Jewellery trade: Resetting strategies post-crisis

This article first appeared in the JNA January/ February 2022 issue.

With businesses around the world gearing up for a ‘great reboot’ beginning 2022, the jewellery and gemstone industry is already seeing steady growth in demand supported by sustained economic recovery in the key markets of the US and China. According to industry stakeholders, demand is stronger than ever as consumers find new meaning in owning a piece of jewellery, whether to celebrate life events or as a form of self-reward.

Retailers are also back on track. According to US-based National Retail Federation (NRF), retail sales continued to grow in the US in November 2021 – up 14 per cent year on year – signalling consumers’ willingness to spend. As of press time, the NRF said the 2021 holiday season could post record consumer spending amid inflation, supply chain disruptions and Covid-19. Jewellery demand in China is also generally stable, with the government reporting steady increases. The latest data showed a 5.7 per cent year-on-year rise in November sales of gold, silver and jewellery.

Retail sales are likewise on the rebound in Hong Kong. The census department said sales of jewellery and other luxury items reached HK$3.52 billion (US$452 million) in October 2021, up 23.1 per cent from 2020 albeit slightly lower than the HK$3.91 billion (US$501 million) recorded in October 2018.

This retail optimism is trickling down on all aspects of the supply chain – rough and polished diamond sales are on the upswing as manufacturers fulfilled extra orders for the holiday season.

According to companies interviewed by JNA, the industry has once again proven its resilience in the face of a crisis. Technology alongside jewellers’ willingness to innovate and rise to the challenge played a critical role in sustaining business operations while on lockdown.

Meaningful jewellery

Yoram Dvash, president of the World Federation of Diamond Bourses (WFDB), said two important factors have contributed to the industry’s recovery – use of technology and other non-traditional means to do business as well as consumers’ renewed fascination for and appreciation of jewellery.

Major diamantaires Alrosa and De Beers both reported steady growth in diamond sales, which they have attributed to positive consumer sentiment and sturdy demand for finished diamond jewellery.

“Demand for diamonds is significantly greater now than it was in 2019,” noted Dvash. “Even though diamond manufacturing facilities in Surat and elsewhere are working at full capacity, it is not possible to fulfil the market demand.”

At the height of the pandemic, companies relied heavily on different kinds of technology to sustain operations, including selling diamonds through the Internet using videos and photos. While the diamond industry is no stranger to difficulties, it has benefitted tremendously from the unprecedented use of technology this time around. And this trend is expected to continue moving forward.

Celine Assimon, CEO of De Beers Jewellers and De Beers Forevermark, supported this sentiment, adding that the jewellers have had to up the technology ante to stay relevant and to effectively engage with customers throughout the pandemic.

“We fast-forwarded our omnichannel transformation and turned to online to reach our clients,” she revealed. “Store closures led to virtual appointments, travel restrictions to a focus on local clients while physical events moved online.”

De Beers Jewellers and De Beers Forevermark trained their sights on domestic clients in the US, China and Europe in light of travel restrictions. Interestingly, the pandemic has inspired resilience and a renewed sense of hope in the consumer albeit on a slightly different level – people are celebrating moments, experiences and relationships now more than ever.

According to Assimon, the diamond jewellery market remains dynamic and the appetite for jewellery remains strong. “Diamond jewellery is about marking special moments. People still want to get married and celebrate key moments in their life. They are choosing what feels safe and meaningful now and diamond jewellery holds both sentimental importance and inherent investment value,” she added.

She likewise observed a dramatic shift in consumer attitude towards sustainability especially during the pandemic. With more discerning and educated buyers, brands are now expected to provide information on how they respond to key environmental and social issues as part of the shopping journey, particularly when it comes to luxury products.

Resilience and flexibility

Hong Kong’s experience during the coronavirus crisis is also out of the ordinary. As a global jewellery and gemstone trading hub, the city immensely depends on international travel to fuel the retail sector and provide a platform for jewellery and gemstone traders to transact business through trade shows.

With travel disruptions, Hong Kong has suffered tremendously from the lack of overseas arrivals. Government data revealed that visitor numbers in 2020 reached 3.57 million, down by 93.6 per cent from 55.91 million in 2019 and by 94.52 per cent from 65.15 million in 2018.

In October 2021, visitor arrivals reached 9,353, up 19.6 per cent from October 2020. From January to October 2021, arrivals totalled 72,458, which is a 98 per cent drop from 2020 figures.

According to Lawrence Ma, founder and president of the Diamond Federation of Hong Kong, China (DFHK) and CEO of the Lee Heng Diamond Group, Chinese visitors used to account for 60 per cent to 65 per cent of domestic retail consumption in Hong Kong. The figure has since fallen to around 1 per cent to 2 per cent.

Local Hong Kong consumers meanwhile are gradually resuming social activities, given the relatively stable Covid-19 situation in the city. More people are venturing out, eating at restaurants and shopping for consumer goods, jewellery included. Covid-19 vaccination records have also improved.

