Chinese Jewelry Market Recovers—But Millennials Don’t Want the Same Old Bling

Last week saw the release of both the Platinum Jewellery Business Review by Platinum Guild International (PGI), and Gold 2048: The Next 30 Years in Gold by the World Gold Council. Both reports addressed current sales figures of the respective precious metals, and predictions for the year ahead. Whilst 2017 saw gold consumption in China climb 9.4 percent, platinum dropped 2.8 percent, with another year of significant loss forecast for 2018. Elsewhere, India saw a 21 percent rise in sales of platinum jewelry, the USA 11 percent, and Japan 2.1 percent – all owing their success to the rise of the millennial luxury consumer.

Diamonds Are a Millennial’s Best Friend

Demand for jewelry overall in China rose 10.4 percent in the last year, a dramatic recovery from the 19 percent drop seen in 2016. This original drop came following the Chinese government’s crackdown on corruption hitting the market hard. President Xi Jinping’s anti-corruption campaign, which banned officials receiving gifts, led Chinese consumers to buy far fewer jewelry products. Now demand for gold is recovering, with millennials emerging as the biggest audience. In the last 12 months, buyers between 18-30 years old made up 39 percent of purchases of 18 karat gold in China.

Where diamonds are concerned, millennial buyers continue to come out on top. According to a report by De Beers, Chinese millennials account for 68 percent of diamond sales in China, with millennials worldwide accounting for 45 percent of global retail sales. Additionally, two of China’s high-end jewelry retailers, Tse Sui Luen Jewelry (谢瑞麟珠宝) and Chow Tai Seng Jewelry (周大生珠宝), made the keenly watched Deloitte “Global Powers of Luxury Goods” annual ranking for the first time, according to the just-released 2018 report. Nine Chinese brands were included in this year’s rankings, all but one of them jewelers. Hong Kong-based Chow Tai Fook Jewelry Group (周大福) made the top 10, beating luxury powerhouses such as Hermès International and Rolex.

Consumers Demand Style Over Substance

So, platinum’s decline is not due to tech-centric millennials turning away from precious jewels, but rather that platinum jewelers are struggling to reach them. And they’re not alone- last week, a report by Bloomberg showed Danish jeweler Pandora’s China sales growth slowed unexpectedly to 16 percent in the first quarter of 2018, down from 62 percent in the final three months of last year. Pandora, who specialize in precious charms, acknowledged this loss is due to evolving Chinese tastes, and an inability to keep up with them – its “styles have become stale.”

But what exactly is it that the Chinese millennial is looking for? According to Huw Daniel, CEO at the Platinum Guild International, the answer is clear-cut.

“We don’t believe at all in this narrative that millennial consumers are somehow less likely to buy jewelry than their predecessors. There’s been a new generation of consumers coming into the market who are, basically, a lot more design-savvy. I think that actually caught the jewelry industry on the back foot, and we weren’t really ready and didn’t anticipate the needs of this new generation of consumer. They put design very much ahead of a lot of other factors, and the platinum designs just weren’t up to snuff.”

This admission has led jewelers to assess what sells and seek out new designers. With gold too, China’s young consumers are no longer looking for gaudy pieces of bling at the heaviest weight, but sophisticated items that unite with their own personal style. According to the World Gold Council’s report, “gold must now compete with technology and fashion to appeal to millennials.” 53 percent of young millennials surveyed said they would rather spend money on designer fashion or technology, with only 22 saying they’d choose gold or diamond.

“We’re now in year five of what we think of as this transition, and what we’re seeing now is a lot of new designs coming up the pipeline that support this fashion-forward idea. But it takes a long time in China because it’s such a big territory,” explained Daniel.

“The platinum business, in particular, is completely polarizing between those who were open to complete rethinking their business model, including the design, and moved to piece-based instead of weight-based pricing. And moved to designs that prioritize design element over the weight of the metal. By that I mean, they’re generally lighter in terms of grammage, and they are products that are more fashion-forward. That type of product we’ve seen to be doing very well, we’ve just got a bit of a supertanker to shift.”

Love or Gold?

The battle for jewel of choice among Chinese consumers has left platinum lagging behind, with only 25 percent of shoppers planning to purchase the metal in the next 12 months, versus 35 percent for gold and 27 percent for diamond. However, in China’s Tier 1 cities, gold is starting to face fierce competition. Currently, 71 percent of consumers own gold jewelry, with platinum close behind at 63 percent.

According to Daniel, “In our studies, if you ask consumers which of the precious metals is most closely associated to love for them, they will say platinum. That’s two and a half times more so than 18-karat gold. So that’s in a way is what we think of as our core equity in China today, it’s basically “the love metal.”

The love metal it may be, but Chinese consumers are still slow to fall for platinum’s charms. PGI’s recent report predicts a further sales drop of 3-8 percent in 2018. Platinum Guild International’s current efforts are in working with the industry to get them to stop producing generic items, but create more unique, intricate designs. E-commerce growth has been slow in the jewelry market, as Daniel explains, “consumers still like to see before they buy with luxury jewelry” – so it’s not the evolving digital world taking sales away from jewelers. Chinese consumers have evolved, and jewelry designs need to match them.

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Industry Sectors, Watches & Jewelry