Rapaport Magazine

Hong Kong

By Mary Kavanagh
Global Challenges Impact Confidence

A new world record for the most expensive diamond ever to be sold at auction was set in Hong Kong on October 7 when The Magnificent Oval Diamond, a 118.28-carat D-Flawless, was sold to a private Asian bidder for $30.6 million. This sale puts Hong Kong on the map as a major center for selling diamonds, alongside Geneva and New York. For more information, see New Auction Record for D Flawless story.
   Simon Zion of Dehres Limited was not surprised by the new record, saying there will always be a demand for that sort of item that has its own intrinsic value. Diamonds are also becoming more popular for investment purposes. Although business has been relatively flat for the past eight months, customers are always looking for top-tier jewels and Zion said his company has seen a trend toward buying “more important top-tier items, bigger sizes and higher quality. The hottest items here are white VS2 to SI1 goods in 1 carat to 2 carats, and it is not easy to procure them.” He concluded, “Top-quality jewels are still in short supply.”
   Dehres also specializes in fancy colors, but the company has seen less demand for yellow stones in 2013 “because prices have come up quite a lot — by about 15 percent,” according to Zion. Demand for other colors such as pink, blue, green and red is still quite strong.

Sluggish Demand
   “Overall, business seems to be slower in 2013 and even though you have a slight upturn here and there, it has not been consistent enough to say that things have gotten better,” Zion said. He attributes the “sluggish” demand to a number of factors, including the global economic challenges, the situation in Syria, the U.S. government issues and, most importantly for the Hong Kong market, the changeover of government in China earlier this year. Since then, demand from the critical Chinese market has not been as strong as expected. This is partly due to the clampdown by the central government on gift giving, according to Zion, and partly because “consumer confidence there is quite low.”

Golden Week
   Retail sales for the annual October Golden Week glittered for jewelry and watch companies in spite of a new tourism law that took effect October 1, the first day of the holiday week. The new law prohibits “forced shopping” — a previously common practice where travel agencies offered Mainland tourists cheap tours to Hong Kong that included shopping trips to partner stores in return for a commission paid to the tour companies by these retail partners. The first test of the new law was during the October Golden Week holiday. Hong Kong is a popular destination for Mainlanders to visit during this period to take a vacation and indulge in shopping. Results from Golden Week proved that Hong Kong retailers’ concerns about the law’s impact appear to be unfounded.
   The Hong Kong Retail Management Association (HKRMA) reported that for most companies, the new law “did not create any significant negative impact on sales performance” and that “member companies were positive that the tourism law would benefit Hong Kong’s tourism industry in the long run.” Retailers had been concerned that the higher tour prices being charged to compensate for the lost retailer commissions would keep tourists away. HKRMA said that many of its members reported single-digit or low double-digit growth for the week. But jewelry and watch retailers in Hong Kong did better than the average. They “recorded a mid-double-digit growth, which was higher than 2012,” according to the HKRMA.

Chow Tai Fook Reports In
   A spokesperson for Hong Kong jewelry retailer Chow Tai Fook said, “The overall performance of our points-of-sale in both the Hong Kong/Macau market and the Mainland China market during Golden Week this year was positive. We saw higher customer traffic and an increase in sales.”
   Demand for mass-market luxury jewelry continues to be strong in these markets. “Fashion gem-set jewelry is increasingly popular, in particular diamonds and gold products with unique, contemporary design,” the spokesperson added. “These jewelry items appeal especially to young people and working women, as fashion accessories at affordable prices for daily wear and festive celebrations.”
   Chow Tai Fook is very focused on the potential of the online market for jewelry. “To capture this huge online market, we continuously enrich our product offering for our official eShop and various other ecommerce platforms,” the spokesperson said, noting that the company sells products designed exclusively for online shopping to attract and retain this category of customers. “We recently launched Angry Birds bracelets and charms, as well as Hello Kitty pendants, necklaces and earrings to meet the increasing demand from younger customers, who make up the majority of online shoppers.” 

Article from the Rapaport Magazine - November 2013. To subscribe click here.

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