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Jewellery Traders Turn Cautious in 2019: The HKTDC Hong Kong International Jewellery Show Survey

The HKTDC Hong Kong International Jewellery Show Survey Finds Buyers and Exhibitors Adopting a Prudent Approach

A poll of 1,347 buyers and exhibitors at the Hong Kong International Jewellery Show 2019 and the Hong Kong International Diamond, Gem and Pearl Show 2019 indicates that traders are taking a more cautious outlook on the market this year.

Buyers and exhibitors expect to see lower upside potential in this year’s sales, in view of less likely price increments, whether in retail or “free on board” (FOB) prices. Adopting a prudent approach, buyers are expanding their sourcing plans at a more gradual pace. To suppliers’ relief, lower upward pressure is expected on production and sourcing costs this year.

In terms of business challenges, respondents are concerned firstly about fluctuations of the global economy, but also price fluctuation of raw materials, increase in operating costs and fluctuating exchange rates. Concerns are growing in relation to the global economy and the impact of political developments on the market.

As far as the Sino-US trade dispute is concerned, most anticipate jewellery exports to remain unaffected in the near term, while some expect either a slightly/very negative impact. On the prospect of a trade dispute resolution, around half of the respondents are neutral, followed by around 30% expecting a positive outcome.

In terms of confidence in different markets, Eastern Europe (excluding Russia) and the Middle East continue to show strong momentum, but India sees the biggest improvement. In contrast, buyers have lower confidence in Western Europe, Hong Kong and Russia.

With regard to market segments, jewellery traders this year again back trendy fashion jewellery, designers’ jewellery and jewellery for weddings and special occasions to perform well. They believe the mid-end market (US$501-1,000 per piece) has the greatest potential, although they also have growing confidence in the low-end market.

E-tailing is becoming ever more prevalent in the jewellery trade. Major product types include diamond jewellery, gemset jewellery and karat gold jewellery. However, the share of jewellery e-tailers trading in gemstones has reduced markedly, particularly for diamonds, pearls and jade.

Broadly speaking, buyers remain satisfied with jewellery suppliers in Hong Kong. While Hong Kong jewellery suppliers have long scored high for craftsmanship, quality and use of material, our poll indicates a significant improvement in the quality of their service.

Limited Room Seen for Sales Growth in 2019

Jewellery traders have become more conservative on the market’s upside potential in terms of sales this year. A net 24% (30% minus 6%) of buyers see room for sales growth this year, down slightly from 25% in 2018. Similarly, a net 31% (37% minus 6%) of exhibitors in our survey anticipate sales growth in 2019, down 4 percentage points from last year.

Chart: Overall Sales Expectations for 2019
Chart: Overall Sales Expectations for 2019

Jewellery buyers have lower expectations of retail price growth than a year ago, with a net 23% (28% minus 5%) expecting an increase in 2019, compared with 30% a year ago. This partly explains their more prudent sales forecast.

Chart: Buyers’ Expected Changes in Price Costs for 2019
Chart: Buyers’ Expected Changes in Price Costs for 2019

Adopting a prudent approach, jewellery buyers are expanding their sourcing plans at a more gradual pace, although in general they are still preparing to spend more this year. A net 35% (37% minus 2%) expect to do so, representing a mild 4 percentage points increase from last year. Meanwhile, a net 26% (27% minus 1%) expect an increase in the unit price, up from 23% last year, and a net 16% (21% minus 5%) plan to source more in terms of quantity, compared to 17% in the previous year. However, those who expect their budgets to grow plan to increase spending at an average of 14% this year, slightly gentler than the 15% anticipated last year.

Chart: Buyers’ Sourcing Plans in 2019
Chart: Buyers’ Sourcing Plans in 2019

With regard to jewellery suppliers, they believe FOB prices will grow at a slower rate this year. A net 8% of exhibitors (19% minus 11%) forecast a rise in exhibitors’ FOB prices in 2019, down 18 percentage points from last year.

To suppliers’ relief, lower upward pressure on production and sourcing costs is expected this year, with a net 48% (50% minus 2%) of exhibitor respondents expecting an increase for 2019, down from 53% in the last survey.

Chart: Exhibitors’ Expected Changes in Price Costs for 2019
Chart: Exhibitors’ Expected Changes in Price Costs for 2019

Business Challenges

Fluctuations of global economy, price fluctuation of raw materials, increase in operating costs and fluctuating exchange rates have again been rated as the four biggest challenges facing the industry.

