China is becoming a consumption-led economy, which bodes well for retail in China, especially the luxury sector . China’s jewelry market is still dominated by foreign brands. Corresponding to the growing demand
s, distinct and revolutionized consumer needs appear, such as customization.
The online and second-hand jewelry market has soared recently. China’s jewelry market can afford to approach a wider target market, men and children represent a flourishing consumer base with unmet demand.
Jewelry sales are tied to GDP, so here is an overview of China’s GDP
The Chinese GDP has seen an upwards trend from 2010 to 2019, maintaining a stable growth rate at around 10% from 2017 to 2019. The percentage of the wealthy class and the upper-middle class in China are expected to rise, which is a sign of growth in the consumption of jewelry. From 2015 to 2020, the number of the wealthiest class (more than 24,000 RMB of monthly disposable income) had the highest growth rate, with a CAGR of 16.9%.
Data source: chyxx, China’s household monthly disposable income
Correspondingly, from 2009 to 2015, China’s jewelry market has grown at an incredibly high rate, which has eventually stabilized at about 6% from 2016 on.
Data source: Qianzhan, size of the jewelry market in China
China’s fundamentals, including the growth of the middle and upper classes, and urbanization, remain strong and the government’s new fiscal policies, such as the 13th Five-Year Plan, are expected to bring about a boost in the jewelry market in the coming years.
These 8 trends shape China’s jewelry market
1. The luxury jewelry market is dominated by foreign brands
Players in China’s jewelry market could be divided into 3 categories: mainland companies, Hongkong-based companies, and foreign companies. Generally, products of foreign brands, such as Cartier, Van Cleef & Arpels, and Swarovski are priced higher than those of domestic brands. These luxury brands often have a long history and customers are eager to know the stories behind both the brands and each product series.
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. In recent years, with the Chinese economy’s recovering from the 2008 global recession, more young players, such as KEER, I DO, and Zbird have entered the market and expanded quickly.
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 Tier I cities. Its products are not available in their online shop.
2. The geographic center of jewelry consumption is shifting downward
With demand in Tier I and Tier II cities reaching maturity, Tier III cities become a more important driver of growth and an important contributor to China’s jewelry market.
The purchasing power of Tier II and III cities is increasing rapidly. Accordingly, the demand for jewelry is increasing as well, stimulating store expansion in lower-tier cities, especially for companies that implement both store franchising and self-operating models.
Data source: chyxx, China Industry Information, Jewelry consumption by Chinese city tier
Lukfook and Chow Tai Fook are the two companies with the most stores in mainland China. In recent years, they focused more on expansion in Tier II, III, and lower-tier cities so as to achieve broader coverage and accelerate authorized franchise stores’ expansion. These cities, which experience higher economic growth, are in general more resilient when facing global economic fluctuations and have witnessed a rapid expansion of their jewelry markets. Cartier is also trying to expand carefully in Tier-II cities, such as Chengdu and Nanjing.
While lower tier consumption is rising, tier-1 consumption is not shrinking
However, the market in Tier I cities is not shrinking; hence, companies keep upgrading their positioning and branding in these cities so that they can cater to their more sophisticated customers.
The population growth rate in Tier III cities is higher than in Tier I and II and has doubled in the past 10 years. The total population of Tier III cities is 5 times higher than that of Tier I cities. With the internet penetration rate of Tier III and lower-tier cities being higher than ever, people are increasingly more likely to be influenced by KOLs when making purchasing decisions. Chinese jewelry brands like Lukfook and Chow Tai Fook are opening more and more store locations in lower tier cities. While Lukfook has opened 280 new stores in tier three and below cities between 2013 and 2017, Chow Tai Fook is focusing on tier two cities, with around 500 new stores opening in tier 2 cities between 2013 and 2017.
3. Gold jewelry is the most popular, but tier I cities are reshaping the trend
China’s jewelry market can be divided into three segments: gemstone jewelry, metal jewelry, and other jewelry. Other jewelry could be made of ceramic, ivory, wood, etc. Although many jewelry companies have expanded their watch sectors, and watches may be encrusted with diamonds or other precious stones, watches are not considered a subcategory of jewelry.
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.
Data source: Gems & Jewelry Trade Association of China, designed by daxue consulting, sales by category in the jewelry market in China
The revenue contribution proportion is the same in some companies. For example, Chow Tai Fook’s gold products contribute to 57.4% of its total revenues.
The Chinese market is dominated by plain, 24-carat products, which represent about 85% of the market volume. This ‘pure gold’ jewelry (known as 足金 in Mandarin) is almost entirely sold by weight. Shops weigh the items chosen by their customers, multiply the net weight in grams by the daily SGE spot price and then add a markup that incorporates the labor charge and a retail margin. The balance of the market is made up of 18 carat (known as K金 in Mandarin) and gem-set products. A large share of the 18-carat market is for wedding bands, where ‘white gold’ constitutes a strong competitor for platinum.
