Overview of Jewellry Retail Market in China

Definition of Jewellery

Jewellery is broadly defined as a form of personal adornment or collectibles with investment value, which primarily takes the form of rings, earrings, necklaces, pendants, bracelets, charms, brooches and other collectibles. Jewellery is generally categorised into gold jewellery, silver jewellery, gem-set jewellery and other jewellery. Jewellery’s value may appreciate depending on its material properties, patterns or meaningful symbols. In terms of sales revenue, the gold and silver jewellery markets each accounted for 61.0% (CNY 431.9 billion) and 6.9% (CNY48.9 billion), respectively, in China jewellery retail market in 2016.

 

Categories of Jewellery

Gold Jewellery: Gold is a dense, soft, shiny metal and the most malleable and ductile metal known. Pure gold has a bright yellow colour and lustre traditionally considered attractive, which it maintains without oxidising in air or water. Gold jewellery includes jewellery mainly made of gold, gold bars and other gold products.

Silver Jewellery: The silver used in modern jewellery is usually sterling silver, or 92.5% fine silver with 7.5% copper. Sterling silver (stamped 925) is harder than pure silver and has a lower melting point (893°C) than either pure silver or pure copper. Silver bars and certain silverware are made of pure silver (stamped 999). Silver is an extremely soft, ductile and malleable transition metal that is slightly less malleable than gold.

Karat gold Jewellery: Karat gold jewellery refers to jewellery primarily made of karat gold, an alloy of gold and at least one kind of other metals, such as silver, copper, nickel and aluminum. It is the amount of alloy that determines the karatage of karat gold.

Diamond Jewellery: Diamond jewellery is mounted with diamonds that are usually laid in platinum or karat gold. Diamonds are expensive due to its scarcity. The prices of diamonds vary primarily depending on their color, carat, clarity and cut.

Platinum Jewellery: Platinum jewellery, marked as “Pt”, contains more than 85% platinum as raw material. . Platinum is a white and durable metal and generally used in jewellery in its almost pure form. Platinum jewellery has three classifications comprising 990 (99% Pt), 950 (95% Pt) and 900 (90% Pt).

Others: Other jewellery mainly includes jewellery that is made of, or mounted with, gemstones, jade or pearls. A gemstone or gem is a mineral, which, in cut and polished form, is used for making jewellery or other adornments. Jade is a kind of metamorphic rock made of silicate minerals of nephrite or jadeite. Pearls are generally considered as organic gemstones and classified by origin, then graded by size, shape, thickness, colour, lustre, surface clarity and matching.

 

JEWELLERY RETAIL MARKET IN CHINA

In terms of sales channels, the jewellery retail market in China is categorised into two segments, comprising the offline jewellery retail market and the online market. Participants in the offline jewellery retail market are jewellery retailers which generate more than 50% of their sales revenues from offline transactions, and participants in the online retail market are jewellery retailers having more than 50% their sales revenues from online transactions.

 

Offline Retail Market in China

Traditional brick-and-mortar retail shops are the main sales channels in China jewellery retail market. In 2016, the sales revenue generated from the offline jewellery retail market in China amounted to approximately CNY 661.7 billion, accounting for approximately 93.5% of the sales revenue generated from China jewellery retail market. Participants in the offline jewellery retail market primarily establish retail shops in areas with stable customer traffic or in department stores and shopping malls. Offline jewellery retailers, as compared with online jewellery retailers, are able to offer customer services including trial and fitting services, size modification services, and more convenient return and exchange services. In China jewellery retail market, typical offline jewellery retailing brands include Chow Tai Fook (周大褔), Chow Sang Sang (周生生), Shanghai Lao Feng Xiang (上海老凤祥) and Luk Fook (六褔). In recent years, these brand retailers have gradually acknowledged the importance of online sales channels and have set up their official online sales platforms to supplement their offline points of sales.

 

Online Retail Market in China

Online jewellery retailers can be categorised as those who purely sell products online and those who adopt an integrated online and offline retail model.

Pure Online Retail Market: Certain online jewellery retailers adopt a business model whereby they distribute all or substantially all of their jewellery products through online platforms and they do not operate any retail shops. Online retailing allows customers to source and order jewellery products via Internet. Typically, these online retailers in China jewellery retail market sell their products through third-party online platforms such as Taobao or JD.com, and in some cases, they will also establish their own websites or mobile Apps to sell their products. These online retailers generally sell their own branded jewellery products or unbranded ones at relatively lower prices. Due to the absence of offline retail shops, customers do not have convenient access to jewellery fitting and maintenance services.

 

Integrated Online and Offline Retail Market: Market participants of the integrated online and offline retail market include our Group, Zbird (钻石小鸟), and Makelumer (每克拉美), among others. Such retailers not only offer diversified products through online shopping platforms, but also establish offline presences, including exhibition halls and retail shops to provide comprehensive services to enhance customers’ shopping experiences. In recent years, integrated online and offline retailing channels have developed and expanded rapidly. In 2016, the sales revenue of this market reached CNY 34.0 billion, accounting for approximately 73.3% of the total sales revenue of China online retail market.China jewellery retail market witnessed steady growth from 2012 to 2016. The sales revenueof China jewellery retail market increased from CNY 514.9 billion in 2012 to CNY708.0 billion in2016, realising the CAGR of 8.3% from 2012 to 2016. Due to factors including the increasing disposable income per capita of PRC citizens, improvement of living standards and the expansion of saleschannels of the retail market, China jewellery retail market is estimated to grow at a CAGR of 7.9%from 2016 to 2021, reaching a total sales revenue of CNY1,035.6 billion in 2021.