The excellent sales results in Asian countries are one of the reasons allowing premiere jewelry brands to talk of recession as if it were some mythical beast. However, it is noteworthy that Asian markets are sending alternately directed signals.
The Chinese jewelry industry is developing “exceedingly faster than expected,” according to a report released by market research resource provider Research and Markets (R&M). Chinese jewelry industry sales have increased approximately by CNY20 billion ($2.88 billion) since 2005, and they reached CNY180 billion ($25.92 billion) in 2007. The report says that since 2003 the retail price index on China’s gold and silver jewelry goods has risen continuously and has been higher than the commodity retail price index in the same period. Besides, China’s jewelry industry has so far become the third largest in the country, preceded only by real estate and automobiles.
In 2007, the trade value of China’s jewelry products totaled $14.2 billion, of which, $6.2 billion was imports and $8 billion was exports, up 35.57% and 16.81% year-over-year respectively.
The report also states that, at the end of 2007, there were more than 10,000 jewelry sales outlets on the Chinese territory, most of them small stores selling inexpensive goods and not specialized in brands. Some large-scale shops or chain stores are selling independent regional brands.
R&M’s analysis is based on the statistics of the Gems & Jewelry Trade Association of China, the China Gold Association, the Shanghai Diamond Exchange, the Ministry of Commerce, the National Bureaus of Statistics and statistics bureaus at provincial or municipal level, as well as information from financial statements of some key jewelry enterprises.
At the same time, the Indian press takes notice of the falling jewelry demand due to growing prices for gold aggravated by an unfavorable exchange rate of the rupee.
The Indian market started to give alarm signals as early as March, when, for instance, there were reports about a 75% sales slump in Gujarat. The situation was not reversed even by the weddings season. It was instantly followed by another sales collapse and according to analysts this situation would last at least until August. However, in the first place this was true for the mass segment. The Indian jewelry industry’s spokesmen stressed that high gold prices urged consumers to invest into top-class jewelry. Buyers shunned form visiting jewelry kiosks, but some of them were flowing over to brands-selling jewelry stores and trade malls.
Cartier sees Thailand as one of the top five markets in Asia that could enjoy a double-digit growth rate this year, the Bangkok Post reports. “Asia is doing well with a sustained momentum over the next few years. It is less affected by the sub-prime crisis in the US as the region led by China has a strong local motive to drive its own economy,” said Nigel Luk, managing director of Cartier Far East.
Currently, sales from Asia contribute 40% of global sales for Cartier. Among Asian markets, China is the fastest growing, followed by Hong Kong, while Thailand is very promising with double-digit growth last year.
Major customers of Cartier are wealthy Thais. Foreigners represent a small portion of the local consumption market.
According to the data released by LVMH Moet Hennessy Louis Vuitton SA of France, aggregate yen sales of all commodities sold under the Group’s brands in Japan decreased 4% in the first quarter.
Tiffany & Co., an American premium jeweler, saw Japanese sales drop 7% year on year in the February-April term on a same-store basis and 2% on a total basis, net of currency movements.
Gavin Haig, President of Richemont Japan Ltd., representing Cartier lines of jewelry and watches on the Japanese market, said the brand was facing an uphill battle in sales at department stores, though sales at its directly run shops are doing well. In particular, he noted a decline in the number of young consumers, who buy relatively lower priced products carrying the Cartier name.
A manager responsible for purchasing foreign brands for a department store in Tokyo’s Nihombashi district pointed to “fewer female customers ready to pay any price for famous brands.”
Top-price segment brands are facing a bearish trend in the country’s regional markets as well.
Italian jewelry brand Bulgari showed solid sales in January-March, marking a 1.6% gain from a year before. But the company’s CEO, Francesco Trapani, is not optimistic. As he sees it, the Japanese market for upscale brands does not seem likely to rebound any time soon because the difference in yen-euro exchange rate over the past few years has pushed up prices by nearly 40%, while consumer income has basically remained flat.
Trapani forecasts tough times ahead for foreign luxury brands in Japan because of the widening gap between the higher prices and the levels at which Japanese consumers feel the products are still within their reach.