The main deterrent to continued growth however is Hong Kong’s strict quarantine policy, which is discouraging overseas arrivals in the city, explained Ma.

“Jewellery shows last year were more local-oriented. Because of the 21-day quarantine rule in Hong Kong, no one would come here to be locked up for three weeks before they can start working,” he noted. “Having said that, the local economy seems to be faring much better and domestic consumption has been doing well compared to 2020.”

Business is about 15 to 25 per cent better compared to 2020 but there is still room for improvement.

Amid the Covid-19 crisis, jewellery companies also embarked on an adaptation and readjustment strategy to mitigate revenue losses. Marketing and product development were tailored to local consumers while technology became an indispensable tool in reaching out to clients.

Ken Lo, director of Eternity Manufacturing Ltd, said his company had experienced a considerable increase in business from the second quarter of 2021 onwards.

Business came mainly from the US, with orders consistently coming in as jewellers stocked up for the holiday season. By the third quarter of the year, even the European market was starting to move again.

“Several customers who have not been active in the past five to six years got in touch with us since they needed to replenish their inventories,” remarked Lo, who is also the former chairman of the Hong Kong Jewellery & Jade Manufacturers Association. “It may not reflect the overall situation but that is our experience.”

The company official attributed this market optimism to some countries learning to live with Covid-19. Echoing the need for traders to once again engage in one-on-one meetings, he said the resumption of international travel is key to actual and lasting recovery.

Appetite for pearls

Yoshihiro Shimizu, chairman of the Japan Pearl Exporters’ Association (JPEA) and chairman of Kobe-based Hosei Co Ltd, agreed.

The pearl industry is heavily reliant on international jewellery fairs to touch base with clients and meet potential customers. Japan also counts on tourist spending to support the country’s loose pearls and pearl jewellery sector.

At the moment, the country is selling pearls remotely through online channels, mostly to Chinese buyers. Japanese Akoya pearls of 6mm to 8mm in diameter are highly favoured in the US market. Golden and white South Sea pearls of 9mm to 11mm are also moving fast.

“Prices remain solid especially for round, near-round and good-quality pearls,” explained Shimizu. “We see strong demand from China and the US. Other promising markets are Japan, of course, and the Far East.”

Tighter supply however is hindering growth in the Tahitian pearl sector. According to the JPEA official, the export of Tahitian pearls amounted to around US$60 million to US$70 million about three years ago but the figure has since dropped to US$15 million in 2020.

“Chinese technicians could not go and visit Tahiti to graft the pearls. Buyers meanwhile are not allowed to visit. There is very limited strategy to get Tahitian pearls out into the open market,” said Shimizu.

Dazzling and colourful

While digital transactions worked well for other sectors in the jewellery and gemstone industry, doing business online is still quite a challenge for the coloured gemstone business, revealed Clement Sabbagh, president of the International Colored Gemstone Association (ICA) and director of Ben Sabbagh Bros.

It was deemed the only feasible way to conduct business at the height of the pandemic – going digital meant utilising company websites, social media and other online platforms to market products and stay in touch with clients.

Consumers with discretionary funds – faced with limited opportunities to spend money on luxury trips, fine dining or going to events – turned to online shopping, specifically for goods that appreciate in value such as gemstones and jewellery.

The shopping journey however remains experiential, according to Sabbagh. “Trading online is easy for harmonised products such as diamonds,” he explained. “This is not the reality for coloured gems since each stone is unique and not easily replenished. As such, digital will not replace in-person transactions.”

Online tools however complement face-to-face meetings as these are valuable for networking, brand storytelling and consumer education.

2022 and beyond

WFDB’s Dvash is maintaining an upbeat outlook for 2022, adding that robust market demand for diamond jewellery is likely to continue, with China and the US driving the growth.

An absence of pandemic-related government funds however could impact full economic recovery. The US, for instance, is winding down its massive stimulus programme in response to rising inflation. It also announced plans to raise interest rates three times throughout the year. As of press time, the US inflation rate hit 6.8 per cent in 2021, its highest level in almost 40 years.

For Ma of DFHK, economic growth and inflation could bode well for the jewellery sector since it could fuel demand for jewellery. “Inflation indirectly affects our industry because people want to buy goods before prices go up. It seems that we have been gearing up for a better coming six to nine months,” he added.

Assimon of De Beers Jewellers and De Beers Forevermark is also bullish about prospects this year. China will remain a key market for diamond jewellers alongside the US and Hong Kong.

De Beers Jewellers is introducing a new high jewellery collection in January and adding new diamond engagement ring styles to its expansive bridal jewellery selection. It is also revitalising other well-loved collections with new designs.

In the coloured gemstone realm, Sabbagh said various market trends that sprouted during the pandemic are here to stay hence companies are continually resetting strategies as they navigate the post-pandemic world. Ben Sabbagh Bros is planning to participate in international trade shows this year and will start visiting clients again, supplemented by online meetings and email orders, he added.