In recent years, gold jewelry has faced stiff competition from gem-set or other jewelry products in Tier I cities. Only 18% of women in these cities would choose to buy gold jewelry when given 5,000 RMB, compared with respectively 14% and 15% who would buy diamonds or platinum jewelry. However, this competition is not as fierce in lower-tier cities. Consumers in Tier III and IV cities flock to buy high carat and heavy gold jewelry for wealth preservation purposes. Also, in Tier I cities, there is a healthy market for 18-carat fashion jewelry, where much of the upper-end demand is met by imported Italian products.
Data source: World Gold Council Tier I cities are changing the shape of consumerism in China: trends that start among these groups eventually filter through the consumer landscape and end up influencing the purchasing decisions of the population in lower-tier cities.
4. Self-purchasing of non-bridal diamond jewelry pieces is growing
Wedding jewelry traditionally accounts for a big share of jewelry consumption, indeed, it contributed for 32.1% and 39.2% to total revenue of Chow Tai Fook in 2014 and 2015. Brands such as I DO and Darry Ring have always targeted consumers in the bridal market.
However, in 2016, only 11.43 million Chinese couples registered for marriage, making it the third consecutive year where the number has declined. Much of the marriage decline results from China’s one-child policy. Ended formally in January after 35 years, the policy accelerated a decline in the country’s birthrate. As a consequence, people between 20 and 30 – the prime marrying age – make up for a smaller share of the population compared with two decades ago. Because families often preferred male babies, China has a surplus of men, further complicating marriage prospects.
Bridal diamond jewelry may not be the foundation of the diamond jewelry industry
With the decrease in the demand for wedding jewelry, brands need to adjust their product lines accordingly. Danish fashion jewelry manufacturer Pandora seems to have quit this market. It has kept away from ‘love’-based promotion in China. Its advertisements have never portrayed the image of couples, which is thought to be old-fashioned and would discourage potential customers such as single women.
Female millennials spur growth through self-purchasing
While women’s desire to receive diamonds as a gift is still strong, in China they are more likely to buy diamonds by themselves. This is due to the growing number of working women. 25% of women in China are already earning more than their spouses, which is higher than that in the US.
They often choose the jewelry they will receive as a gift by themselves or at least have play some role into its selection. Around 26% of women receive diamonds for birthdays, a number that rises extraordinarily in the occasion of 18th and 20th birthdays. Whereas, 27% of women buy diamond jewelry for no specific reason. When purchasing diamond jewelry, emotional drivers are particularly powerful in China, with the celebration of relationships and personal milestones topping the list (factor that stands among the less relevant in the US).
Source: De Beers Diamond Insight Report 2017, designed by daxue consulitng, drivers of purchases in the jewelry market in China
Millennials increasingly value jewelry for everyday wear. Unlike wedding jewelry, jewelry for every day wear is a recurring purchasing opportunity. A peculiarity of this category of consumers is that they value the purchasing experience more than the product itself, which is also why Pandora is so popular in China. Its Moment series bracelets provide over 600 different options to Chinese customers, launching new products on various celebrating days. Pandora remained at a two-digit percentage annual revenue growth rate since it entered the Chinese market officially in 2015.
Domestic jewelry companies are also seeking to attract millennials. As a consequence of the acquisition of the Boston-based jewelry brand Hearts on Fire, Chow Tai Fook now provides a broader range of products targeting younger customers. Another popular brand among millennials is Luk Fook, which provides gold jewelry of low quality, thus making the price more affordable.
5. The digital market can’t be isolated from offline stores
Online shopping has effectively become a national pastime in China, with approximately 77% of people picking it as their favorite leisure activity.
80% of consumers aged between 20 and 40 learned about gold and jewelry products through the internet and 60% of them have purchased jewelry online. The percentage of spending on gold jewelry under RMB1,600 was 64%, while that on gold jewelry over 3,000RMB was 15% only. Currently, the products priced at around 1,000RMB are prevalent in the internet spending on gold jewelry, while the products priced under RMB2,000 are the major market for internet spending on gem-set jewelry. Chow Tai Fook sets price range in their physical stores is 3,000-6,000RMB, whereas online it is 1,000-1,500RMB.
Most of the main players in China have their own Tmall and JD stores, while WeChat shop and Vip shop are the most popular social-media platforms on which users have easy access to jewelry products.
E-commerce players keep rolling out physical stores
In the online market, jewelry companies’ biggest challenge is to inspire confidence in customers. Almost all the online jewelry shops of will locate the nearest offline shop for online visitors, inviting them to walk in so to see and touch the jewelry.
