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Trends in Russia’s Jewelry Industry

08 july 2009

The Guild of Jewelers of Russia has sent a letter to Vladimir Putin, Russian Prime Minister, asking the state to back up the jewelry industry, according to BFM.ru.

The letter said that starting from January 2009 jewelry production slumped. In the first quarter this year it decreased 44% as compared with one year ago, while jewelry retail sales went down 15% in the same period.

At the Guild’s meeting preceding the letter, high credit rates were named as one of the reasons for the slump accompanied by higher global prices for gold and cringed demand, especially for pieces priced above 150,000 roubles, the Expert Magazine said.

“If this trend will continue, in several months it will result in a shortage of Russian made jewelry in retail trade which will bring about an increase in illicit traffic of jewelry to the Russian market,” the Guild’s letter said.

In connection with this the Guild asked the government to allow Russia’s State Reserve to dispense precious metals to jewelry makers giving them a payment respite under appropriate guaranties.

According to the Novaya Gazeta Daily, Russia’s diamond market started to recover only this spring. Adamas, the largest jewelry network, reached the last-year level in sales in “high” April. And it boosted its wholesale 30% up already in May (against April).

“We are now getting a very important signal: jewelry is again perceived as an asset without any corrections for the crisis,” says Pavel Sidorenko, General Manager of Adamas. “This is a bottom marker. People are again buying and their interest towards eternal values is once again awakened. However, the cumulative demand will still stay below the pre-crisis level for a long time. This year, the jewelry market will decrease at least by 30% versus 2008. And the currently higher demand may be due to redistributed shares in the field. Once small outlets closed their share went to large-scale chains.” So jewelry “heavyweights” intend to grow further. Take, for instance, Adamas, which optimized its staff in February and plans to open new stores to be once again manned.

According to forecasts, gold jewelry sales in 2009 will drop down 30-40%. Those jewelry networks, which have no own production lines, will face the greatest difficulties, the Delovoy Peterburg Daily predicts.

Jewelry marketers say that 2009 will be a complicated year for retail. Thus, the results of its first three months proved a 30 to 50 percent slump in gold jewelry sales in Russia. Sergey Dokuchayev, General Manager of OAO Russkiye Samotsvety, predicts a 40-percent contraction in sales in 2009, whereas Olga Mironova, General Manager of the RosYuvelirExpert Analytic Agency says it will be 30 percent.

On the backdrop of lowered payment capacity among the population, cheap silver jewelry is shining as ever greater attraction. According to Step by Step, a marketing agency, the inexpensive jewelry market may go up by 20 to 25 percent in 2009.

Jewelry manufacturers are still cutting their way through a slack season, Perm’s Business Class Daily informs. According to market players, the market has notably sagged compared to the previous years. Perm-based jewelers say that currently there is a 20 to 35 percent decrease in sales, whereas profit margin leveled to zero and negative levels. Igor Zamorin, General Manager of Shik, a jewelry network, even argues that sales dropped approximately 40 percent to one year ago.

However, there are those who has not noticed any decrease in shopping activity. According to the RBC Daily, Denis Adamsky, General Manager of the Moscow Jewelry Plant (MJP), says that his company has not posted lower sales since MJP’s products are aimed at the mass consumer segment, where there has been no price landslide. According to him, MJP’s sales revenue in the first quarter 2009 was similar to that posted one year ago.

Marketers expect a seasonal pick-up in the nearest time. According to Perm’s Business Class Daily, it is customary for shopping activity to regain its former level by summer and boost by autumn.

Russia’s output of diamond jewelry in January-April 2009 decreased 29.9% compared with the same period last year, Rosstat, the Russian statistic agency, says, according to RIA Novosti.

Russian jewelers produced 219,000 pieces of diamond jewelry in the first four months of this year. This April diamond jewelry output dropped 31.6% against last April.

A survey by the All-Russian Public Opinion Research Center this April proved that the majority of Russians turned to be more frugal in their spending (1600 people in 42 Russian provinces took part in the survey). 58% of respondents acknowledged that the crisis made them tighten their belts. The survey results were published by Rostov’s Molot Daily.

According to the Delovoy Peterburg Daily, financial problems made wealthy Russians to review their spending as well.

Thos earning more than 5,000 euros a month had also to spin out their money due to the crisis. They mainly skip elite foodstuffs and jewelry, while children and cars in this respect come after all the others.

Profi Online Research tried to find out how the crisis hit the Russians whose monthly income was 5,000 euros and above. The company interviewed 500 people asking them to share their opinions.

The majority of them did not remain aloof to financial woes. Only 10% of the surveyed said they did not take any actions to save their fortunes. The rest took care of their wealth. Thus, 48% of them converted their funds into foreign currencies. 

Nevertheless, the Russian luxury market is not going to surrender. According to a report published by the Bolshoi Business Daily, the organizers of the legendary Millionaire Fair Moscow launched their new project of this kind, the Summer Fair, held on June 26-28 on the Royal Bar premises.

Many mass consumption manufacturers are also optimistic. As the Yuvelirnaya Rossia Magazine says, the jewelry factory operating in the town of Kolchugino (the Vladimir Region) switched over to assembly-flow production of silver and gold jewelry. The technological breakthrough was financed by Russian investors.