There have been a significantly increased number of publications in the Russian mass media pinned to the jewelry industry. The reason behind is the country-wide discussion of the global crisis and its aspects which impact the situation in jewelry trade. To put it bluntly, the question is whether people are buying or not gold and diamonds for a rainy day. Just one month ago, there was nothing like it in the Russian mass media: the situation in Russia did not seem that serious and officials avoided talking about a crisis in their country with journalists prudently following in their steps. October and November brought about quite another information environment. For journalists in Moscow and Russian provinces, visiting jewelry stores and pawnshops turned to be a part of the daily Russian routine in the crisis period.
Protecting their money from the crisis, Russian people are trying to invest it into what they believe can survive the fall of any currency. Buying some real estate, opening an account with Sberbank and purchasing gold – these are the methods to protect their personal savings mostly trusted in this country, according to the Russian Public Opinion Research Center (VCIOM). If buying real estate to invest one’s money is reasonable only in the segment of elite real property which only the most credit worthy people can afford, gold can be purchased by the widest strata of population. During the last two months, jewelry chain stores registered an unprecedented sales growth reaching from 40% to 70%, unanimously say the jewelry marketers polled by the RBC daily.
Almost one half of Russians (51%) consider real estate as the most reliable way to save their money, 19% think it is gold and jewelry, while the remaining 17% believe their money can be saved at Sberbank, says the October survey of VCIOM. Jewelry chain stores signal a higher level of demand for their products. “In the course of two recent months, the sales growth in our network across the country amounted to 37 - 70%,” told the RBC daily Denis Adamsky, General Manager of the Moscow Jewelry Plant (MJP). A similar situation is observed at Tsentr Yuvelir’s stores: in the first half of October, sales there went up 43% as compared with the same period last year. “This autumn we expected a growth rate of 15-20%,” says in amazement Oxana Fruntikova, CEO of Tsentr Yuvelir.
Jewelry market participants say major purchases were expected in October although previously this month had not coddled jewelers with any significant sales hikes. “The number of finished transactions in October grew 12% against September,” Pavel Sidorenko, Marketing Director of Adamas, says. “It used to be otherwise: October results were always lower than in the first autumn month.” Mr. Adamsky of MJP specifies that as a rule in this period there is no growth movement: “Our would-be customers switch over to other expenses, for instance gearing up their children for school, buying winter clothes. However, today despite all these needs people nevertheless purchase jewelry.” As for sales, the crisis-ridden October left far behind even March, a sales peak month for jewelers: according to MJP, their sales in October snowballed by 90% compared to March.
Adamas sources pinned this purchasing spree to fears caused by the crisis on financial markets. “There is a psychological factor at work here: currently, people are in a hurry to buy what they want,” Sidorenko believes. “Besides, gold is always gold.” Denis Adamsky is inclined to see investment intentions in October purchases: “The main demand is for diamonds and stone-free jewelry; with an average cash register receipt reaching $400 there is a rising trend in purchases worth up to $4,000.” He adds to the RBC daily that premium class items are probably used as an investment tool. “There are customers who purchase large-size loose diamonds from MJP worth a six-zero-figure viewing them as movable property,” Mr. Adamsky says. According to Aleksey Davydov, Brand Manager of the Smolensk Brillianty Jewelry Group, in October the demand went up for investment gems: large-size diamonds, sapphires and emeralds. However, despite the eye-appealing dynamics of autumn sales, jewelry store managers are very uneasy about further developments.
This is a general view of the situation in the jewelry business in Russia. However, judged by publications in the provincial press residents of every regional center perceive it in their own way. It is difficult to understand in a real-time mode why the demand for jewelry in one city is high while in another it is low. Apparently, economic factors are playing their role accompanied by peculiarities in information distribution and other aspects. Expert evaluations may probably follow later. So far, news form provinces in a first approximation look like follows.
