According to surveys performed by the Inventica Company, in the course of last 5 years the Russian jewellery market was showing high growth rates of 25-30% annually. The stable market growth was the result of the population higher well-being leading to increased purchasing capacity. In particular, there is an upward tendency in purchasing expensive products: if in the first six months of 2006 sold items worth more than 8 000 roubles accounted for 2%, in the same period of 2007 this figure was already 14.5%. On the background of a high market, consumers are seen to change their attitude to jewellery in a significant way. Presently, jewellery shifted to the category of ordinary goods.
Valery Radashevich, General Director of the Guild of Russian Jewellers, when opening the exhibition “Jewellers’ Guild - 2007”, informed that last year jewellery sales in Russia reached almost 80 billion roubles (up 118% to 2005). Of this amount, diamond adornments accounted for almost 44 billion roubles (up 121.4% during one year). The Russian jewellery market share within the world jewellery market is now 2.2%.
During the exhibition, Boris Borisov, First Deputy CEO of the Russian Assay Chamber, told that in the first 9 months of 2007 the Chamber assayed and hallmarked over 35 million gold jewellery pieces with a total weight of 91 tons, which is 94% of the whole output in 2006.
Simultaneously, Russia imported 1.9 million gold adornments weighing 7.6 tons.
Besides, this government agency assayed 23.8 million silver jewellery items totally weighing 171.5 tons.
There is an increased demand for platinum jewellery – in the reported period companies sold 16 700 jewellery items weighing 108.9 kg, as well as 3 300 palladium adornments weighing 16.6 kg.
V. Radashevich stressed that the Guild of Russian Jewellers sticks to a positive outlook for 2008. Jewellery sales in the Russian market will be close to 100 billion roubles (against nearly 89 billion roubles in 2006). Gold articles sales will grow to approximately 135 tons (90.6 tons last year). It is quite real, in the jeweller’s opinion, to produce 150 tons of gold jewellery in 2010.
According to V. Radashevich, “the jewellery industry needs a certain support from the government” since Russia is going to join the World Trade Organization. He believes that removal of all import duties on all jewellery gems and components could be the first step required to stabilize the jewellery market. Giving the industry 3 or 4 years to adapt to the new customs policy, the next step may possibly involve cancelled import duties for ready-made jewellery articles and small diamonds. V. Radashevich declared that the unstable situation in the jewellery market affects the investment component of gold application. Meanwhile, a slowly growing price, instead of its sharp fluctuations, could permit to use gold as an instrument of reliable investments. According to him, today about 18% of gold sold in the Russian Federation is used by consumers for investment purposes.
Rajesh Gandhi, President of Choron Diamond, an international jewellery company, estimated the Russian jewellery market in 2006 at $3.8 billion, of which $1.8 billion (47%) fell on diamond jewellery. According to R. Gandhi, precious metal articles account for 50% of sales and adornments with semi-precious and precious stones account for the other 50%. One of the main trends in the jewellery market in the coming years will be trade networks movement to provinces. This process is stipulated by the laws of economic development: trade networks of wantonly growing markets feeling the lack of resources in mega cities are seeking their ways of expansion in provinces.
According to expert assessments, today in Russia there are three large-scale networks each comprising over 100 stores – Adamas Holding, Adamas and OAO Moscow Jewellery Plant (or MJP, belonging to Israel businessman Lev Leviev). Besides, there are about a dozen of medium-sized Russian jewellery networks, such as Yashma-Zoloto, Grace, the Kristall Jewellery Center of Smolensk, the Krasnoyarsk Plant of Non-Ferrous Metals, the Yekaterinburg Plant “The Urals Jewellers” and the Tsentr-Yuvelir network in Moscow. Experts emphasize that the greatest demand in Russia is for non-expensive jewellery. Premium-class items account for only 2-3% of the jewellery market. The largest jewellery networks having from 20 to 100 outlets, according to experts, operate in the medium and low price segments with an average single sale receipt amounting to about $400.
The participants of the “Prestige-2007” Exhibition, which took place in October in Nizhniy Novgorod, ventured their own vision of the Russian jewellery market. In their opinion, the Russian jewellery industry will be moving towards producing exclusive jewellery.
It is said that the Russian jewellery market is facing recession. The North-West Region registered a 5% - 6% drop in jewellery demand, while in the Volga Region, this figure reached 12% and in the South Federal Region, it went up to 20%.
Today jewellery adornments are treated exactly as adornments and not as investments. Nobody is going to buy diamonds for savings purposes because it is wiser here to invest into real estate. The owners of jewellery boutiques complain that 80% of all sales fall on the New Year and 8 March.
It should be noted that this tendency is quite in rhyme with the world jewellery market. Thus, American jewellers consider the Christmas Eve and the Saint Valentine Day as the key periods for jewellery sales.
Managers of jewellery companies say that exclusive items are especially popular these days. Despite their high price, the client’s faith that he or she is going to be the only owner of an art object clears all the doubts. On the other hand, the market is full of “second-hand masterpieces”, whose design is “cribbed out” of fashionable Italian jewellery houses. These are the usual ways of Chinese and Turkish manufacturers.
According to FinExpertiza Consulting, today in Russia, diamond jewellery accounts for 15% of the market. Another 5% belong to jewellery with other gems. The majority of consumers prefer to buy jewellery items with semi-precious stones or without any stones at all.
