If you briefly depart from the holidays and cast a glance on the current state of the Russian jewelry market as a whole, you will easily notice that demand is simultaneously influenced by several alternately directed long-term and short-term trends. Objectively, the average Russian wage earner’s income level is gradually rising, although being significantly affected by inflation in recent months. Besides, the jewelry demand pattern is influenced by rising prices for gold in the world. Finally, Russian consumers turn to be more and more sensitive to jewelry fashion trends.
According to the data provided by the Gild of Russian Jewelers, in the first six months of 2007 jewelry sales in this country went up 35% against the forecasted 15%. Valery Radashevsky, heading the Gild, believes that this demand was caused by the falling rate of the U.S. currency causing the Russians to retarget to more reliable assets. In his opinion, the Russian jewelry market will sell 100 billion roubles worth of jewelry as the year’s net result.
In November, the “Continent Siberia” analyzed the state of jewelry market in Novosibirsk. According to the publication, the significant rise of gold price and the increased number of players in the mass-consumption jewelry market did not so far bring about any conspicuous transformations. There were no attractive offers made by new marketers and consumer demand remained at the same level. However, market redistribution already started and consumer loyalty was of special significance at this time. According to Irina Kuznetsova, General Manager of the Almazy Yakutii Jewelry Chain Stores, there were as many as three markups in November only. The Adamas Network Stores informed that the average sales slip amount went up by 500-1000 roubles.
Nevertheless, despite the price rise demand for mass-consumption gold jewelry remained at the same level. To a certain extent, it changed its composition. Marketers noticed increased demand for “light-weighters” – jewelry items weighing 2-3 grams. “Despite the increased prices, it was nevertheless evident that people took the liberty to spend more on jewelry and to choose what they really liked,” said Tulbek Azimbayev, General Manager of the Charoit Jewelry Boutique.
The mass media of Perm, which covered the “Jewelry Fashion-2007” Exhibition, also pointed to wonton growth of the jewelry market in their city. Daniil Dmitriyev, Executive Director of the Exhibition, said, “According to visitors polled in 2006, jewelry items worth 30,000-50,000 roubles were in the segment of most significant demand. This meant that people were ready to pay a certain amount of their money for beauty… In 2007, people were trying to take stock of more expensive things with carat-heavier gemstones made of more expensive metals – platinum and white gold. It meant that their purchases were more conscious. In some way, they were buying things with some investment purposes.”
Sweeping market saturation was the main trend of the season. Mass consumption “jewelry ware” did not escape the fate of many other branches of the consumption market: during the last two or three years Novosibirsk saw many new market players coming, while the players with a long-term record significantly escalated the number of their trade outlets. Today there is a “trio” of federal-level leaders actively operating in this area: the 585 Network, Yashma-Zoloto and the Moscow Jewelry Plant.
“The Novosibirsk jewelry market is not only saturated, it is oversaturated,” believes Natalya Sokolova, General Manager of the Russkiy Yuvelir Jewelry Network in Novosibirsk. Tougher competition is ever more conspicuous, agrees Zhanna Provotorova heading the Retail Department of the Zolotoye Runo Boutique. In the nearest future, as predicted by some marketers, only large-scale manufacturers and strong network sellers will remain in the market.
However, jewelry stores operating in the mass-consumption segment in certain Russian regional centers (not to mention provincial capitals) are presently turning into regular “neighborhood retail stores.” Thus, according to the Tyumen Municipal Department for Consumption Market, the city is currently involved in some sort of chess castling: small food stores are being closed, but there are many jewelry stores being opened instead. In Moscow, jewelry stores are replacing gaming houses in a similar way. In 2007, mass media already described the downtown area of Yaroslavl overcrowded by jewelry stores. In Kostroma, the regional governor is toying with the idea to promote the city’s image of a “jewelry capital of Russia” and to restructure the historic Red Mall for trade in homecraft and jewelry wares.
