Jewelry Business - Hong Kong China

China HK

GDP growth rate: 7.8% 1.5%

Ease of doing business: 96 2

Starting a business 151 6

Getting credit 73 3

Market potential: 56

Market growth rate 100 44 http://globaledge.msu.edu/mpi

Purchasing power rate: 3

Economic freedom:

Competitors: 18

Unemployment rate; 4.1

Disposal income: 4094

Population:1,385,566,537

GINI index: 0.48

http://www.indexmundi.com/china/distribution_of_family_income_gini_index.html

China and HK

HK

 Value growth slows in 2012 from high growth in 2011 to 10% reaching HK$54.6 billion

 Hong Kong Jewellery Alliance is formed in 2011 to defend mid- and small-sized jewelleryretailers

 Real jewellery has the fastest value growth in 2012

 Chow Tai Fook Jewellery leads with 18% value share in 2011

 Jewellery is expected to have a constant value CAGR of 3% to reach HK$74.9 billion in 2017

TRENDS

 The Hong Kong Jewellery Alliance was formed by more than 30 mid- to small-sized jewelleryretailers in 2011. They aimed to standardise merchandizing and promotions by joint advertisements in order to lower operational costs to help survive the fierce competition.

 The poor economy reduced the overall value growth of jewellery in 2012 and costumejewellery had slower growth than in 2011. Growth estimates were more cautious due to the sales volume decline compared with 2011.

 Real jewellery also had slower value growth . Growth was partially supported by the high gold, silver and diamond prices in the first quarter of 2012. However, the enthusiasm of mainland tourists in buying real jewellery slowed due to the weaker economy. This resulted in a slowdown in mainland expenditure in Hong Kong, and the purchase of real jewellerywas part of this.

 Costume jewellery's target market was locals who held back on spending on non-necessary items including costume jewellery. This resulted in a slowdown in value growth to 6% in 2012.

 Value growth in real jewellery is usually affected by raw materials prices rather than demand. However, the slowdown in value growth in the first quarter of 2012 resulted in players launching various promotional campaigns to increase sales.

 Though unit price of real jewellery is expected to increase in 2012, unit price increase was slower than in 2011. The increase in unit prices is due to the increase in gold prices, as well as the increasing high rental costs in Hong Kong. However, with the slowing down in consumer spending, retailers had to run aggressive promotions to entice consumers to spend.

 Gold jewellery had the best sales of precious metals over the review period. Platinum was second and silver third. With the Chinese culture in Hong Kong and mainland China, gold is popular since it symbolises wealth and happiness.

Customer

 Consumers usually purchase real jewellery for special celebrations such as weddings and anniversaries while the mainland tourists buy them as gifts. Most costume jewellery is treated as disposable jewellery in Hong Kong; thus, brands compete with each other on price and designs instead of materials used.

 Private label is not popular among the locals as the majority are brand-conscious and are always looking for the most fashionable design in town. On the other hand, seeing the high purchasing power of the mainland tourists, there are increasing numbers of mid-priced and luxury costume jewellery brands expanding in Hong Kong. Examples include Folli Follie, Artina and Swarovski.

Table 1 Sales of Jewellery by Category: Volume 2007-2012

'000 units 2007 2008 2009 2010 2011 2012

Costume Jewellery 3,887.6 4,295.8 4,510.6 4,781.2 5,044.2 5,246.0

Real Jewellery 2,599.2 2,882.5 3,199.6 3,775.5 4,908.1 5,251.7

Jewellery 6,486.8 7,178.3 7,710.2 8,556.7 9,952.3 10,497.7

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 2 Sales of Jewellery by Category: Value 2007-2012

HK$ million 2007 2008 2009 2010 2011 2012

Costume Jewellery 1,207.0 1,418.2 1,496.2 1,600.9 1,697.0 1,790.3

Real Jewellery 18,268.2 21,903.6 24,006.3 32,648.6 47,993.4 52,792.7

Jewellery 19,475.1 23,321.7 25,502.5 34,249.5 49,690.3 54,583.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 3 Sales of Jewellery by Category: % Volume Growth 2007-2012

% volume growth 2011/12 2007-12 CAGR 2007/12 Total

Costume Jewellery 4.0 6.2 34.9

Real Jewellery 7.0 15.1 102.1

Jewellery 5.5 10.1 61.8

Table 6 Sales of Real Jewellery by Type: % Value Breakdown 2008-2012

% retail value rsp 2008 2009 2010 2011 2012

Earrings 24.4 24.3 24.2 24.1 24.0

Neckwear 17.8 18.0 18.1 18.2 18.3

Rings 26.7 26.8 26.9 27.0 27.2

Wristwear 19.6 19.7 19.8 19.9 20.0

Other 11.5 11.2 11.0 10.8 10.5

Total 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from