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PGI: Platinum jewellery sales indicate increase in Q2 2021

20 september 2021

Platinum Guild International (PGI), in its annual report The Platinum Jewellery Business Review (PJBR), analysed the retail sales of platinum jewellery, trade performance and consumer sentiments in its four key International markets - China, India, Japan and the USA - concluding that China’s economy maintained its recovery momentum into Q2 2021. In India, the economy bounced back, despite the disruptions caused by the second wave of COVID-19, and business started to reopen in the first week of June. Japan’s GDP for Q2 rebounded and delivered better than expected growth. In the US, GDP recovered to pre-pandemic levels despite potential headwinds from a new COVID variant. Platinum jewellery sales of PGI’s strategic partners saw a notable increase in Q2.

Studying the individual markets, PGI’s conclusions are as below:

China: While recovery slowed in Q2 against last year’s strong rebound, China’s economic growth slowed to 7.9% YoY in Q2, after registering 18.3% YoY growth in Q1, due to COVID-19 resurgence, supply chain disruptions; manufacturing output disruptions; higher raw material costs, and continued moderation in domestic consumption. To sustain domestic-driven growth, the People’s Bank of China cut its reserve requirement ratio (RRR) and released about $154 billion into long-term liquidity. Platinum fabrication declined; Branded collections drove the platinum business and partly offset the sharp decline of generic products which faced competition from gold. Platinum gem-sets enjoyed good momentum due to pent-up bridal demand and the launch of new collections and designs.

According to the Review, the total platinum transactions via the Shanghai Gold Exchange increased by 70% YoY to 17.0 tonnes in Q2 2021, reaching a new quarterly high, which offset the decline in Q1 and led to a 20% increase reaching 28.9 tonnes in H1. China customs data showed that net platinum imports also increased by 68% YoY to 32.6 tonnes in Q2 2021, offsetting the decline in Q1 and leading to an 18% increase to 53.2 tonnes in H1. Hong Kong’s net import volume of platinum, an indication of unofficial imports for jewellery use, increased by 115% YoY to 2.9 tonnes in Q2 2021 and 5.3 tonnes in H1 2021. Retail sales volume of platinum jewellery proved more resilient than fabrication. The sales volume of PGI retail partners declined by 15% YoY in Q2 2021, which offset the growth of 42% YoY in Q1 (adjusted) and led to an increase of 6% YoY in H1 2021.

India: In India, business reopened since June amidst another disrupted quarter. The new Delta variant caused another lockdown that reduced sales and traffic in Q2 and retailers are prepared for business in Q3. Platinum jewellery sales from strategic partners to stay flat or register a small growth compared with Q2 2020. The current situation index fell to a new all-time low as consumer perception of the general economic situation and employment scenario lowered further. The future expectations index also showed a similar trend, driven by a sharp fall in expectations on the general economic situation.

PGI’s key strategic partners have taken to social media and mobile messaging to build awareness about the reopening of their stores and to assure their customers about the vaccination of store staff and updated safety protocols. The focus of all strategic partners is to ensure vaccination of all their front-end employees as a priority. Around 70-80% of their total workforce is vaccinated.

Key strategic partners have seen business coming back in June after the April-May lockdown. PGI partners in major metropolitan areas have reported recovery of 50%+ in June while it was at 60-70% in tier two cities where the incidence of COVID-19 was less. Sales in Q2 2021 are estimated to stay flat or post a small growth compared with Q2 2020, although no actual data are reported due to store closures. Strategic partners aim to optimise immediate demand with wedding dates and key festivals in the July–September period. They have already planned promotions, marketing and retail activations for Q3.

Japan: Platinum jewellery sales in Japan delivered a strong rebound. Retail sales in Japan were up marginally by 0.1% YoY in June, below market expectations of 0.2% but still marking the fourth straight month of growth in Japan’s retail trade, although at the weakest pace after 11.9% YoY in April and 8.3% YoY in May. Retail sales gained 3.1% in June, the highest in four months, after two months of decline in April (-4.6%) and May (-0.3%). Japan’s consumer confidence index reversed its upward trend in April and May on the new wave of COVID-19 cases and the announcement of the third State of Emergency and improved to 37.4% in June. Two-thirds of H1 2021 was under the State of Emergency for nine major prefectures. However, none of the measures to date has been as restrictive as they were during the first State of Emergency in Q2 2020, resulting in a continued increase in foot traffic, especially with the Olympic Games taking place in Japan during the summer. This has benefited asset type jewellery and high-ticket platinum pieces. Against a low base in Q2 2020, unit sales of platinum recovered by 68.5% YoY in Q2, driven by earrings/pierced, pendant/necklaces and bridal jewellery. All sales channels except door-to-door grew, with the highest recovery in department stores by 218% YoY, as they were largely closed for the majority of Q2 2020 with a sharp decline in sales. Unit sales of all price points for platinum jewellery grew, compared with the disrupted quarter last year, led by pieces priced over $10K, $1K-2K and $500-1K, especially via contemporary chains and department stores. The outlook for Q3 was cautiously optimistic as the vaccination rate has increased, especially among older age groups.

