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Brighter Market Prospects for 2018: The HKTDC Hong Kong International Jewellery Show Survey

A poll of 1,269 buyers and exhibitors at the Hong Kong International Jewellery Show 2018 and the Hong Kong International Diamond, Gem and Pearl Show 2018 suggests that optimism is increasing in the industry about the market outlook in 2018.

Buyers’ sourcing plans continue to grow this year, while both buyers and exhibitors are expecting to see higher prices (retail and FOB) and therefore higher sourcing and production costs.

Buyers are generally showing greater confidence in markets such as Eastern Europe (excluding Russia), the Middle East, Russia, the Chinese mainland and Latin America. Western Europe is the only developed market buyers think will be doing better in 2018.

Overall, the respondents seemed to regard the fluctuation in the price of raw materials and increases in operating costs as their key challenges in the year ahead, followed by the changing fortunes of the global economy and movement in exchange rates.

In terms of which segments of the jewellery market are likely to do well, the buyers suggested that contemporary jewellery has the biggest potential, followed by jewellery for weddings and special occasions, and designers’ jewellery. They believe the retail-price ranges with the most promise are the mid- to high-end segments, namely US$501-1,000 and US$1,001-5,000 per piece.

E-tailing is becoming ever more popular in the jewellery trade. Diamond jewellery remains the most popular category of jewellery sold online; and more diamonds and pearls are being sold, or are expected to be sold, online compared to last year.

Overall, buyers remain highly satisfied with jewellery suppliers in Hong Kong, and are especially satisfied with the quality, use of material, craftsmanship and design available in the city.

Brighter Outlook for 2018

Jewellery traders report a brighter outlook for 2018. 97% of buyers and 93% of exhibitors expect their overall sales to increase or maintain the same level as last year. This compares well to the figures of 90% of buyers and 75% of exhibitors who gave that answer to the same question in the 2017 survey.

 

Chart: Overall Sales Expectations for 2018
Chart: Overall Sales Expectations for 2018

 

In line with this rosier market outlook, buyers’ sourcing plans this year show further expansion in general – a net 31% (32% minus 1%) of buyers who were surveyed are preparing for a bigger budget, up from 23% in 2017; a net 23% (24% minus 1%) expect an increase in the unit price, up from 20% last year; and a net 17% (19% minus 2%) plan to source more in terms of quantity, compared to 11% in the previous year.

 

Chart: Buyers Sourcing Plans in 2018
Chart: Buyers Sourcing Plans in 2018

 

The upward pressure on exhibitors’ production and sourcing costs continues, with a net 53% of respondents expecting an increase for 2018, up from 33% (39% minus 6%) in the 2017 survey, while more than a quarter of exhibitors (30% minus 3%) are expecting a rise in exhibitors’ FOB (free on board) prices. Similarly, buyers’ sourcing costs look set to rise, with a net 45% (46% minus 1%) expecting an increase – up from from 32% in 2017, and just 6% in 2016. The upward trend of retail prices is also likely to continue. A net 30% (31% minus 1%) of those surveyed expect an increase this year, compared to 22% (28% minus 6%) last year.

 

Chart: Expected Changes in Price and Costs for 2018
Chart: Expected Changes in Price and Costs for 2018

 

Market Prospects

As part of the survey, buyers were asked to provide their opinions on prospects in different global markets on a scale of 1 to 5, with 1 indicating that the market will be “very unpromising” for the next two years, and 5 indicating “very promising”. Eastern Europe excluding Russia scored highest, with 4.00, followed by the Middle East (3.81) and Russia (3.81).

The expected outlook for many of the developed markets, including North America, Japan and Australia and Pacific Islands, and some emerging markets (such as ASEAN and India) fell from their rating in the 2017 survey. However, Western Europe is expected to show more positive market prospects in the coming two years, and is the only developed market to enjoy a rating in the top ten.  

 

Chart: Buyers Views of the Market Prospects in the Next Two Years
Chart: Buyers Views of the Market Prospects in the Next Two Years

 

Business Challenges

45% of respondents to the survey reported that changes in the prices of raw materials is expected to be the biggest challenge they face in 2018, followed by increases in operating costs (pointed to by 40% of those surveyed). Just 35% indicated that fluctuations in the global economy was a major concern, a sharp decrease from the 49% who cited this in 2017.

 

Chart: Major Business Challenges in 2018
Chart: Major Business Challenges in 2018

 

Contemporary Jewellery Set to Shine

Respondents were also asked to evaluate the potential of major market segments on a scale of 1 to 5, with 1 indicating that the segment has the “least potential” and 5 indicating the “greatest potential”. Ratings of all market segments were up this year from 2017, with contemporary jewellery topping the list with a score of 3.97. Jewellery for weddings and special occasions (3.88) and designers’ jewellery (3.80) came second and third on the list.

 

Table: Respondents Evaluation of the Potential of Major Market Segments
Table: Respondents Evaluation of the Potential of Major Market Segments

 

Buyers were also asked to evaluate the potential for each retail price range on a similar scale. They scored the mid- to high-end market as the segment with the most potential – with the highest ratings for US$501-1,000 (3.73, up from 3.51 the year before) and US$1,001-5,000 (3.70, a rise from 3.36 in 2017).

 

Table: Buyers Evaluation of the Potential of Retail Price Range
Table: Buyers Evaluation of the Potential of Retail Price Range

 

Rise In E-tailing Continues

Selling through e-tailing is becoming increasingly popular among jewellery traders. In this year’s survey, 36% of respondents described themselves as e-tailers, up from 22% in 2017. Among those who have not yet started their e-tailing business, 12% report they will offer e-tailing in the next two years, up from 9% last year.

 

Chart: Currently Engaged in E-tailing Business
Chart: Currently Engaged in E-tailing Business

 

Chart: Intention to Start E-tailing in the Next Two Years
Chart: Intention to Start E-tailing in the Next Two Years

 

Among those who engage in, or are going to engage in, e-tailing, 48% say they sell (or will sell) diamond jewellery online, up from 40% last year. Gemset jewellery (30%) and karat gold jewellery (15%) are also popular with e-tailers. More diamonds and pearls are being sold, or expected to be sold, through electronic platforms than was the case last year.

 

Chart: Product Types Sold or Expected to be Sold Through E-tailing
Chart: Product Types Sold or Expected to be Sold Through E-tailing

 

Hong Kong Highly Rated

Buyers remain generally satisfied with jewellery suppliers from Hong Kong. On a scale of 1 to 5, buyers gave ratings of 3.75 to 3.95 across a range of performance indicators in the 2018 survey, slightly up from the range of 3.67-3.95 in the 2017 survey. They are most satisfied with Hong Kong jewellery suppliers’ quality (3.95), use of material (3.94), craftsmanship (3.92) and design (3.92).

 

Table: Buyers Evaluation of Hong Kong Jewellery Suppliers
Table: Buyers Evaluation of Hong Kong Jewellery Suppliers

 

Profile of Respondents

  • 481 exhibitors – 38% from Hong Kong, 40% based in Asia (excluding Hong Kong), and 22% from the rest of the world
  • 788 buyers – major markets in the Chinese mainland (57%), Hong Kong (44%), Asia excluding Hong Kong and the Chinese mainland (43%), Western Europe (21%), and North America (18%).

The Hong Kong International Jewellery Show 2018 and the Hong Kong International Diamond, Gem and Pearl Show 2018 took place from 27 February-3 March 2018 at the Hong Kong Convention and Exhibition Centre and the AsiaWorld-Expo respectively.

Content provided by Picture: Louis Chan
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