Emerged in 1960s, Hong Kong’s fine jewellery industry has gone through a remarkable transformation during the past half-century. The export-oriented industry has made a concerted effort of the stakeholders to achieve its high reputation in the global jewellery trade. Hong Kong is currently the 6th largest fine jewellery exporter in the world. Original design, constant innovation and sophisticated craftsmanship are among the attributes of the fine jewellery manufacturers in the city, a large number of them have successfully ventured into OBM from OEM, and got into their strides to go branding on the international stage. Facing the shifting world economic significance from the developed countries to emerging economies, Hong Kong jewellers are utilizing distinctive strategies to cope with challenges and stay alert to the new opportunities. Hong Kong Jewellery has interviewed a number of local jewellers for their reviews on the 2013 global market and outlook for the future. Cooperation, integrated management, new platform establishment and emerging market exploration are the order of the day.
Market exploration
Year of the Snake was not an easy one, as most of the interviewed jewellers commented. Statistics from the Hong Kong Trade Development Council (HKTDC) shows that 2013 witnessed a 6.5 percent growth in Hong Kong’s total exports of precious jewellery reaching US$7.2 billion, a sharp drop when compared with 2011 (+34.7 percent) and 2012 (+14.3 percent).
Overviewing the global economy, most of the interviewees concluded that: the worse time in the Eurozone has gone; the United Stated has gained some growth but it is too early to see a complete recovery; business in Russia is seeing a slow growth; the slowing pace of growth in China does not bring much trouble; exports to the Middle East in value terms decreased.
“Market depression in general has led to the slower export growth. This is not a structural issue in the jewellery industry. The problem is where has the hot money gone? We see people are becoming conservative in non-investment consumption of luxury products while under the same circumstances, brisk trading is among the large diamonds, arts investment, etc,” explained Aaron Shum, president of Aaron Shum Jewelry Ltd.
The improving jewellery design and manufacturing capability of Mainland China, Korea and India have strong influences on the international market. According to Irene Leung, general manager of Bossa Jewelry Ltd, India is becoming more than a sourcing country but a competitive exporter to western countries. The gems and jewellery from India contributes about 15 percent of the country’s overseas shipment, to US$39.5 billion in 2013-2014, released theGem & Jewellery Export Promotion Council (GJEPC), India.
“When we are marketing in Mainland China, we need to adapt to the local tradition and make more efforts in showcasing diversified products instead of just competing with domestic counterparts in prices,” said Jessica Fong, founder of Jessica Fong Fine Jewelry.
“When the market share is taken by more competitors and the economic growth is slowing down, it is a good time for us to slow down our pace as well and pay more attention to gathering market information, for example, the new generation consumption trends, the fashion market, new sales channels or concept innovation,” she added.
Moreover, the price fluctuation of precious metals, diamonds, precious stones and other materials has somewhat trimmed down profit margins. Fong said: “Silver is becoming more precious. Using silver with precious or semi-precious gemstones and diamonds to make cutting-edge designs is a popular choice.”
Some manufacturers are making inroads into retail in emerging markets. "India, Malaysia and Indonesia have increased their gold jewellery consumption," said Leung from Bossa Jewelry. "Market research helps us penetrate into the market faster," she added.
Aaron Shum Jewelry has paid special attention to the local culture, custom and religion in the targeted markets. The strategy has proved to be successful in its Middle East market exploration. “The Southeast Asia market is explored with the same tactic. Interaction with local consumers and getting to know their culture are helpful in product innovation as well," addressed Shum.
When targeting the US market, La Vie Premium Ltd uses a new marketing approach. The company has built an online platform recruiting the jewellers in the United States to help them expand their sales outlets. The new platform is going to make a debut launch in JCK Las Vegas this May. “Our sales channel is based on trade fairs. This is a T[rade fairs] to B[usiness] to C[onsumers] sales channel. Through gathering all the jewellers and chain stores in the United States, we sell the jewellery to the local consumers who will enjoy a purchasing experience of convenient shopping and save the tax,” said Lo Huang, the brand’s spokesman.
Mainland, good but patience required
A slower growth in China in 2013 was estimated at 6.7 percent which, according to most jewellers, is not the major reason for their lowered profit margin. Hong Kong jewellers still keep expanding retail networks and strengthen their penetration into the Mainland through trade fairs, franchising and cooperative arrangement.
Early in March 2014, Aaron Shum Jewelry announced that they had entered into an exclusive distributorship with Chow Tai Fook Jewellery Group Limited (CTF) of a new diamond collection featuring Aaron Shum Jewelry’s patented Coronet design in the Greater China region. "Looking at the economy growth, I am optimistic for the fine jewellery consumption market in China this year. Consumers will maintain the increasing demands for design, quality and brand," Shum commented.
However, the impact of renminbi appreciation and rising labour cost brings manufacturers higher production cost. Meanwhile, Chinese government’s policy on the restraint of consumption of luxury products for gifting has reduced the sales volume of high-end jewellery. According to Lolly Lam, general manager of Sunlight Jewelers Ltd, the company is penetrating into the Mainland market in first- and second-tier cities with exclusively-made jewellery at RMB100,000 up. "We are patient to the market development. For high-end jewellery, sales channel is very important. We are looking for long-term customers.”
On the other hand, Adam Lau, managing director of Able Jewelry Mfg Ltd, thinks it takes time to lower the tax for coloured gemtones in Mainland China. "There are huge resources in the mainland, but the tax is too high for our jewellers. We are looking forward to the day when we can both purchase and sell in the market. Currently, importing coloured gemstones needs an eight-percent import tax, an eight-percent sales tax plus a 15-percent VAT,” said Lau.
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