Platinum jewellery sales in China continued a five-year slump in the recent past triggered by rising dominance of generic designs, unbranded offerings and the weight-based proposition. The uniquely special preference of younger consumers had a role to play too, in the dwindling demand for platinum. Tim Schlick, chief strategy officer of the Hong Kong-headquartered Platinum Guild International (PGI), offers an in-depth analysis of all these issues, and examines the appropriate strategic response to regain platinum's positioning in the China market as an extremely precious, highly valued metal which is also associated with 'love'.
China is one of the world’s largest consumer markets for platinum jewellery besides the United States, Japan and India. According to a PGI report, Platinum jewellery accounts for about 70 percent of the metal's total demand in China. Nearly 12 million items of platinum jewellery are sold in the country every year. The drop in platinum price was expected to boost the sales of jewellery, making it more affordable for the younger consumers. These consumer generally buy more ‘approachable’ items for day-to-day use. However, sales figures actually went down by seven percent in 2018 compared to the previous year.
“The Gen Y and Z consumers have a very different attitude to jewellery differently from previous generations,” said Schlick when explaining non-price factors of demand. “Not only does jewellery compete with other luxury items, it also faces keen competition from ‘experience products’ such as travel." He believes jewellery is no longer a must-have item for younger consumers, "they are essentially immune to marketing that appeal to superficial desires and marketing,”
On the contrary, the younger generations are impressed by brands with substance, he suggested. “If brands have a compelling story, consumer will listen. They crave love, intimacy and meaningful connections more than their elder predecessors. They are possibly the most romantic generation of all times - willing to celebrate authentic love with jewellery,” he said.
Last year, PGI undertook various initiatives to address different challenges in the China market. The focus remained on bringing novelty to the market, creating buzz and making platinum more attractive on the whole. Some of the notable initiatives included the appointment of Mainland actor Yang Yang as PGI’s China ambassador in February and launch of the Moment of Eternity collection in October.
In the Chinese Mainland, around 20 manufacturers, some 40 retailers and nearly 5,700 stores represent the platinum jewellery market, according to PGI. On one hand, Gold continues to be a very popular choice. On the other, making and selling platinum items are not encouraging to practitioners due to the low profit margin. As a result, there is little incentive to invest more in product design, craftsmanship and marketing of platinum jewellery.
“In the past few years, PGI has continued to guide and support retailers and manufacturers of platinum items - helping with marketing and introducing new, innovative collections in this fast-changing market,” Schlick said.
For example, the association has worked with key manufacturers in China on new collections and technological improvements. The effort helped them avoid direct price competition through design and consumer differentiation, contributing to improved profitability.
It also worked with retailers, helping to fine-tune their platinum portfolio to meet evolving consumer needs of jewellery. “The new collections allowed retailers to charge a premium and enjoy better profit margins. The improved profitability also allowed retailers to reward front line sales associates with better financial incentives, motivating them to sell more platinum jewellery. The net outcome is a win-win scenario for all parties involved and a healthy value cycle,” he added.
PGI has strived to enhance consumers’ shopping experience and add value to platinum products. To that end, it assisted jewellery retailers to refine their display props and strategies. It also worked closely with key trade partners who aspire to make platinum a prime ingredient to their business success.
“Retailers and manufacturers who proactively adapted to evolving consumers’ needs have been particularly successful in selling and marketing platinum jewellery,” he said. However, many others in the sector need to follow suit to accelerate the expansion of branded platinum collection-based jewellery, which better meets consumer needs and makes platinum more profitable for retailers.
According to the PGI report, unbranded items without a compelling brand story accounted for 80 percent of the total platinum jewellery sold in China last year. As much as 75 percent of platinum pieces were sold by weight, while 65 percent were plain in style.
Despite being the favoured “love metal” for bridal jewellery, platinum has experienced increasing pressure from the growing popularity of gold. To make it worse, fewer number of people in China are getting married.
“The bridal segment still accounted for 22 percent of platinum’s volume share among tier one to tier three urban markets. Platinum bridal jewellery acquisition rate for brides still stands at 53 percent. The drop in sales volume in the bridal segment can be largely attributed to the declining number of people getting married in China” Schlick said.
He believes that platinum will continue to be a preferred choice for bridal rings because of the ardent fans of the white metal - women who are younger, better educated, more sophisticated with higher income. They have a clear preference for platinum over pure gold.
PGI is on the constant quest for new market opportunities for platinum jewellery. It keeps venturing into different segments, such as jewellery as gifts. “Among the 78 percent of non-bridal business, there are countless opportunities. One of which is ‘motherhood jewellery – a gift of love for young women becoming mothers,” said Schlick.
This May, PGI partnered with Hong Kong-based Luk Fook Jewellery to launch the Baby Darling collection - platinum that captures the deep joy behind the monumental transition of being only a wife to being a mother.
According to PGI, modern Chinese families want more exclusive collections of safe and meaningful gifts for their new-born babies, which opens a new window for branded, beautifully-designed, rare and safe platinum jewellery.
“Extensive consumer research across regions and segments shows us the massive market opportunity among 26 million consumers in China - people looking for the perfect gift when celebrating a cherished newborn. Rare and hypoallergenic platinum is the perfect choice, while the Baby Darling series is a symbolic celebration for both the wife and the baby as they embark on the new adventure in life,” says the association.
Although the lull platinum jewellery market in mainland China is expected to persist in the next two or three years, things should turn around after the fundamental issues mentioned earlier are solved. PGI has seen encouraging results from some manufacturers and retailers, noticing an early indicator for new growth in platinum in the long-term.
“We will carry on the incessant efforts to reinvigorate the platinum business through current and future market makers. Working with our trade partners, we continue to build role models across different purchase occasions in addition to the bridal segment, making platinum a safe bet for future growth,” says Schlick. (Photo courtesy: PGI)
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