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The Battle for China’s $100 Billion Jewellery Market

International brands, domestic giants and unbranded jewellers are vying for a slice of China’s jewellery market, which is poised for double-digit growth.
Singer Huang Ling attends opening ceremony of Cartier jewellery exhibition in Shanghai, China. Getty Images.
Singer Huang Ling attends opening ceremony of Cartier jewellery exhibition in Shanghai, China. Getty Images.

Hard luxury is emerging as an increasingly attractive category in China, but the jewellery consumer’s mindset, motivations and behaviour have all undergone a fundamental shift over the past five years.

Fine jewellery has traditionally been seen as an investment, rather than a fashion-led category. Long dominated by unbranded products, branded jewellery in China still accounts for a relatively low 15 percent of the overall market, compared to 20 percent globally.

“It’s not about wearing gold because everybody does; it’s wearing a branded product that fits with what I stand for,” said Daniel Zipser, a senior partner at McKinsey & Company who leads the firm’s consumer and retail practice in Greater China.

This means international brands have barely scratched the surface when it comes to penetrating the broader Chinese jewellery market, which was valued at 647 billion yuan ($100.13 billion) in 2020, according to Euromonitor International.

If ever there was a time to double-down on the mainland, experts say, it is now.

I think the shift of the majority of sales happening domestically [in China] will not reverse.

Though Euromonitor data indicates that the overall jewellery market in China declined 8.5 percent in 2020 year-over-year, some segments and price points outperformed in an otherwise challenging year marred by the pandemic. Domestic sales in the luxury jewellery category, for example, rose 39.3 percent and the luxury fine jewellery category saw sales rise 50.6 percent.

Though these gains are largely the result of domestic luxury spend that might otherwise have happened overseas if consumption were not trapped within China’s borders, Euromonitor’s estimates of future growth remain rosy. The overall jewellery market will bounce back to growth of 18.11 percent in 2021 and enjoy a compound annual growth rate (CAGR) of 8.1 percent through 2023. The luxury jewellery segment is tipped to grow 24.8 percent this year and see a CAGR of 18.5 percent through 2023; luxury fine jewellery, meanwhile, is set to grow 28.5 percent this year and enjoy a CAGR of 20.5 percent until 2023.

“I think the shift of the majority of sales happening domestically [in China] will not reverse,” said Cartier’s chief executive Cyrille Vigneron, in the inaugural edition of The State of Fashion: Watches and Jewellery report co-published by The Business of Fashion and McKinsey & Company.

“The market will grow by itself anyway, and faster domestically than overseas or in travel retail,” he added.

While there is little doubt that the overall size of the opportunity is huge, some players will be better placed than others to take advantage of the double-digit growth expected in the years ahead.

Domestic Market Leaders

China’s relatively underdeveloped branded jewellery market has always been dominated by jewellery giants from the mainland and Hong Kong.

Currently, the top four jewellery brands in China by market share, according to Euromonitor data, are the Hong Kong-headquartered Chow Tai Fook and Chow Sang Sang (number one and four respectively) and the Shanghai-headquartered Lao Feng Xiang and Lao Miao (number two and three respectively).

Though these brands are little known in the west, in China they are synonymous with jewellery, specifically the 24-carat gold jewellery and other materials and design elements with auspicious meanings in Chinese culture that have long been the focus of local consumers. With thousands of retail outlets across the country, these incumbents have the dual advantage of local knowledge and deep market penetration with which they can make the most of the coming jewellery boom.

Niche Chinese brands such as Hefang, Yvmin and Ooak are also beginning to gain traction, particularly among the post-90s and post-00s generations, taking share from affordable global brands and unbranded jewellers alike.

“This trend is particularly obvious in mainland China and the rest of Asia, where there is a mushrooming of micro brands from both ground-breaking new names — small and big — and spin-offs of well-known brands,” said Louis Chan, assistant principal economist of the global research team at HKTDC, which operates the Hong Kong International Jewellery Show, among other industry events.

To some extent, it is fair to say that most of China’s big heritage brands have struggled to adapt their businesses to the new era, with some lagging when it came to e-commerce adoption for example. But Chow Tai Fook has been able to leverage the pandemic period for better financial results than it has in years gone by.

In the first three months of this year, the group saw sales grow 152.6 percent year-on-year, albeit off a low base considering the restrictions on physical retail that were in place from late January to April 2020 in different parts of China, as the country worked to contain its first widespread outbreak of Covid-19. It also increased points of sale by 150 since the start of 2021, to 4,591 — giving it an enviable footprint across China’s vast and varied geography.

“To penetrate lower-tier cities [and capture consumers of unbranded jewellery in those markets], we have to work with a good partner — one who understands local knowledge, local economic situations and local relationships,” explained Kent Wong Siu-Kee, Chow Tai Fook Jewellery Group’s managing director for corporate and Hong Kong, Macau and Overseas.

Approximately 90 percent of Chow Tai Fook’s franchise partners are local jewellery operators who have operated their own store in their respective cities for a significant period, Wong added, which means they already have a relationship with local customers.

“We bring in our brand — our operation model and our management system, including the IT system — and they can also share in our CRM ecosystem,” he said.