Concerns are growing in relation to the global economy and the impact of political developments on the market. For both of these challenges, the proportion of respondents highlighting them rose 9 percentage points in 2019, the largest increase among all the options.

Chart: Major Business Challenges in 2019
Chart: Major Business Challenges in 2019

Cautious Optimism Over Sino-US Trade Dispute

Some jewellery products, encompassing 48 tariff lines under the Harmonized System Code of Chapter 71 (HS 71), are subject to US Section 301 tariffs (List 3) on Chinese imports and face additional tariffs of 10% since 24 September 2018. 

In our poll, 37% of buyers and around half of exhibitors expect a slightly/ very negative impact on jewellery exports over the near term. However, a majority – 64% of buyers and 55% exhibitors – expect no negative impact.

Chart: Views on the Near-Term Impact of the Sino-US Trade Dispute on the Sector’s Export Performance
Chart: Views on the Near-Term Impact of the Sino-US Trade Dispute on the Sector’s Export Performance

When asked about the prospect of a trade dispute resolution, respondents are cautiously optimistic. Around half are neutral, followed by around 30% expecting a positive outcome. 

Chart: Views on Likelihood of a Resolution of Trade Dispute Between China and the US
Chart: Views on Likelihood of a Resolution of Trade Dispute Between China and the US

Market Prospects

As part of the survey, buyers were asked to provide their opinions on the prospects for 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) and the Middle East continue to show strong momentum. This year, these markets feature among the top three most promising jewellery markets, after scoring higher ratings for a third consecutive year.

Meanwhile, India shows the biggest improvement in the minds of buyers, with its score rising to 3.86. In contrast, buyers have lower confidence in Western Europe, Hong Kong and Russia in the coming two years, with their scores and rankings falling.

Chart: Buyers’ Views of Markets’ Prospects Over the Next Two Years
Chart: Buyers’ Views of Markets’ Prospects Over the Next Two Years

Trendy Fashion 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 “greatest potential”.

Ratings for most market segments are down slightly this year, although sentiment is still more favourable than in 2017. Similarly to last year, trendy fashion jewellery, designers’ jewellery, and jewellery for weddings and special occasions are the market segments considered to have the greatest market potential, scoring 3.85, 3.76 and 3.72 respectively this year.

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. With a score of 3.71, the mid-end market (US$501-1,000 per piece) is considered the segment with the most potential. However, buyers also have greater confidence in the low-end market this year, with the US$101-500 retail price range scoring 3.59, up from 3.54 in 2018, and US$100 or below scoring 3.46, up from 3.38 a year before.

Table: Buyers’ Evaluation of Potential by Retail Price Range
Table: Buyers’ Evaluation of Potential by Retail Price Range

Better Engagement on E-tailing

In recent years, more jewellery traders have engaged in e-tailing. This year, 42% of those surveyed describe themselves as e-tailers, with that figure rising for a fourth consecutive year. Among those who haven’t started their e-tailing business, 14% say they intend to do so in the next two years, up from 12% 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

Product-wise, most traders (85% – the same as last year) are selling finished jewellery through e-tailing, with diamond jewellery (42%), gemset jewellery (32%) and karat gold jewellery (22%) being the major items. However, the share of respondents trading in gemstones has reduced markedly to 27%, down nine percentage points on last year, particularly for diamonds, pearls and jade (down one-two percentage points for each segment).

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

Hong Kong Further Improves Quality of Service

Broadly speaking, buyers remain satisfied with jewellery suppliers in Hong Kong. On a scale of 1 to 5, they gave ratings of 3.74 to 3.96 across a range of performance indicators in the 2019 survey, well above the “neutral” point and slightly higher than last year.

While craftsmanship (3.93), quality (3.92) and use of material (3.92) have long been considered among Hong Kong jewellery suppliers’ biggest strengths, this year buyers praised their quality of service above all else, with this attribute showing significant improvement, up 0.21 points to 3.96.

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

Profile of Respondents

  • 509 exhibitors – 36% from Hong Kong, 44% based in Asia (excluding Hong Kong), and 20% from the rest of the world
  • 838 buyers – major markets in mainland China (51%), Hong Kong (42%), Asia excluding Hong Kong and mainland China (41%), Western Europe (26%), and North America (21%).

The Hong Kong International Jewellery Show 2019 and the Hong Kong International Diamond, Gem and Pearl Show 2019 took place from 26 February-4 March 2019 at the Hong Kong Convention and Exhibition Centre and the AsiaWorld-Expo respectively.

Content provided by Picture: Charlotte Man
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