US: In the US, platinum jewellery sales soared along with strong trade sentiment. US retail sales increased in June as demand for goods remained strong even as spending is shifting back to services. Sales surged 18.7% YoY in June, after 28% YoY in May and 53% in April, and are now well above their pre-pandemic level. The jewellery industry enjoyed sustained recovery thanks to a rebound in consumer sentiment on the back of vaccination rollouts and economic recovery. PGI’s strategic partners saw exceptional growth in Q2, and platinum expanded its presence among major and independent retail chains.

Platinum jewellery demand gained strong momentum in Q2 against a low base of last year, with most companies recovering back to 2019 pre-pandemic levels. Some are reporting Q2 2021 was the best quarterly performance in the company’s history. Platinum jewellery sales of PGI USA’s strategic partners had the fourth consecutive quarter of double-digit growth in Q2 2021. Total platinum jewellery ounce sales from PGI strategic partners jumped by 48% YoY, while unit sales went up by 100% YoY. Sales value also hiked by over 150% YoY. As consumer spending on jewellery continued to grow, retailers leveraged platinum to benefit from higher ticket prices. Among platinum jewellery sales, gemstone fashion jewellery continued to outperform the other categories, with triple-digit growth in units and value. Engagement jewellery and wedding bands also delivered high double-digit growth, thanks to postponed weddings and engagements and unit sales of platinum crowns enjoyed an impressive rebound of ~70% YoY. Platinum jewellery, especially branded collections in the major and independent chains has grown and delivered impressive results. PGI also worked with new business development partners to continue to ensure dedicated platinum strategies across all distribution channels. One of PGI USA’s branded jewellery partners reported a 61% YoY increase in platinum business as of the end of May. Despite the concerns of the next wave of the new variant that could hamper the recovery of business and retail sales, the potential negative impact on travel and experiential spending could continue to support jewellery demand, and platinum is well-placed and leveraged by retailers to capture high-spending consumers.

The PGI Consumer Sentiment Survey: The survey concluded that in Q2 2021 demand sentiment for precious jewellery remains stable in most markets, especially Bridal and gifting drive the increase in average spending on precious jewellery. Compared to a year ago when many countries were hit by the first wave of COVID-19, there is also a recovery in average expenditure on precious jewellery in Q2 2021 driven by bridal and gifting, despite a reduced number of consumers in the survey.

China leads the growth in bridal jewellery, with average spending rising by over 20% YoY in Q2, while Japan reports a notable increase in average expenditure on precious jewellery for gifting by over 10% YoY. Confidence in in-person shopping has improved in the US. Even with the effect of the pandemic and the prevalence of online and contactless shopping, consumers in the US still showed a strong preference for purchasing jewellery in an offline retail store. Confidence in in-person shopping has improved that 63% of Americans are now feeling most comfortable due to high vaccinations with 70% of the respondents feeling most comfortable to shop in-person at a jewellery store, increased from 35% back in Q4 2020. The cross-market survey interviewed over 2,000 jewellery buyers and wearers aged 18 to 65 from PGI’s four key markets China, India, Japan and the US. PGI identified five key findings for the platinum jewellery industry in Q2 2021.

The demand sentiment for precious jewellery remains stable for China, Japan and the US, and Chinese consumers show the highest consumption sentiment in Q2. 78% of Chinese, 66% of Indians and 59% of Americans surveyed said they purchased non-bridal precious jewellery within the past 12 months, and over 25% of them have purchased within the past three months. Compared to the previous quarter, China shows greater spending intention for precious jewellery in Q2 among the four markets, as 31% of Chinese report they are willing to spend more on precious jewellery. Bridal and gifting drive the increase in average spending on precious jewellery. China leads the growth in bridal jewellery, with average spending rising by over 20% YoY in Q2, while Japan reports a notable increase in average expenditure on precious jewellery for gifting by over 10% YoY. Confidence in in-person shopping has improved that 63% of Americans are now feeling most comfortable due to high vaccinations especially females aged 56-65, with 70% of the respondents feeling most comfortable to shop in-person at a jewellery store, increased from 35% back in Q4 2020.

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished