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How young consumers and low-tier cities are shaping China’s jewelry market

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In 2019, China’s jewelry market accounted for 32.44% of the world’s overall market, vaunting a year-on-year increase of 7.7%, while the global market was suffering a 1.4% drop. Jewelry sales in China mostly followed the household disposable income which has been growing relentlessly since 2010, leading the best-off class to increase elevenfold between 2010 and 2020.

china's jewelry market
Data source: Qianzhan, designed by Daxue Consulting, Size of China’s jewelry market

China’s jewelry is a match three game

Players in China’s jewelry market can be divided into 3 main groups: world-renowned brands, Hong Kong brands and Chinese mainland brands. Foreign companies, such as Cartier, Swarovski and Van Cleef & Arpels, dominate the premium high-end market in higher-tier cities, and they are usually priced higher than those of domestic brands. Instead, Hong Kong and mainland brands compete in the high and medium-end market. Chinese domestic jewelry companies are younger than their international competitors: most of them have no more than a hundred years of history and thus offer cheaper prices.

Big companies such as Chow Tai Fook Group implement a multi-brand strategy, building high-end jewelry brand image. Jewelria, for example, is a brand of the Chow Tai Fook group which targets high-income people and only has stores in a few first-tier cities. Moreover, its products are not available in their online shop. New domestic brands, such as YIN, I Do and Qeelin, are gaining ground by targeting customer segments that have been long ignored by long-established companies, thereby achieving great success especially among the youngest. However, so far branded jewelry only accounts for 15% of China’s jewelry market, showing that there is still room for new players to enter the market.

Pure gold jewelry is not that popular among the youngest

China’s jewelry market can be divided into three segments: gemstone jewelry, metal jewelry, and “other jewelry”, including ceramic, ivory, wood jewels, etc. In the whole jewelry industry, gold products are the most popular category and account for more than half of the industry revenues, followed by diamonds, jade, and other precious metals such as platinum and silver. The Chinese market is dominated by 24-karat gold jewelry, which holds about 85% of the market share. Such pure gold jewelry is usually sold by weight: retailers multiply the net weight of the items chosen by their customers in grams by the daily gold price and then add a markup comprising labor charge and retail margin. Furthermore, in first-tier cities there is a healthy market for 18-karat fashion jewelry, where most of the upper-end demand is met by imported Italian products.

In recent years, gold jewelry has faced stiff competition from gem-set and other jewelry products in first-tier cities. According to a survey carried out by the World Gold Council, only 18% of women in these cities would choose to buy gold jewels when given 5,000 RMB, against 14% and 15% who would buy diamonds or platinum jewelry respectively. However, the situation is completely different in lower-tier cities since consumers there have a strong preference for high karat and heavy gold jewelry for wealth preservation purposes.

In addition, different age groups tend to show different preferences in terms of jewelry materials: compared to other consumer groups, Chinese Gen-Z dislikes gold jewelry goods and tends to opt for diamond and platinum jewels.

New trends in China’s Jewelry Market: the rise of the “sinking market”

With demand in first- and second-tier cities reaching maturity, third-tier cities become a key engine of growth for China’s jewelry market. Indeed, the population growth rate in low tier-cities has doubled over the last 10 years and, currently, the total population in third-tier cities is 5 times larger than that in first-tier cities.

The purchasing power of second- and third-tier cities is increasing rapidly triggering a rise in the demand of jewelry, thus stimulating store expansion in lower-tier cities.

Lukfook and Chow Tai Fook are the two companies with the largest number of stores in mainland China. Between 2013 and 2017, Lukfook has opened about 280 new stores in lower-tier cities, while Chow Tai Fook focused more on second-tier cities, inaugurating around 500 new stores. Foreign brands, such as Cartier, are attempting to expand their business in second-tier cities as well.

However, the market in first-tier cities is anything but shrinking. In fact, jewelry houses keep on investing and upgrading their positioning and branding strategy in these cities to meet the needs of their most sophisticated customers.

