Золото Au - 2332,76 руб/гр.
Серебро Ag - 31,11 руб/гр.
Платина Pt - 1711,61 руб/гр.
Палладий Pd - 1616,93 руб/гр.
 

Russian jewelry market: is revival possible?

03
апреля
2017

Jewelry market in Russian and in post-Soviet countries is in a down economy nowadays. Jewelry retail sales go on declining in 2016 in Russia, by 30% more. Especial decline is seen at the diamond jewelry market competing with cheaper gemstones. It’s a common case when even large players overestimate the stones and use cheap synthetic materials.  

As a result, production declines with the rate at the level of 2015. According to the Russian Assay Chamber, golden jewels offer in 2016 was equal to 27.1 mio pcs, or 51.7 tons, but in 2015 it was about 28 mio pcs and 58.9 tons. According to another data, Russian jewelry industry reduced using gold in 2015 compared to the year 2014 by 39.8% - to 34.22 tons. Situation with silver jewels became worse: 41.34 mio pcs (21% decline), or 183.5 tons (-12%). It means oversupply in silver segment, many companies reoriented to. At that, silverware import did not change in number during the previous year: it is about 11.5 mio pcs, as in the year 2015, but its weight is 16% less and equal to 37.5 tons.

 Jewels marked in the Assay Chamber

 

             2014

           2015

           2016

 

 

Q-ty, mio

Mass, tons

Q-ty, mio

Mass, tons

Q-ty, mio

Mass, tons

Gold

38,64

99,44

28,00

58,89

27.11

57,66

Silver

59.57

251,78

50,91

208,52

41,34

183,48

TOTAL*

98,21

351,22

78,93

267,52

68, 46

241,22

*Total volume includes platinum and palladium jewels; their quantity is counted in kilograms, and there were practically no changes in years. For instance, 12.46 thous. platinum jewels and 2.76 thous. palladium jewels passed through the Assay Chamber in 2016.         

According to some data, the jewelry market growth can revive slowly in 2017 but in case of economic situation improvement and increase of middle class income. But even in case of jewelry market growth by 8% per year during 2018–2020, the complete reinstatement to the volumes of 2015 is possible in 4-5 years only. The expected growth of demand for jewelry cannot be satisfied by domestic production only, as significant part of capacities was disabled in crisis period and technologies are practically not updated. And what is more important – companies have no current assets for purchasing raw materials in order to increase production in short period of time, and that would increase attractiveness of Russia for foreign suppliers. 

Latest changes in market regulations contribute to potential growth of import market as well. So, export duty for diamonds, previously equal to 6.5% is eliminated starting from September 1, 2016 within the frames of obligations of Russia to WTO; export duty for gold and platinum is reduced from 4.88% to 1.63%. Given that practically all the diamonds are exported (their export to India is growing lately: $1.5 bln/year), this measure will make development of Russian cutting even more difficult. Import duty for jewels is reduced from 20% to 10% starting from January 1, 2017. Abolition of import duties for gemstones is announced as well; today they are equal to 15% for rubies, sapphires and emeralds, and 10% for other gemstones.

Steps towards liberalization of jewel market will make favorable conditions for foreign manufacturers’ entry to the Russian market; they can offer products of de luxe or premium segment or rather significant quantity of not expensive jewels with diamonds and natural gemstones: Modern Russian buyers want to be sure they are paying for quality products.

Tendency of increasing quantities of imported jewelry showed up at the markets of a number of post-Soviet countries already in 2016. At the same time there were changes in importing structure itself. Earlier the bulk of imported jewels belonged to foreign manufacturers of high-price “de luxe” and “premium” segment (such brands as Chopard, Cartier, Bvlgary, Tiffany etc.), but in latest couple of years we witness a flow of imported products practically in all price segments, especially in "mass-market" segment.

Jewels import to Russia

 

           2014

          2015

           2016

 

 

Q-ty, mio

Mass, tons

Q-ty, mio

Mass, tons

Q-ty, mio

Mass, tons

Gold

1,81

5,34

1,11

2,30

0,57

1,46

Silver

30.23

109,68

13,69

45,69

14,78

41,41

TOTAL*

32,05

115,10

14,80

48,05

15, 35

42,92

* Total volume includes platinum and palladium jewels; their quantity is counted in kilograms and has no effect on gross data

According to experts’ opinion, clandestine importation ratio is still quite high, especially in de luxe price segment  and can go up to 70% of total imported quantity. The main reason is too expensive customs clearance for importers: its cost against purchase price of the products can make over 20% in practice (Armenia, Ukraine), up to 45% (Russia, Kzakhstan, Belorussia, Azerbaijan) and even up to 100% (Uzbekistan, Turkmenia).   

Jewels export from Russia

 

            2014

             2015

             2016

 

 

Q-ty, mio

Mass, tons

Q-ty, mio

Mass, tons

Q-ty, mio

Mass, tons

Gold

0,49

17,89

0,24

2,64

0,22

0,76

Silver

0,55

3,58

0,28

2,14

0,50

1,96

TOTAL*

1,04

23,47

0,52

4,78

0, 72

2,72

* Total volume includes platinum and palladium jewels; their quantity is counted in kilograms and has no effect on gross data

Sharp decline of golden jewels comes under notice - from 18 tons in 2014 to 2.64 tons in 2015. It’s a consequence of state control enforcing, due to which corrupt practices of fictive export were stopped, for instance, in cases of golden chains exporting practically by gold price in order to compensate 18% VAT. In some cases export supplies were on paper only.

Russian share in the world export of jewelry is negligibly small – 0.12% only ($120 mio). At that, there are big perspectives of its growth: due to high-quality design, cost reduction and presence of numerous Russian-speaking expats who prefer buying Russian goods. Nowadays fierce dispute is on the point of the state policy in terms of export: jewelers persistently demand introducing regulations for free export with declarative system.  

Active market reformatting goes on under these conditions. Major companies reduce production volumes and establish cost saving. Former market leaders who always actively raised funds, are in a difficult situation at present. So, debts of jewelry company “Yashma Zoloto" reached $500 mio, and on May 25, 2016, Arbitrage declared "Jewelry House Yashma" bankrupt. A search was made in the Moscow office of “Adamas” group of companies at the end of December. The company is suspected in tax evasion in the amount $80 mio. Small enterprises unencumbered with high expenses and quick reacting to demand become more successful. Market share of Russian jewelry in cost expression, according to experts’ estimates, was equal to 45 bln rubles ($0.71 bln) in 2016, and taking shadow segment into consideration (30-35%) it can reach $1 bln.

In general, Russian customer is looking for low-cost products, and this tendency seems visibly stronger in the previous couple of years. Average purchase in retail jewelry shop is not over 18-20 thous. roubles. (around $300). Retail margin for jewelry items in Russia and in post-Soviet countries is reduced to 30-50% at present. The widespread business-model of a retail jewelry shop is presented by multi-brand network. At that, as for Uzbekistan, Kirgizia, Azerbaijan, Georgia, the best sales results are shown by numerous smaller players. Foreign jewelry companies in post-Soviet countries are presented by “boutiques” mainly in premium and de luxe price segments. Both single retail facilities (Chimento, Pomellato, Pianegonda, Emporio Armani, Nomination) and multi-brand facilities are popular. As a rule, modern trade centers serve as main location of boutiques.