Sales following the Hong Kong show that ended on February 20
suggest that Chinese retailers and dealers are refilling their inventory again,
although with reasonable caution so they don’t get into the same situation of
overbuying that they did in 2011. Gemological Institute of America
(GIA)-certified round diamonds with triple EX cuts were the first goods to
move, and they paved the way for other sales. The widespread overstocking
problem that was caused by speculative purchasing has been eliminated by a few months
of sharply decreased buying or no buying at all.
JEWELRY RETAIL UP
In the first two months of 2012, China’s gold, silver and
jewelry retail reached $6.74 billion, a 19.1 percent growth, according to data
released by the country’s National Bureau of Statistics on March 9. The total
retail sales of consumer goods increased by 14.7 percent to $531.12 billion.
The bureau released the data for January and February together because the
dates of the Chinese New Year, a prime jewelry gift-giving and wedding holiday,
are different each year.
The growth rate in jewelry sales from local bureaus of
statistics varied by region. Beijing showed slower growth in consumption by
15.8 percent, and 8.8 percent growth in jewelry sales, and the growth rate has
sharply decreased. The Beijing report also revealed that its consumption opened
high but lacked momentum.
On the other hand, Anhui Province, a less wealthy region,
showed 22.1 percent growth in overall consumption and a 33.1 percent increase
in jewelry sales. With the national government’s lowering of its gross domestic
product (GDP) growth forecast to 7.5 percent for 2012, and continuing
uncertainty over the domestic and global economy, caution can be expected to
dominate the overall consumer market in the next months.
POTENTIAL IN THE WEST
Chongqing and Chengdu, the two most important cities in the
western part of China, are becoming more and more important in the jewelry
market. Nine Hong Kong jewelry companies from the Hong Kong Jewelry
Manufacturers’ Association (HKJMA) participated in a recent B2C shopping
festival in Chongqing that showcased Hong Kong products. Although the more
remote location of the show affected foot traffic and sales were below expectations,
the exhibitors still felt that they had gained experience that would be helpful
in developing their businesses further. As a mountain city with a population of
30 million, old historic districts and new retail sectors catering to wealthy
consumers, Chongqing’s retail sales numbers for general merchandise are rising
quickly.
Although its jewelry and diamond business is still
developing and Chongqing is not yet a very open market, it reminds some of the
situation in Beijing and the advanced coastal cities ten years ago. That’s why
many merchants see huge potential for growth in the city over the next few
years based on the fast-rising overall consumption and the enormous
population.
The diamond and jewelry business in Chengdu, the most
important city in the west, developed much earlier than Chongqing’s and has
already been a hot spot for several years. It is home to many traditional
jewelry brands, as well as website-based diamond retailers. The city also has
the leading consumer confidence level in China. In 2011, Chengdu boasted an 18
percent increase in consumption and a 37 percent increase in the sale of
silver, gold and jewelry.
COLORED DIAMOND INTEREST
Natural fancy color diamonds are getting increased attention
as those Chinese consumers who already own white diamonds develop more
sophisticated appreciation for the beauty and rarity of natural colored varieties.
At the same time, with the inflation rate high and the credibility of bonds
issued by many countries becoming questionable, large diamonds can be a good
store of value. In addition, more diamond merchants in China are increasing
their share of colored diamond business since it can be more profitable than
the fiercely competitive white diamond market.
Foreign suppliers also are increasing their promotion of
colored diamonds to potential buyers from China. “Natural colored diamonds make
up only 1 percent of global production, which gives them ‘unquestionable
value,’” said Bruno Scarselli, who represents the third generation of U.S.-based
colored diamond specialist Scarselli Diamonds. “There is a tremendous demand
for yellow diamonds, but also blue and pink,” Scarselli told Reuters at the
BaselWorld watch and jewelry show. “There are not enough diamonds to satisfy
one-tenth of the new billionaires that are created every month in China.”
The Marketplace
- Demand is strong for .30-carat to 1.1-carat round D-H,
VS1-SI2 diamonds with Gemological Institute of America (GIA) certificates,
preferably in triple EX cut.
- Demand has increased for princess cuts but there are not
enough goods available.
- Natural colored diamonds have increased in popularity with
those Chinese buyers who have already bought white diamonds.
Article from the Rapaport Magazine - April 2012. To subscribe click here.