One difference between e-commerce players and conventional players is the function of physical stores. The former ones have fewer physical stores: Kela (柯兰钻石) has 210 stores, and Zbird (钻石小鸟) has only 41 stores. These stores only have sample products and a few inventories. Customers can either place a digital order through in-store tablets, their own mobile devices, or the store clerks directly. Then, they have to wait for the products production and shipping from Shenzhen, China’s biggest jewelry manufacturing and trading hub, where most jewelry manufactories are located (including Kela and Zbird), for 5 to 20 days.
Zbird (钻石小鸟) successfully implemented a B2C model into the jewelry industry. The company was founded in 2002, even before Alibaba launched Taobao, and started selling diamond rings and pendants on Eachnet, the first e-commerce platform in China, and only opened its first flagship store in 2014.
However, for Zbird and Kela, most of the revenues come from physical stores: 80% for Zbird and 70% for Kela. Customers looking for engagement and wedding rings are more likely to buy the ring in the physical stores rather than online, while the latter is more frequently used to buy personalized diamond jewelry like pendants, earrings, and other pieces that are less likely to require opinions from family members.
E-commerce and O2O interactions will continue to reshape the retail industry
Unlike e-commerce companies, conventional jewelry companies are trying to reach out to as many customers as possible. They focus on in-store experience and multiple stores in each city. Chow Tai Fook’s revenue from e-commerce platforms accounts only for 9.3% of the company’s total revenues.
Chow Tai Fook levered its extensive retail network paired with inventory unification system to collaborate with online platform partners and launched the online order distribution program in 2017, enabling its customers to enjoy jewelry deliveries directly from nearby POS in shorter delivery times.
WeChat is an efficient channel to communicate with customers
WeChat’s monthly active user count sits at 1.2 billion as of Nov. 2020. 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.
From February sixth until Valentine’s Day of 2017, 150 limited edition “rose gold love bracelets” were available exclusively on Cartier’s WeChat online store. Each bracelet cost over RMB 30,000 and was on the more affordable end of its jewelry collection. All the 150 bracelets were sold out within a week.
The purpose of this campaign was not to focus on the selling figures, but rather on showcasing Cartier’s premium-purchase experiences. Essentially, using hunger marketing resulted in raised brand awareness and increased consumers’ desire for products.
Besides WeChat, Weibo and Douyin are also witnessing a major increase in the number of jewelry brands’ presence on the platforms. Domestic jewelry brand iDo has 38 thousand fans on Douyin and is one of the most popular jewelry brands on the platform by far if compared with Chow Tai Fook’s mere 12k fans and KEER’s 14k fans. The most popular videos of iDo are the promotional cuts off a group of celebrities, Nine Percent, that has presented its crossover perfume. The group member of this nine-member Chinses boy group formed by the survival show Idol Producer has at least 4 million fans on Weibo, 73 percent of which are young people aged under 23. Finally, this perfume contributes 4-million revenue to iDo. Recently, Chanel cooperated with Douyin, posting videos about its watch, gaining up to 73 thousand views.
Brands need an innovative form of advertising. The parent company of iDo, Hiersun Industrial Co., Ltd., founded its own film company, and plan to shoot a movie based on the idea of its iDo bridal jewelry. The same as Kela, whose parent company Gangtai Holding (Group) Co., Ltd has acquired an advertising company in 2015.
Without a long history, domestic jewelry brands emphasize the design and quality of raw material
High-end jewelry brands attract customers by leveraging the brand’s history, such as Cartier and Van Cleef & Arpels, whereas younger brands usually rely more on design, social commitment, etc. Pandora, for example, raised its concern about Thailand’s workers, while Shinning house (钻石世家) made significant donations to schools in rural areas.
The diamond market in China
According to the De Beers’ Diamond Insight Report, China is currently the second-biggest consumer of diamonds in the world, after the USA, for a total market value of 66 billion RMB. Diamond jewelry is mainly popular among young consumers. About 80% of the people who purchase diamond jewelry belongs to the ‘80s or ‘90s generations. Thus, there is still room for the expansion of the demand in this specific market segment.
Diamonds stand as the most imported jewelry item in China with a market share of 65,2% of the total, followed by non-silver products (19%) and common metal products.
Since the Shanghai Diamond Exchange is the only transaction platform for the import and export of diamonds in mainland China, most jewelry companies in China purchase processed diamonds from it. However, some companies, such as Zbird, choose to sign purchase agreements with foreign diamond exchanges (such as the Antwerp Diamond Exchange) and purchase processed diamonds directly from there.
