Rapaport Magazine

Hong Kong

By Mary Kavanagh
Business Strengthens

Business has been “buoyant” over the past few months, according to David Nazer, managing director of Haywards, a designer and manufacturer specializing in bespoke engagement and wedding rings for the expatriate market. “In the middle of 2013, everyone was saying the market was slow, but now we are starting to see movement of stones.” Nazer said business was good over Christmas and the Chinese New Year and Haywards was busy in April with Easter holiday sales.
   Nazer, who uses memo goods from suppliers to show customers rather than buying stock, reported six months ago that he could hold on to memo goods for as long as he liked. Today, manufacturers want stones returned within a week or two — a sign of the changes in the marketplace and the healthier demand for diamonds. “There is a faster turnover of stock, in particular for rounds rather than fancies,” he said. “There also has been a sudden surge in the demand for 1-carat G, VS2 round stones. They are turning over so fast that they are hard to get a hold of and manufacturers are playing catch-up to meet demand.”

Eye-Clean and Vintage
   Traditionally in China, there has been strong demand for high-clarity diamonds, but this is changing. “The demand is now trending toward eye-clean goods,” said Nazer, who noted that people are accepting that you don’t need “super-high clarity to have a good-quality diamond.” The increase in demand for SI1 and VS2 stones and difficulty sourcing stock in that range are evidence of this trend.
   Haywards also has seen a surge in requests for vintage engagement rings, many of them influenced by Georgian turn-of-the-century styles with a lot of smaller stones surrounding larger stones. Vintage halo styles with fine micropavé and filigree settings are also popular. Another trend has been for customers to have vintage jewelry redesigned, mostly inherited pieces. Nazer, who has seen Haywards’ customer base expand over the past couple of years to include more local Hong Kong Chinese, also reported a slight increase in demand for yellow gold and rose gold rings, which now make up 10 percent to 15 percent of its business compared to one or two pieces per year in the past.

Driving Traffic
   Chow Tai Fook Jewellery (CTF), the world’s largest jewelry chain, reported a decline in same-store sales growth in Hong Kong and Macau in the fourth quarter that ended on March 31 “due to the weaker customer traffic during the period.” Sales at the company’s Macau and Hong Kong stores open for at least 12 months fell 9 percent from a year earlier as fewer customers visited the shops, the company reported. That compared with 7 percent growth in the previous quarter. Group sales rose 22 percent in the fourth quarter, slowing from a 26 percent increase. Strong retail sales of mass-market luxury jewelry products, especially gem-set jewelry, contributed to the growth and the company also reported a steady recovery in the wholesale business in Mainland China.
   Word-of-mouth and online referrals play an increasingly important role in attracting new customers. “We offer a unique personal service,” Nazer said, underscoring the main differentiator between Haywards and the large local chain stores such as Chow Tai Fook and Chow Sang Sang and the luxury brand U.S. and European stores. “Our clients are very involved in the process of designing their own rings from start to finish.” Recently, Nazer has seen a surge in referrals via online forums where people read reviews of jewelers and ask for recommendations. “Good online reviews are driving new business,” he commented.

Economic Outlook
   Despite the slowdown in economic growth in Mainland China, the Hong Kong Economic Monitor is of the view that this “will not derail the city’s ongoing recovery.” The monthly research report and economic analysis prepared by the Hang Seng Bank reaffirmed its 2014 forecast of 3.6 percent gross domestic product (GDP) growth for Hong Kong. It said the economic impact associated with a mild slowdown in the Mainland economy would be relatively modest, whereas the overall external environment will be favorable to Hong Kong and a cyclical upswing is likely to fall into place.
   The Hong Kong Retail Management Association (HKRMA) reported a decrease in total retail sales in February 2014 by 2.3 percent in both value and volume over a year earlier, which is the first decrease recorded since August 2009. The HKRMA attributed the drop in part to the fact that the Lunar New Year fell in January this year, whereas it was in February in 2013.
   The sales category of “jewelry, watches and clocks, and valuable gifts” recorded a drop of one-half of 1 percent in sales value, not as severe a decrease as some other product sectors. It recorded an increase of 5.3 percent for the combined sales value for January and February 2014. A majority of member companies said they expected single-digit growth, and a minority forecast flat or low-double-digit sales increases for March 2014. Members forecast varying results for the Easter holiday, ranging from zero to low-double-digit growth.

Article from the Rapaport Magazine - May 2014. To subscribe click here.

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