Svetlana Maksimova, CEO of YuK Casting House, graduated from the Physics and Mathematics Faculty of the Yakutsk State University. Prior to the 1990s she lived for more than ten years in the Dzhugdzhur mountain ridge area (where gold mining was underway). She took an active part in the creation of the diamond cutting industry in the Republic of Sakha (Yakutia). Having settled in Moscow in 1995, Svetlana Maksimova started her own business in high-end jewelry retail trade launching the Yakut Diamonds trade mark, which later turned into the regional trade mark for many jewelers in Yakutia.
How do you assess the current state of the diamond market and diamond jewelry?
I am afraid that replying to this question it would be difficult to say something positive. Official data and figures show that this industry has a rather low pace of development. The pre-crisis level has yet been matched. So, in my opinion, there is nothing to be particularly pleased about. The average ticket is still far from the pre-crisis level, though better than in recent years. Bureaucracy and ‘gray’ schemes are there accompanied by low-quality gold, bad documentation and risks of laxer control over retail. There are less good quality diamonds in the market and this is when customers buying a diamond ring are eager to go into details regarding the quality of a stone, its characteristics and the design of a jewelry piece.
The expectations of industry representatives for a gradual decrease in import duties have not been met either - the long-awaited WTO is not producing positive influence on our industry. The result is that, according to unofficial experts, illegal imports (smuggling, in the words of authorities) are on the rise, mainly channeling South-Eastern and some European goods to our market.
In your opinion, what are the reasons for the poor development of the industry and what are its main challenges?
In my opinion of a private entrepreneur observing the behavior of my target audience in terms of purchases, the state of the economy and the internal policy do not facilitate higher demand: the tightening of control over income and expenses of officials and wealthy people in general, the Cyprus events, competition from other, more attractive investments, in particular, in real estate (for example, it is advertised that investments yield a secure profit only if put into housing), the expansion of Moscow boundaries – all this makes affluents to withdraw their capital or busily invest into real estate. Unfortunately, the banking community and other financial institutions do not know how to work with such capital as precious metals and gems. There is virtually no normal lending extended to the jewelry industry, while rental prices for jewelry premises are exorbitant. As a result, many firms, especially smaller ones, are actually working for the owners of selling space, who managed to get those areas during the period of privatization, though they were built by the state in the Soviet era. Modern shopping malls hiked rental prices for jewelry stores to about $10,000-15,000 per one square meter. Many landlords, in addition to high prices for rent, do not hesitate to monitor sales journals claiming an interest (up to 10%) in the turnover. Thefts from jewelry stores and during exhibitions do not subside. Many smaller entities feel unprotected from thieves and gangsters, as well as from law enforcement agencies. Cases of insurance benefits paid by insurance companies are rare. All jewelry stores carry considerable protection costs, but in an emergency these measures are actually futile.
The desire of the state to totally control the entire circulation of precious metals and finished goods made of precious metals and gems based on the law of the 1990s, brings about a situation when imports of jewelry and small-scale private production of routine and even very attractive designer jewelry are going on outside any accounting and control. Last year, the authorities even issued a decree under which sales personnel must ask their customers buying jewelry worth over RUB 15,000 – this is a little more than $400 - to produce copies of their passports! And I do not see any prospects for bringing the legal framework in line with the realities of the jewelry industry.
Are there any new trends in the market, new firms and brands and is there anything of interest about them?
The fact that the customs zone is a bit expanding, for instance, via Kazakhstan, may be called a positive development.
Where possible, Russian manufacturers are retooling their production facilities, improving their technological base, thus driving higher the quality of their goods in general.
There are more and more competent and bold managers in jewelry companies, who build their business in line with global trends. Since the state has completely left the industry in terms of production and retail, their personnel policy is also tailored along private reasoning and many companies are now led by the children of ‘industry captains.’
Boutiques of world famous jewelry brands opened in major trading centres, which is very good both for buyers, who have wider choice, and for domestic jewelers, who have an example to follow and a good incentive to improve the quality of their products and to improve the overall artistic taste.
We can see a trend probably in the fact that many newlyweds started to buy more expensive engagement rings and order diamond rings of more interesting design, than just a gold ring. Judging by my clients, people in Moscow began to buy more jewelry in white gold.
Lately, more and more money turnover is going through credit cards instead of cash, which is very good. But this is more playing into the hands of the banking sector - for example, Sberbank does not want to reduce its commission taken to service its terminals. So far, there is no established crediting practice for our customers at jewelry stores, including our own, and although we offer this kind of service, people are not accustomed to buy jewelry on credit. They eagerly buy appliances, cars, flats, but not jewelry.
On the upside I can add that online stores are doing brisk business, which is a very good opportunity for busy people.
How was your last holiday shopping season and what are your predictions for this year?
Speaking about New Year sales, I should say that unfortunately, I and my friends have not registered any jump in sales. Yes, there was growth, but not like before. People were mostly buying small silver souvenirs, cheap pendants and rings. This New Year, there were few who bought jewelry worth more than $10,000 for their special ones. Christmas gifts were even smaller in caliber. It seems that such gifts were mostly various gadgets.
As for predictions, until the state will not change its attitude to the industry, everything will go on the way it is going now – in a quiet, drab and tax-evasive manner...
What is your opinion about jewelry trade fairs and exhibition policy of their organizers?
The situation with jewelry exhibitions is very peculiar. They are more in number. The key player is Restek from St. Petersburg, which is running a lot of exhibitions, including provinces. In general, as I think, exhibition activity is developing quite briskly, engaging provinces. But among the organizers there is no understanding of its general vector - each of them is doing this at his or her own discretion. As a result, there are a lot of overlaps and sometimes jewelry shows are held simultaneously in one and the same city and organizers are competing with each other to the detriment of participants. In Moscow there is no well-developed exhibition infrastructure, especially with parking lots. Manufacturers and trade organizations are put in the same conditions during exhibitions. Even exhibition advertising is based on the condition that individual visitors can buy from factories and manufacturers. Is there any place then for retail and trade organizations? Even at retail exhibitions held in the run-up to holidays (International Women’s Day on the 8th of March or New Year) the stands of jewelry factories selling jewelry to individuals at wholesale prices occupy forefront places.
In recent years, the Moscow retail network has been selling jewelry under the trade mark of Yakut Diamonds. Is demand for this kind of jewelry rising? And what are your plans for the future?
You know, the international market has become more sensitive to beauty criteria and Russian goods have acquired noticeable preference.
As for Yakut Diamonds, it should be said that jewelers from Yakutia work with genuine diamonds, which, as you know, are mined in Yakutia. This inspires confidence. The staff of these jewelry stores is also from Yakutia, and in general these are competent, modest and honest people.
As for my plans, I view the promotion of Yakut diamonds and diamond jewelry in Russia and in other countries as the main task of my life. While starting my own business, I was engaged in importing casts or unfinished jewelry pieces without central diamonds. I was seeking suitable models at various exhibitions across the world and used to pay nearly 50% of the cost as custom duty, I imported billets then set diamond in them, thus creating my own ‘exclusive’ jewelry. Now of course, I work with good jewelry craftsmen and we make many classic models, that are in demand, here in Moscow, successfully participating in jewelry contests.
Galina Semyonova, Rough&Polished