Rather than purchasing processed and polished diamonds, a few big players are able to process diamond by themselves, vertically integrating their business model. Chow Tai Fook now purchases rough diamond from Alsora and Rio Tinto, and has 5 Jewelry Manufacturing Companies in mainland China, covering upstream raw material procurement, rough diamond cutting and polishing, and midstream product development, manufacturing, and quality assurance.
As young consumers in China take a growing interest in cheaper, more accessible alternatives to mined gems, lab-grown diamonds are becoming more popular in China. Consumers born in the 80s and 90s, as well as millennials, are turning to lab-grown diamonds as they are cheaper than mined gems of similar quality and marketed as eco-friendly and ethically sourced.
In China, which produces about 90% of the world’s lab-grown diamonds, this type of diamond takes up 3% of the total diamond market, a data significantly higher than the world’s average (2%). Industry predictions show that this number is set to grow at an average of 22% a year.
In a market where fraud and corruption are more frequent than in other international diamond markets, brand awareness and reliability are fundamental to gain the consumers’ trust.
6. There is still much room for jewelry for men and children
China’s jewelry market consumption is dominated by females. 63% of jewelry products are purchased by females, and this number would go up with an increase in unit price.
While the traditional women’s market is fiercely competitive, the male jewelry market is still in the early stage of its development. As well as traditional jewelry items, such as rings, the men’s market also includes solely masculine items as tie clips, cuff-links, and belt buckles. The interest of mainland male consumers in jewelry products stems mainly from their taste for diamonds. Among Chinese males in the 30-44 age group, 67% wish to own diamonds. Compared with the relentless growth in overall demand, though, the development of the mainland male jewelry market is relatively slow.
Limited male jewelry despite the strong demand, especially in tier I cities
Although jewelry brands have some male jewelry products, the design lacks innovation, and most of them are gold rings or bracelets, while only offering very few man’s diamond rings.
Data source: Data from brands’ Tmall flagship stores, daxue consulting design
Most male consumers buy mostly jade and K-gold products, but the diversity of jewelry purchased is going to increase along with the income of the male population. High-income male consumers prefer amber, diamonds, colored stones and crystal, and are less interested in conventional jewelry such as jade and K-gold. Males in tier I and II cities account for most of the revenues of jewelry for men.
Jewelry for children
In accordance with Chinese traditions, people give longevity locks, bracelets, and necklaces to children as goodwill tokes and as a way of wishing them a healthy and happy life. In particular, the kinds of gold jewelry items that can be worn, but which also have an inflation-proof value, are the top choices among those parents who are concerned with managing the family’s finances.
In December 2015, the two-child policy allowing Chinese couples to have two children was passed, and effective from January 2016.
Data source: National Health and Family Planning Commission of the People’s Republic of China / Statista
In response to the implementation of this policy, many companies have introduced a variety of kids’ products. Lukfook, for example, launched an array of jewelry accessories featuring the Rilakkuma, a popular fictional character produced by a Japanese animation studio, where the baby gift sets came with accessories representing wishes of peace, safety, and healthiness as well as exquisitely designed gift boxes. Chow Tai Fook also co-branded with Disney, Line, and Marvel, attracting parents willing to make their children a present.
Besides images of cartoons, the twelve Chinese zodiac animals are also a theme of children’s jewelry. Indeed, parents believe that giving their children a gold or silver bracelet of their zodiac animal would keep bad luck away from them.
7. Smart jewelry may be an opportunity
Totwoo, the first Chinese smart jewelry company, has received a 20-million A-level investment in 2016, which it used for the developing of new products and launching offline stores. Previously, it had already launched smart jewels such as “We Bloom”, “We Bold”, and “Time Memory” in 2015. Totwoo sells necklaces and bracelets, priced from 1,098 to 2,389RMB, made of crystal set on a base of silver or gold. The relevant featured function is that two connected users can share their “virtual emotions” in real-time through the Totwoo APP to make the jewel light up and vibrate. Users can record their notes and receive alerts: “Take a break,” “Fitness Tracker” and “Incoming call.”
The conventional jewelry company Chow Tai Fook also invested in a smart jewel named “Linklove”, which has vibrating, selfie shooting, and step tracking recording functions.
8. The second-hand jewelry market is at a beginning stage
Although the second-hand market is growing fast in China, especially for second-hand cars, having over 10 e-platforms exclusively for the second-hand car business, second-hand jewelry seems to just at a beginning stage. Second-hand jewelry products could be traded in dedicated second-hand e-commerce platforms that allow users to sell things in various categories, such as Xianyu, developed by the Alibaba group, and Zhuanzhuan; or in platforms exclusively for luxury products, such as Zhier (只二) and Secoo (寺库).
Daxue Consulting can strategize your entry into China’s jewelry market
As a business intelligence authority in China, Daxue Consulting has a thorough understanding of China’s jewelry market and millennial spending habits and can help your company strategize a China market entry.
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