Jewellery manufacturers have been heaving a sigh of relief as sales figures show early signs of improvement, but they remain cautious in their outlook for the industry amid volatile global and regional economies.
During the past two years – as the world nursed the wounds inflicted by the global economic crisis – jewellery sales slumped by a hefty 60 per cent to 70 per cent, heavily denting jewellery companies’ pockets, says industry sources.
The decline had been mainly attributed to financial uncertainties that have dampened consumers’ appetite for the luxury retail segment, said Murat Alpsan of the Turkey-based Sade Is Mounting Jewellery, a manufacturer and exporter of gold and diamond jewellery.
“The volatile prices of gold have, in one way, also affected the market because it influences the consumers’ buying trend,” he said.
Alpsan admitted that their sales dwindled by about 70 per cent during the past two years. Asked if he sees an upturn in the near future for the jewellery industry, he said it is difficult to make a prediction.
“It all really depends on how strong and fast the global economy recovers. So far, while we’re seeing some gradual recovery, I am not expecting the market to surge in the coming two-three years. It will be a slow process,” he said.
Dinesh Sakariya of HV Jewellery LLC, a Dubai-based diamond exporting firm, said they have also witnessed a decline in sales of around 70 per cent the past two years and it was not only until August this year when they saw some form of respite from the financial meltdown.
“It’s a bit improving and I hope it will continue to do so,” he said when asked about their current operations.
As a wholesaler, HV Jewellery had to increase their international exposure to compensate for the market slowdown in the Gulf and the rest of the Middle East, says Sakariya.
“There was a year when we had to participate in 18 jewellery exhibitions all over the world, in addition to our own marketing campaign. So far we have noticed that the market is improving. It is much better now than six months ago,” he added.
Lower prices to attract buyers
Keval Navadiya who represents Star Light Jewellery LLC, another diamond jewellery wholesaler based in Dubai, said they had to resort to lowering their prices at the height of the financial crisis to attract retailers.
“We supply to retailers, who were also having difficulty in boosting their sales, especially during the past three years. We had to lower our prices at one point in order to accommodate the retailers’ request,” Navadiya said without mentioning how much discount they gave their customers.
Emerging markets proved to be a haven for jewellery manufacturers and retailers, according to the industry sources.
Alpsan said Sade Is Mounting Jewellery, which has a branch in Dubai, has done quite well with customers from other GCC countries such as Saudi Arabia and Kuwait, as well as those from Russia, Azerbaijan and India.
Meanwhile, Sakariya of HV Jewellery said their buoyant markets have been those from Asia such as China, Japan, Thailand and India.
Gold jewellery demand strong: World Gold Council
With gold trading above $1,300 in the recent past weeks, it is no surprise why investors have been betting their cash on the precious metal as a safe haven, moving further away from high-risk assets such as equities.
According to the
World Gold Council’s (WGC)third-quarter outlook on global gold demand trends, jewellery demand jumped by 8 per cent to 529.8 tonnes compared to same quarter in 2009 despite increasing prices. This increase was fueled by key markets such as India, China, Turkey, Russia and Hong Kong.
“These results demonstrate that consumers in these countries are becoming accustomed to higher price ranges and, in some cases, that the investment aspect of gold is increasingly playing a role in demand for jewellery. Price expectations are also being revised upwards, with consumers preferring to make gold jewellery purchases at current prices in order to avoid purchasing at yet higher prices in future,” the WGC reported.
The Middle East market, however, was a subdued as demand only reached 60.4 tonnes, down by 11 per cent from 68 tonnes in the third quarter of last year.
“Demand across the region followed a similar pattern: healthy demand in July, aided by the wedding season coinciding with a dip in prices, followed by a weak August and September, as Ramadan and price volatility discouraged purchases,” the report said.
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