There is another trend: manufacturers distribute their products not only through their trade networks but also by way of their e-stores. As a rule, e-prices are lower than prices offered at boutiques by several thousand roubles.
Kristall of Smolensk is quite content with how its e-commerce is going on. Kristall experts say that in this way they sold half-a-million dollar worth of diamonds during nine months and it was impossible to pinpoint any preferences of e-buyers who bought both $200 and $15 000 worth stones.
Today Russians are ready to pay an average of 3000 to 5000 roubles for jewellery. Experts interpret it as an opportunity to expand for both jewellery makers and sellers. According to Olga Mironova, General Director of RosYuvelirExpert, a Russian information agency, “the fact that in Europe one hundred dollars are considered as an initial demand level and that Russia has reached this notch gives hope for a qualitative change in the jewellery consumption pattern.” “The growth of purchasing capacity implicitly serves to bring the jewellery purchasing culture to a higher level,” Olga Mironova explains. “We may hope that buying high-quality original items, consumers will strain after jewels belonging to another level. May be they will stop to associate jewellery with just a combination of metals and inserts, which can be bought at sales being offered at a one-item price for two or the whole year round with a 50% or 70% discount.” According to a survey performed by RosYuvelirExpert in team with the Gortis Consulting Company, if a couple of years ago the major buyers at jewellery stores were people aged 45 and older, nowadays buyers are rapidly getting younger. The most active among them are 25-year-olds. This is a generation of buyers, which, according to the surveyors, want “everything and now” though they do not trust any traditional advertisements and are loyal to a certain brand. “Buyers are not only getting younger, they are cosmopolitan and evidently because of this ratings started to include manufacturers from Italy, Turkey and Brazil,” explains Olga Mironova. “The main thing for Russian manufacturers is to hold the middle class.” If a couple of years ago, jewellery were chosen by gold weight, prices and discounts, today, according to the surveyors, emotions are the leading factor.
Meanwhile, the retail jewellery market makes its players to win new territories and low-income buyers ever more actively, RBC noted. Only sales in Moscow are able to maintain a required cash flow to medium-segment sellers. The example of Altyn, the only network positioned as a discounter, shows that the majority of purchases were made by the audience, which choosing between a 500-rouble ring and a 600-rouble ring will buy the first because it is 100 roubles cheaper. “We analyzed the demand and found out that we are faced with a new style of consumption,” says Pavel Sidorenko, one of the owners of the Adamas Jewelry Company. “The buyer wants to save money and to have pleasure not so much from what is bought but from the discount.” Besides the consumers’ wish to come to the democratic market segment, there are market reasons for this: for some time already, the gold price in the world market is going up and Moscow jewellers predict that manufacturers and sellers will have to lift prices at least by 20% until the end of this year. Under such circumstances, selling non-expensive product is a good way to stay afloat.
Network trade is targeted at medium buyers and it involves mass consumption products. I do not want to use the “consumer goods” expression but this is actually the case, says Sergey Bogomolov, Deputy CEO for Commerce of OAO Yuvelirnaya Torgovlya Severo-Zapada. “We are much more interested in perspective buyers, i.e. in people who stick to high fashion and purchase original things. It is of much more interest and much more profitable to sell high price goods spending similar labour at similar labour costs. Our sales network is now trying to operate in boutique format and it goes not bad. An expensive store involves particular design of its trade hall, coffee and a possibility to view an item through a magnifying glass without any haste and under special lights listening to expert explanations.
…I am just convinced that in two or three years the Russian jewellery market will have several major operators, while the rest will face difficult times. As for our domestic jewellery factories, after Russia will join the WTO they will most probably be closed. Try, for instance, to shut down production at the Village of Krasnoye-on-Volga, which has the only enterprise, a jewellery factory, bearing quite a lot of municipal duties and maintaining a sewage treatment works, a kindergarten, a school, a hospital at its own expense and besides being the major payer to the local budget. This is why their products are expensive, because their prime and overhead costs include everything. Then, our jewellers pay 18% more for their gold and our workforce is expensive. Today the jewellery industry features an average salary of approximately $700. Most factories will not survive under such conditions… If we are to name the WTO enemies in this country, then we have to name our jewellery factories. The point is that they will not be able to adapt immediately. For example, you are more probable to put on a Tissot watch than Chaika and to buy a Sony TV set, not Temp or Raduga. Unfortunately, we shall have to fall out of habit of wearing Russian jewellery. The situation will be like anywhere else in the world, globalization.”
All the jewellery retailers admit that the time for their consolidation in the market has already come, RBC says. Today the market leaders – Adamas, Jewellery Network 585, the Moscow Jewellery Plant and Yashma-Zoloto – are working in team to squeeze out petty players out of the market and approximating the time when they will grapple with each other. The only niche to house small companies for a while belongs to exclusive designer items like, for instance, those made by Valentin Yudashkin’s Fashion House. However, the luxury segment in the Russian jewellery industry is far from being the most promising. It is already quite well represented by such world famous names as Chopard, Cartier, Tiffany and Carrera у Carrera. It is unlikely that our jewellers will be able to compete with them today and even tomorrow. They belong to quite different weight categories.
