In the jewelry market of Russia the crisis collapse continues. According to Infox.ru, jewelry companies estimate the depth of dropped demand as 30%-50%. The market of top-end jewelry appeared vulnerable, analysts say and do not expect fast recovery.
In the past two years, prices for gold almost doubled: in 2007 one gram of gold was priced at 700 rubles, while now its average price is 1200 rubles. Jewellers too raise prices for their goods, making gold pieces worth 30% higher. But buyers do not take jewelry even if it is priced as before. Despite the statements by officials about the end of recession and incomes of the population growing by 2.3% (in 2009), demand continues to fall since the growth of incomes has mainly been based on social payments.
The manager of the sales department of Yuvelirprom, a Moscow-based experimental jewelry factory, told Infox.ru that during 2009 demand for gold goods reduced by 30%. “There are many manufacturers now in the market, both large-scale and small-scale. And there is a permanent struggle for buyers who unlike earlier days do not spend money for jewelry. So far we are trying to maintain production at the previous level, but demand continues to go down,” he says.
Reduced demand is also felt by retail networks. According to Boris Burlachenko, Commercial Director of Serebryany Mir, “the situation in the networks is such as it should be in a crisis.” “Every seller puts its own markup for goods. Currently, if you are expected to react to clients’ behavior correctly it means you should lower this markup. But the permanent rise in prices for precious metals does not permit this and prices for jewelry go up. Therefore many small players are closed, while networks feel a bit safer,” Boris Burlachenko says. “On the whole it is possible to say that demand has dropped by 50%.”
In the Russian jewelry market there are operating about 4,450 companies. In 2008, the market was valued about $4 billion, and in 2009 it contracted by 7%. In 2010 sales continue to fall.
About one third of all jewelry is manufactured in Moscow with the Krasnoyarsk Territory, Kostroma and Vladimir Regions being among large-scale players as well. OOO Adamas is the biggest jewelry retailer.
Natalia Smirnova, analyst of UniCredit Securities, expects a long crisis in Russia’s jewelry industry. “The crisis in the market of goods made of precious metals may be very much prolonged. In Russia jewels are considered as luxury, and not as consumer goods. So in hard times buyers save first of all on expensive jewelry. Unlike cheaper goods, demand for jewelry will be recovering for quite a long time,” Natalia Smirnova predicts.