What’s new on China’s diamond market

Vaunting a market size of 610 billion RMB in 2019, China has steadily held the second position as the world’s largest diamond market for over a decade, preceded only by the US. According to diamonds.net, between 2002 and 2018, the import of net polished diamonds through the Shanghai Diamond Exchange recorded an astonishing annual increase of about 27%. As younger generations impose themselves as the main drivers of national consumption, China’s diamond market boasts a greater potential of growth than other developed countries. Indeed, Chinese Millennials are expected to surpass their US counterpart in terms of purchasing power.

china's jewelry market
Source: WeChat, Cartier’s flagship store on WeChat

Although diamond jewels are increasing their share in the bridal market, as Gen-Z consumers become the main group of newlyweds and domestic marriage rate declines, the non-bridal segment is bound to play a major role in boosting the demand for jewelry goods. Thus, it is not surprising that brands that have always targeted consumers in the bridal market, such as I Do, are now attempting to widen their audience, conveying the idea that diamonds are not just for weddings.

Single women, men and children: long overlooked consumer groups steal the spotlight

In China, the association between diamonds and love is not that straightforward. Indeed, Chinese young consumers tend to consider diamonds as fashionable accessories rather than just symbols of romantic commitment. Highly educated women living and working in higher tier cities are among the most important self-purchasing consumers. According to De Beers Diamond Insight Report 2017, 25% of women in China earn more that their partners do, and 34% of them purchase jewelry goods either for celebrating personal milestones or on impulse, while just 12% of them mention romantic commitment as their main driver of jewelry consumption.

Unlike Westerners, Chinese men show great appetite for jewels and diamonds: among Chinese male consumers in the 30-44 age group surveyed by the Hong Kong Trade Development Council, 67% of them declared wishing to own diamonds. Nevertheless, current supply cannot meet Chinese men’s demand for something more than gothic rings and rapper chains, inducing them to purchase women’s jewelry with gender-neutral designs.

china's jewelry market
Source: Weibo, Cantonese actor Zhong Hanliang wearing one of the rings from Bulgari B.zero1 unisex collection

In accordance with Chinese traditions, people give longevity locks, bracelets, and necklaces to children as lucky charms as well as a way of wishing them a healthy and happy life. In particular, gold jewelry items are the top choice among parents concerned about family’s future financial situation due to their inflation-proof value. Many companies have thus launched their children’s collections. For instance, Chow Tai Fook collaborated with Disney and Marvel to create its baby gift sets.

Smart jewelry may be an opportunity

Although still at their infancy, China’s smart jewelry market is growing fast. Totwoo, the first Chinese smart jewelry company, received a 20-million A-level investment in 2016 to further develop its innovative jewels. The brand sells necklaces and bracelets priced between 1,098 and 2,389 RMB, with the main feature being able to light up and vibrate through controlling it over an app.

Also Chow Tai Fook invested in a smart jewel named “Linklove”, with vibrating, selfie shooting, and pedometer functions.

E-commerce and O2O interaction keep on reshaping the industry

Nowadays, the digital world imposed itself as an essential part of the luxury consumer’s journey. According to McKinsey, about 60% of touchpoints are digital in China, however, customers tend to gather information online then purchase them in physical stores. Display counters in large shopping malls, specialty stores and experiential stores are the main distribution channels for jewelry in China. Nevertheless, independent shops, chain stores and e-commerce are gradually gaining grounds.

One of the main differences between jewelry e-tailers and conventional players is undoubtedly the role played by physical stores. E-commerce players, such as Kela and Zbird, tend to display just a bunch of sample products and keep a limited inventory in their brick-and-mortar shops. After placing an order through in-store tablets, their own mobile devices, or store clerks, customers must wait for up to 20 days before receiving their jewels. Chinese consumers looking for engagement and wedding rings are more likely to buy their rings in physical stores rather than online, while they opt for jewelry e-tailers when willing to purchase personalized diamond jewelry that are less likely to require opinions from family members. Retailers tend to keep their most expensive items in physical stores, since customers prefer having the chance to see and try jewelry items on when it comes to spending great sums of money.