Jewelry trade in the City of Vladimir, as evaluated by the marketers themselves, is proceeding on the whole at a usual autumn pace. Nevertheless, there is an upward trend in the number of high-priced purchases, diamonds in the first place. At the same time, for instance, in Rostov-on-Don many jewelry stores admit their foot traffic is thinner these days. Mid-price segment vendors say that sales at premium boutiques, where prices start at 80,000 roubles for an item, do not cave in. Jewelry stores in Kirov are also free of buyers thirsty for jewelry. Their salesmen say people are not buying even diamonds. On the contrary, banks have registered an increase in demand for gold – spurred by unstable market, Kirov’s inhabitants are busily opening precious metal accounts, the Komsomolskaya Pravda – Kirov says. Jewelry boutiques of Orenburg also say their jewelry sales are flat. According to the KP-Tatarstan daily, small jewelry boutiques in Kazan are empty. The situation is somewhat different with large stores only. The SM-Nomer Odin weekly in Irkutsk says the number of jewelry stores is significant in the city and now they face a real danger of being shut any time soon. At the same time, according to the KP-Irkutsk daily, the banks located in the city report of a nine-fold growth of gold credited to the savings accounts of Irkutsk residents compared to one year ago. They bought more than 24 kilos of gold (twice as much versus 2007) and about 29 kilos of silver (up 30%). The banks got the hint and started selling platinum and palladium. The correspondents of the provincial edition of Argumenty i Facty report there are no crowds in the majority of jewelry stores in Yaroslavl.
So, there has been no increase in demand for jewelry in a whole range of provinces. In what way then did the above sales hike occur, the sales hike mentioned by many jewelry network spokespersons? Higher prices for jewelry should be taken into account in the first place. Besides, Moscow is mostly responsible for jewelry demand. On the eve of cold weather the demand for warm clothes somehow slumped but it sharply jumped for jewelry. The correspondent of the Trud daily who visited the Guild of Jewelers – 2008 Exhibition witnessed someone buying six diamond jewelry sets at once. The daily polled jewelry sellers asking them whether they were busier during the last two months due to people searching for safer ways than banks to keep their money in. As it turned out, not every one of them had to work too hard – someone was selling diamonds and silver ware like hot patties, while others were desperate at the total absence of customers.
Some provinces saw a significant upswing in jewelry demand in October – November. For instance, people living in Ulyanovsk, the Sibirski Kuryer writes, quietly started to buy foodstuffs for future use and invest their remaining money into jewelry. The KP-Samara daily reported about queues in Samara’s jewelry stores. “Sales went up about 10% or even more,” the Komsomolskaya Pravda was told by sales assistants of a large jewelry network. In Yekaterinburg jewelry and gold sales surged by 30%. This was reported by the KP-Yekaterinburg daily, which quoted the data furnished by Victor Konteyev, the city’s vice mayor. Jewelry marketers in Chelyabinsk are unanimous in that gold jewelry sales reflect a significant upward drift, the Chelyabinsk Za Nedelyu weekly says. As it is noted by most boutiques in the city, despite the expected seasonal decline jewelry demand in recent months increased by an average of 15-30%. Eager to protect their savings in the unstable period on financial markets, the inhabitants of Chelyabinsk are trying to invest into what they believe will survive the fall of any currency – gold. Having no opportunity to buy bullions, the majority of people are purchasing gold jewelry. Meanwhile, experts deem investments into jewelry products expedient only for jewelry stores and later for pawnshops, but not for current buyers. In October, the number of purchases made in the Russian northern capital grew by an average of 12% compared to September, although as a rule during this time sales go down, the MK v Pitere daily says. According to experts, such a rush about jewelry has been triggered by the crisis. Afraid to lose their savings, people started to invest into jewelry. It is noteworthy that now large-size and pricy jewelry items are being bought more often. As merchants say, if earlier the majority of purchases were bracketed within 10,000-12,000 roubles, now there is a stable rise in purchases worth 100,000 roubles. Many boutiques catching at such a turn of affairs even wound up their gift actions and curtailed their discounts, which are now no more than 5-10%.