In some areas of Moscow there are more jewelry stores than food shops, wrote the “Argumenty i Facty” in surprise. “Do you find it strange?” comments Dmitry Sh., a field investigator of the Economic Crime Department of the metropolis. “According to our information, up to 80% of goods sold by jewelry stores in Moscow are trumpery having very fishy relation to jewelry. They are made of gold stolen from the gold mines in Yakutia and Magadan. The metal is illegally smuggled to Turkey where it is used to stamp out trinkets. Then they are smuggled back and hallmarked with high assay numbers. Since no taxes or dues are paid under this scheme, the net income per one gram of gold exceeds 1,000 roubles. Such schemes allow to organize “sales” and to “cut” the initial price of jewelry by 50 percent and even more.” Doctor of economics, Professor Nikita Krichevsky agrees with the investigator: in 2006, there were 50% of counterfeits in the total amount of jewelry articles in the Russian market.
According to participants of the Novosibirsk jewelry industry, the majority of buyers in the mass-consumption jewelry segment are women aged 40-50. Women are not only active buyers of gold; they wear it much more often. The sterner sex is more modest. “The fashion of the 1990s when massive gold chains and enormous signets were the main masculine adornments has long since passed,” says Vitaly Vitukhin, General Director of the Novosibirsk Jewelry Plant “Adalit”. “The women’s share in the market product range accounts for 55%, while that of men for 45%,” informs Alexander Tarasov, heading the group for promoting the 585 Jewelry Network stores.
The estimates of the Russian luxury market given by the jewelry industry participants and experts are also very bright. According to Prime-TASS, the luxury market capacity in Russia last year was 2.5 billion euros and its major part fell on Moscow amounting to 1.8 billion euros. Bernard Arnault, Chairman of the Board, Louis Vuitton Moet Hennessy, who visited Moscow, said in the nearest future the world luxury market would be doubled rising up to 300 billion euros, and according to him, this market growth would be facilitated by India, China and Russia. However, the luxury market in Russia will catch up with its leaders – the U.S.A., Japan and China – only in 10 years.
According to Merrill Lynch, at present there are 88,000 dollar-millionaires in Russia. This indicator is growing from year to year. This means that the number of potential clients of the luxury industry is growing. According to Eves Gijrath, the founder and President of the Millionaire Fair, the watch and jewelry market in Russia is averagely growing by 25% every year. Despite the widespread stereotype idea about contrast between Moscow and provinces in lifestyles and attitudes towards valuables, it would be difficult to miss the luxury market growth in Russian provinces. For instance, on December 14, Evroset opened a Vertu mono-brand boutique of expensive mobile phones in Yekaterinburg. Yevgeny Chichvarkin, Chairman of the Board, Evroset, told at a press conference that this was the fifth and largest Vertu boutique in Russia.
“I am proud that this store was opened in Yekaterinburg and not in another city. This emphasized the high status of the city and improved wellbeing of its residents. The point is that the phones, which are already on sale in the Yekaterinburg boutique, belong to the price segment ranging between 4,600 to 300,000 euros. Besides, this is the most beautiful of all the boutiques of this brand in Russia,” Yevgeny Chichvarkin stressed.
According to Irina Burova, heading the luxury business in Evroset, in the opened store there is a full-scale line of Vertu phones, which are hand-made and inlaid with precious metals and stones. “In particular, only the Yekaterinburg boutique will put on sale a Vertu Signature Cobra exclusive phone created by Vertu in team with Boucheron, one of the world leading jewelry houses. The point is that there were manufactured only 8 phones of this series. Today, of the limited series there remained only one and it will be showcased in Yekaterinburg. The phone is encrusted with 2 hand-cut white diamonds and 439 rubies. The price of this phone is 300,000 euros,” Irina Burova informed.
According to Victor Lukanin, heading the Urals subsidiary of Evroset, during the two weeks after the general public came to know about a Vertu boutique opened in the Urals capital the company’s information service received over 100 calls from Yekaterinburg residents wishing to buy these phones.
It should be stressed that during the press conference, about 15 minutes after the “mobile” boutique was opened, it was reported that one of the phones had already been sold at 4,600 euros.
In December, a one-of-a-kind jewelry item was put on sale in Kaliningrad and it was a platinum ring decorated with 224 diamonds, the largest of which weighed 3.5 carats. The insurance value of the ring was set at $250,000. It is curious that the work was performed by Kaliningrad jewelers, who hope their magnificent jewelry piece will find its owner before the New Year and that s/he will be a resident of Kaliningrad.