Social Media as efficient channels to engage with customers

Most of the main players in China have their own Tmall and JD flagship store, while WeChat and VIP are the most popular social-media platforms where users can have access to jewelry products. WeChat boasted about 1.2 billion monthly active users in 2020, maintaining its position as being the most popular Chinese social media platform. It is not surprising that Tencent’s multifunctional app plays a major role in jewelry houses’ O2O strategy in China. Cartier was the first luxury jewelry brand to use WeChat moments ads. Relying on Tencent’s enormous database, the accurate delivery of the ads helped Cartier’s WeChat account gain a huge following. In occasion of 2017 Valentine’s Day, the French jewelry brand launched 150 limited-edition “Rose” and “Love” bracelets available exclusively on its WeChat store. The bracelets were sold out within one week, but such initiative principally aimed at raising brand awareness and increasing consumers’ desire for Cartier’s products.

Besides WeChat, Weibo and Douyin are also witnessing a major increase in the number of jewelry brands running a flagship store on the platforms. Domestic jewelry brand I DO boasts 286 thousand fans on Douyin, imposing as one of the most popular national jewelry houses on the platform. Some of I DO’s most popular posts on the short-video platform are part of a series of romantic wedding proposals divided into about 30 episodes.

Moreover, live-streaming sales has become increasingly popular for all major jewelry brands and jewelry accessories ranked as fourth most important category in terms of live-streaming sales in 2020.

Jewels have a great story to tell

In order to meet the needs of customization-demanding younger consumers, main players in China’s jewelry market are enhancing their O2O strategy and enhancing customer experience by integrating online and offline features. For instance, LVMH-owned Chaumet allows customers to measure their finger sizes in 360 degrees on their Mini Program, while Cartier offers tailor-made services like engraving, gift-wrapping, and white-glove delivery services via TMall.

Moreover, jewelry houses rely heavily on storytelling to catch Chinese consumers’ attention and stand out from the crowd. Nevertheless, while foreign brands stress on their long history and deep-rooted legacy, Chinese brands bet on design, social commitment, quality of raw materials and cost-effectiveness.

Another big difference between foreign and domestic brands lies in the nature of their products. On one hand, classic pieces from big names are perceived as ever-green and extremely versatile, whereas, on the other hand, domestic brands provide younger and more fashion-forward jewels to target Gen-Z, as showed by WBJ and YIN.

Sustainability matters to high-end luxury consumers in China According to Agility TrendLens 2021, a study covering thousands of high income individuals in six countries, 88% of Chinese high-end jewelry consumers take into account brands’ social responsibility when it comes to purchasing luxury goods in a serious matter. 89% of the Chinese interviewees declare being willing to pay a premium for sustainable and eco-friendly products. This trend extends to China’s diamond market as well: about 56% of respondents are open to pay between 10% and 20% more for a sustainable diamond.

Despite the bias against artificial diamonds persists, moissanite diamonds are getting increasingly popular among Chinese Gen-Z consumers. Indeed, since young couples are eager to have more cost-effective weddings, they are keener to purchase lab-grown gems. The outbreak of the pandemic accelerated this trend, as couples prefer allocating their money in other commodities.

china's jewelry market
Data source: Agility TrendLens 2021, designed by Daxue Consulting, Percentage of surveyed high-net-worth consumers who are willing to pay more for a sustainable brand by country

6 takeaways from China’s jewelry market

  • China’s domestic jewelry market kept on growing in 2019, despite the overall global market was suffering.
  • Due to their differences, foreign and domestic brands target distinctive market segments and adopt different strategies. However, branded jewelry only accounts for 15% of China’s jewelry market so far, illustrating that there is still room for new players to enter the market.
  • 24-karat gold is Chinese consumers’ favorite jewelry material; nonetheless, younger generations tend to prefer platinum and diamond jewelry goods.
  • Lower-tier cities, non-bridal, self-purchasing, and smart jewelry are keywords in today’s jewelry market in China. Meanwhile, single women, men and kids are imposing themselves as important drivers for growth.
  • In order to conquer the hearts of Chinese young consumers, jewelry houses need to develop a strong digital and social media strategy aimed at enhancing customer experience by integrating online and offline features.
  • Chinese high-income consumers take seriously into account brands’ social responsibility efforts during their shopping, and they are willing to pay more for sustainable luxury goods.

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