There is no international brand currently operating in China that can compete with these domestic giants when it comes to scale, but in an environment increasingly focused on celebrity-based marketing, brand stories and fashion credentials, international jewellery interlopers might have a different edge.

International Challenger Brands

To give an idea of just how fragmented China’s jewellery market remains, Chow Tai Fook and Lao Feng Xiang, with only 7.6 and 7.5 percent of China’s jewellery market each according to Euromonitor data, are far ahead of their next competitors, Lao Miao has 3.5 percent and Chow Sang Sang 1.3 percent.

The only international jewellery brand to make the top five by market share is Cartier, with 1.1 percent, though other international players are rising. Tiffany & Co., for example, at number seven on the list, has grown its market penetration considerably over the past year, reaching 1 percent market share in 2020, up from 0.6 percent in 2019.

With so much room left for brands to convert consumers of unbranded jewellery, the ability of these international brands, and others, including Van Cleef and Arpels, Bulgari, Swarovski and Pandora, who also feature in China’s top 15 selling brands, to win over new customers will hinge on a number of factors. Chief among them will be the localisation of high-quality, compelling brand stories and the online environment will increasingly be where the battle is won.

Last year saw a slew of hard luxury brands embrace storytelling-based e-commerce with newfound enthusiasm.

Globally, Cartier’s parent-company Richemont went all in on e-commerce, partnering with Alibaba to invest in Farfetch as part of a $1.1 billion deal. Only days after the deal was announced, Cartier hosted its first jewellery livestreaming show on Alibaba’s Taobao Live during Alibaba’s Double 11 shopping festival, featuring more than 400 watches and jewellery items, including a necklace valued at $28.3 million.

“In China, e-commerce in the jewellery industry [has traditionally been] very, very transactional [but] there’s a lot more storytelling happening on Tmall today because, at the end of the day, it’s the biggest store window in the world,” said Jacques Roizen, Pandora’s senior vice president and China general manager.

“To treat it just purely as a transaction is a huge missed opportunity and that’s why we’ve made a lot of changes in upgrading our homepage [there],” he added.

Those changes seem to have paid off. Earlier this month, during China’s major mid-year sales period known as 618, Pandora was catapulted into the top three of Tmall’s ranking of top-selling jewellery brands for the sales event.

Beyond branding, digital storytelling and sales festivals, there is another driver for China’s jewellery boom: the unquenchable desire for design-led jewellery that consumers can use to symbolise their own personal style.

Leading by Design

When Alice Xu founded Ooak in 2012, it became one of China’s first multi-brand stores. Her focus was working with niche independent jewellery brands from around the world, introducing them to the China market, where a growing segment of consumers was beginning to treat the category more like fashion — a vehicle for self-expression — rather than purely as an investment commodity.

Over the years, Ooak has worked with more than 1,000 brands in this way, but in 2017 the focus of the business changed significantly, to building her own in-house brand.

The vision was to be a brand, designed by a team of top international design school graduates, priced somewhere in between the Taobao brands flooding the mass market fashion jewellery space, and the niche designers and luxury brands that consumers buy for a special occasion.

They are willing to try all types of stuff. They will buy Tiffany, Cartier, and also designer brands.

As more Chinese consumers, particular younger and more fashion-forward men and women, convert to brands, it’s likely that this design-led niche between the entry level and premium jewellery markets will see explosive growth (Ooak’s price point sits between 300 and 3,000 yuan, $46.42 and $464.35). Xu believes that this segment’s growth need not be at the expense of the growth of luxury jewellery or luxury fashion brands with jewellery as part of their offering (worldwide, luxury fashion brands are expected to make up 10 percent of growth in the branded market by 2025).

In her telling, the young women who make up Ooak’s customer base at their 20-odd stores around China’s first tier cities (as well as online, where 40 percent of Ooak’s sales are made) are not choosing between buying luxury branded jewellery and more affordable, design-led niche players like Ooak. They are buying both, to serve different needs.

“They are willing to try all types of stuff. They will buy Tiffany, Cartier, and also designer brands; it’s becoming more of a mix,” Xu said. “When they buy from the luxury brands, [they’re looking for] the signature style [and they might buy] once or twice a year, but when they buy Ooak or other fashion jewellery, it’s to match their outfits, so they buy much more frequently.”

With this change in mindset comes a host of new opportunities, but Chinese consumers still need more than a brand name, easy access and a pleasing aesthetic to win them over. In many categories, but especially one associated with a sense of occasion as closely as jewellery is, there is also the emotional element to consider.

Much like the motivations for buying jewellery, the reasons people feel a personal attachment to jewellery is broadening in China — especially in the wake of the pandemic.

Whereas once jewellery gifting would be associated with major life events — a wedding or graduation — today younger women and men also more commonly self-gift as a reward for hard work and achievement. A jewellery purchase these days can also be a kind of compensation, a way of treating oneself to something nice when missing out on other pleasurable activities — like an overseas trip, for example.

“That intangible value is also important,” Chow Tai Fook Jewellery Group’s Wong said. “So, we have to not only give the right product, authenticity and top quality, but also give something that the customer believes fulfils that emotional need.”



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