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09 december 2021

The Russian Federation Ministry of Finance expects to increase the export of jewelry in this way

(vedomosti.ru) – Russia’s Ministry of Finance wants to launch an online jewelry trading marketplace aimed at foreign buyers. Such an initiative is contained in a letter from Deputy Finance Minister Alexey Moiseev to Tigran Sargsyan, Deputy Chairman of the Board of the Eurasian Development Bank (EDB) (Vedomosti has the document, and its authenticity was confirmed by a representative of the ministry).

The Russian Ministry of Finance agreed with the Ministry of Finance of Belarus to launch a pilot project aimed at developing online jewelry trading to increase the export of jewelry goods from the Eurasian Economic Union (EAEU) to the world market, Moiseev said in his address. The deputy minister invites Sargsyan to take part in the creation of an IT infrastructure necessary for this purpose, using among other things the resources of the Digital Initiatives Fund of the Eurasian Development Bank (EDB).

Sargsyan confirmed the receipt of this letter through a representative. According to him, the EDB, together with the Russian and Belarusian Ministries of Finance, is indeed working on the project titled “Digital Trade. Jewelry,” the purpose of which is to form a new trading platform for organizing exports to third countries.

To create it, according to Sargsyan, it is necessary to go through two stages. The first is to digitize the internal processes of the industry in the participating countries. The second is to design directly a new infrastructure and create a logistics system, says Sargsyan. In Russia and Belarus, jewelry hallmarking has already been launched - this is a good basis for further paperless interaction with regulatory authorities, as well as an opportunity for export registration “in one click,” he explains. According to Sargsyan, the result of the joint work will be a new online trading space for the jewelry industry of the EAEU countries.

Why do the authorities need a marketplace?

The marketplace is aimed at the b2c segment, and this platform will be selling finished goods, as Vedomosti was told by a representative of the EDB Digital Initiatives Fund. This will reduce costs for businesses by eliminating intermediaries and creating a completely new e-commerce ecosystem in the market, the source said. According to the source, the platform will be developed in such a way that deliveries will be carried out to the buyer's door.

The volume of the Russian jewelry market is about 70 million gold pieces per year, Moiseev said through a representative. According to the Association of Internet Trading Companies (AITC), sales of this category in 2020 amounted to 222 billion rubles, of which 30 billion rubles are accounted for by online trading. Russia’s Guild of Jewelers estimates the share of online sales in the segment at 10%. Online sale of jewelry in Russia has been legalized since the end of 2019, subject to mandatory certification of precious stones and the presence of an assay mark.

The potential of this market allows selling goods not only domestically, but also abroad, the Deputy Minister of Finance added. According to Moiseev, now participation in international exhibitions is limited due to the pandemic, which narrows the export potential of the industry. He clarified that the request for new opportunities for entering foreign markets comes from manufacturers. In addition to directly increasing exports, the marketplace will help open new names of jewelers from Russia and the EAEU and will also contribute to the development of the industry, Moiseev summed up.

On January 1, 2021, Russia launched the State Integrated Information System to control the turnover of precious metals and precious stones. Currently, registration in this system is voluntary, but from March 1, 2022, all operations with jewelry products must be transferred to the system. From March 1, 2023, it will be imperative to apply a special barcode – nanomark - to jewelry goods. According to Moiseev, the digital platform will become one of the options for implementing this traceability system, which will collect information about all products manufactured in Russia, and then in Belarus.

The share of jewelery from the EAEU in the global market is less than 1%, while for the Union countries it is export that is a key factor in the development of the industry, said a representative of the EDB Digital Initiatives Fund. The launch of the marketplace will at least allow industry stakeholders to optimize the work with documents required for international trade, the source said.

Does business need a state marketplace?

Vedomosti sent inquiries to the largest jewelry retailers and manufacturers. Online jewelry sales have been growing steadily over the past few years, including due to the pandemic and restrictions on the operation of offline stores, agreed the CEO of the Alrosa jewelry group, Irina Morozovskaya. According to her, the initiative of the Ministry of Finance can only be welcomed. Online jewelry retail in Russia is growing mainly due to large federal players who invest in their own e-commerce, said Artem Sokolov, managing partner of Sokolov. The structure of demand in the virtual segment is mostly focused on the mass market - a category of low and medium price range, he said. Premium jewelry pieces worth more than 400,000 rubles are still more often sold in brick-and-mortar stores, he points out. The success of the state marketplace will largely depend on the volume of investments in promoting the new plarform in competitive international markets, Sokolov believes.

Jewelry production in Belarus, Kazakhstan, Kyrgyzstan and Armenia is not so large, so the project is more likely aimed mainly at Russian companies, says Eduard Utkin, General Director of the Jewellers’ Guild of Russia. According to him, currently, bureaucratic procedures hinder the sale of jewelry for export. Difficulties arise not so much with the search for buyers abroad, as with the shipment of products to them from Russia, Utkin continued. A lot of documents are required, it is impossible to do without the services of a customs broker, which are quite expensive, the expert explained. Thus, foreign trade is available only to large companies that are willing to incur additional costs, while these channels are not available for small ones. If the marketplace takes over the functions of customs clearance, it will be a breakthrough step in the development of jewelry exports, Utkin assured.

The platform should be rather a service model on which commercial marketplaces and online stores will be able to receive certain services, says AITC President Artem Sokolov. In fact, a full-fledged online jewelry trade in Russia began at the end of 2019. Since then, the local market has seen a stable growth of online sales on average from 5% to 40% per month, depending on the region. According to AITC, the volume of orders in January - March 2021 increased 3 times as much compared to the same period in 2020.

However, according to Utkin, foreigners do not yet have much interest in Russian jewelry, but there is a huge Russian-speaking diaspora abroad that may be interested in buying domestic goods.