Mainland China in the first three quarters of 2009 soared by 98.8 percent year on year, while exports to the rest of the world dropped by more than 30 percent to $2.4 billion.
“China as a market has long been the focus of global attention. The global financial crisis has served as a catalyst to make Hong Kong companies realize the market opportunities in Mainland China,” said Alan Lo, general manager of KTL Jewellery Mfr. Ltd.
However, Sunny Chan, chairman of the Hong Kong Jewelry Manufacturers’ Association (HKJMA), pointed out that there are some fundamental problems that need to be addressed. “Although China has a huge market potential, the complicated and time-consuming procedures of applying for import and wholesale licenses in China, for instance, have deterred some of our members from venturing into the market. More efforts still have to be done in making procedures more transparent to accelerate the pace of development.”
Becoming World’s Biggest Gold ConsumerAccording to Philip Klapwijk, executive chairman of GFMS Ltd., precious metals consultancy, China might have become the world’s largest gold consumer in 2009. “We think China will be the No. 1 gold consumer for 2009, although the fourth quarter will still be the decisive quarter,” Klapwijk said. “If prices remain high, then China is more likely to be the biggest user because the Indian market is more price-sensitive.” Estimates are that annual domestic gold demand for jewelry and investment might reach 432 tons.
The Marketplace
- The wholesale market improved in the second half of December in preparation for the Christmas holiday retail sales, as well as Valentine’s Day and the Chinese New Year. The wholesale season is expected to last until the end of January.
- Demand is greatest for 0.30- to 1.10-carat round stones in D-J, VVS-SI, Gemological Institute of America (GIA)-certified and preferably EX cut.
- Demand is also good for round and some fancy shapes in 1 carat in I-K, SI for promotional items. There is some demand for fancy shapes of the same color and clarity, too.
Article from the Rapaport Magazine - January 2010. To subscribe click here.