During the National Day Golden Week holiday from October 1 to 7, jewelry retail sales were booming nationwide, especially in gold items. In fact, sales of wedding jewelry picked up even before the holiday, since many couples were planning to hold their wedding ceremonies during the weeklong holiday. Adding to the sales boost was the fact that this year’s Mid-Autumn Festival holiday fell on September 22 through 24, providing Golden Week with a head start and creating a “super holiday.”
Golden Sales
The Golden Week sales season is widely known in the trade as “Gold September, Silvery October,” reflecting the fact that September is a very good sales season, and October is also very good, although not as good as September. Sales were also helped by the fact that high gold prices and low bank interest rates are driving many consumers to buy gold jewelry, gold figurines and gold bars to store value.
The Beijing 2010 Shopping Festival, which specially targeted the wedding segment of the retail market, also positively impacted the Golden Week sales that followed. The three major jewelry retailers in the city — Caibai, Guohua and Gongmei — enjoyed a year-on-year Golden Week sales increase of 77.7 percent, 180.7 percent and 82.4 percent, respectively, according to data released by the Ministry of Commerce.
The next big sales season will be from Christmas to New Year’s, for which retailers also have high hopes. Although Christmas is not a national holiday in China and does not have the same importance as in Western countries, it is becoming more popular among the young people. Meanwhile, Indian suppliers are rushing to make as many sales in China as possible before closing for their own Diwali holiday November 5.
In the midst of so much good news, many wholesalers are complaining that the fierce competition among fellow wholesalers and also the competition among the downstream retailers have squeezed their profit margins despite the increase in sales.
Wedding Show Woes
Part of the blame is being placed on the increasingly popular and increasingly frequent big-city wedding show, which is both loved and hated. Big cities like Shanghai might have more than ten of these business-to-consumer (B2C) wedding shows a year that cater to the need for wedding photos, gowns, banquets and, of course, wedding diamonds and jewelry. Retailers, exhibiting side by side, have to fight muzzle to muzzle over prices because it is so easy for the consumer to shop around and pit retailer against retailer. The hectic comparison-shopping and competition for sales can bring final selling prices down by 30 percent compared to regular retail prices, making them close to wholesale prices. A three-day wedding show can close as much as half a million dollars in sales, but many retailers say the low prices can make it hard to make any profit at all.
The shows attract a large volume of consumers but the problem is that weddings are a one-time buying event for most people, so when a consumer buys wedding jewelry at a very low price at a show, it will be a long time before he comes back, if ever. At the same time, the wedding shows are so frequent that savvy consumers shopping for jewelry can simply wait for the next one, rather than visit stores. That impacts on the sales of both the traditional and website-based retailers. In response, some well-known exhibiting retailers, seeing the impact of the shows on their businesses, have simply dropped out of the shows entirely.
Responsible Jewelry
The workshop on Corporate Social Responsibility (CSR) was the keynote event of the United Nations Institute for Training and Research (UNITAR) Week, held in the United Nations (UN) Pavilion at the Shanghai World Expo on September 21 and 22. The themes of CSR and “Responsible Jewelry” are new concepts for the China jewelry market, despite the fact that it represents more than $30 billion in annual sales — of which more than $3.7 billion is in diamond jewelry — has a growth rate of more than 10 percent annually and employs three million employees in more than 50,000 jewelry companies.
Organized by UNITAR, in cooperation with CIBJO’s World Jewellery Confederation Education Foundation (WJCEF), and with the assistance of HRD Antwerp, the workshop brought together for the first time high-ranking UN officials, members of the Chinese government, jewelry industry leaders from around the world and other business leaders. The event began with a jewelry-industry focused session, organized by CIBJO, which reviewed the evolution of CSR in the jewelry sector over the decade, covering events from the establishment of the Kimberley Process Certification Scheme (KPCS) to the adoption of a proactive CSR policy by CIBJO, following its acceptance into the United Nations Economic and Social Council (ECOSOC) in 2006.
The Marketplace
• Wholesalers returning to work after the Golden Week holiday reported sales had picked up.
• There is heightened concern among big wholesalers about the weaker dollar because it has the effect of lowering margins on existing stock that was bought months ago with U.S. dollars, but is being sold now in renminbi.
• The price war in China, both in wholesale and retail, has been going on for a while, but never as fierce as this year. Trade members are facing a lot of variables, including the rising rough but flat retail prices, and the fast-rising value of the renminbi against the U.S. dollar.
• Demand remains good for rounds in 0.30 carats to 1.10 carats, D-H, VS, Gemological Institute of America (GIA)-certified diamonds in triple EX, double EX and EX cut grade with none to faint fluorescence.
• Demand is good for parcel goods of 0.10-carat, G+, SI and 0.20-carat, G+, VS.
Article from the Rapaport Magazine - November 2010. To subscribe click here.