Prices for jewelry doubled in a year. To survive the crisis, chains are reducing purchases of imported goods, increasing the amount of silver on shelves and closing outlets. The Secret found out how the conservative market changes during a crisis.
Loss of clients
According to the Guild of Jewelers of Russia, prices for jewelry increased by 50% over the year. In July of this year, the analytical company Watcom estimated that traffic in the capital's shopping centers decreased over the year by an average of 6%. The worst situation is in medium and small shopping centers, where traffic fell by almost 17%. In such conditions, players have to reconsider their assortment and close their outlets.
“Now everything depends on the company’s ability to work with low traffic,” says Dmitry Baranov, operating director of the Adamas network. In May, the company managed to return to a slight increase in sales thanks to a targeted loyalty program. “We select the assortment and price offer depending on the location of each specific store. For example, our store on Maroseyka has a completely different inventory from the one on Tverskaya,” explains Baranov.
During 2015, the number of jewelry stores in the country decreased by 25%. Some players have decided to go completely online. Thus, the Russian jewelry brand Alchemia Jewelery closed two of its monobrand stores at the end of 2014 and focused on sales through partner online stores. “Such stores have their own sophisticated audience, which comes just for unusual products, like ours. Refusal from retail outlets and promotion on the Internet played into our hands - now our sales are growing,” admits brand co-founder Igor Komov.
Photo: Artem Geodakyan/TASS
Import substitution
Against the backdrop of falling demand for jewelry, production volumes also decreased. According to estimates by the analytical company BusinesStat, since 2010, production volumes in the country have grown by 27% every year, and in 2014 this figure decreased to 8.4%.
“Everyone has reduced production,” says Andrey Panferov, first vice-president of the Estet jewelry house. - Some twice, some by 10–15%, some by 30%. If we talk about us, we have reduced it by about 20% in actual size.”
At the same time, imports of jewelry also decreased significantly. In the first quarter of this year, its volume was two and a half times less than in the same period in 2014. “Before the crisis, more than 60% of the products in stores were of imported origin - a lot was brought from Southeast Asia, both officially and unofficially. Today, due to the exchange rate, it has become unprofitable to buy imports. I think that by winter there will be an equal share of our and imported products on the market,” continues Panferov. He is confident that large chains left without imports will turn to domestic producers.
Adamas decided to refuse to cooperate with foreign partners in the network after the cost of $1 exceeded 50 rubles. You can still find imported jewelry on the shelves of retail stores, but their share tends to zero.
“The demand for jewelry in general fell by 45%, and, in particular, for imported products - by 70%,” explains Eduard Utkin, general director of the Guild of Russian Jewelers. - Chains are purchasing more and more from Russian manufacturers - according to my estimates, imports on the market now account for no more than 20%. Imported producers will return to the market when the ruble strengthens. However, so far there are no forecasts for the strengthening of the ruble. I believe import substitution will continue in the next 10-12 years.”
According to Utkin, thanks to the reduction in the cost of work in dollar terms, Russian manufacturers should strengthen their position in foreign markets. If metals and stones all over the world are pegged to the dollar, then the work of the master is pegged to the local currency.
Bet on cheap materials
The ruble began to fall back in 2013, and at the same time the preferences of Russians began to change. Two years ago, silver products became leaders in popularity and have not lost their position since then. Gold products remain in second place. “Of course, silver has also become more expensive, but in silver designer jewelry the price of the material is dissolved in the cost of the work, so an increase in price by one and a half or even two times cannot seriously increase the price of the finished silver product,” says the founder of the brand jewelry Natalia Bryantseva Natalia Bryantseva.
The main share of the jewelry market falls on the middle and low price segment, while luxury products account for only 10%. Market participants predict a decline in the quality of products in inexpensive stores. “Manufacturers in the mass segment will more often make jewelry from gold of the lowest standard, reduce the number of diamonds in products and reduce other characteristics of jewelry that the buyer is not very knowledgeable about,” says Kuzma Kuzmichev, founder of the Yekaterinburg jewelry brand Kozmas.
"Sugar". According to the founder of the company, Svetlana Efremova, the prospects for the niche are obvious: “A lot has changed over the year - if before I had difficulty finding new brands, now I receive messages from young designers consistently once a day.”
However, many market participants are pessimistic. The real market contraction will happen next year. "It's no secret that New Year- the best period for the jewelry industry. Everyone wants to capture him. Based on the conversations we hear at exhibitions, many are planning to close down their jewelry business after the holidays,” concludes Dmitry Baranov.
Cover photo: Artem Geodakyan/TASS
Wealthy Russians have always viewed the purchase of jewelry as one of effective ways investing money. This type of investment, of course, is inferior in popularity to purchasing real estate and bank deposits, but the interest in jewelry in Russia is so great that in 2016 it entered the top 10 countries with the greatest demand for gold jewelry. According to Irina Stepanova, executive director of the Sotheby’s representative office in the Russian Federation, in recent years, interest in expensive jewelry and rare diamonds is partly due to turbulence in the economy.
Of course, they invest in jewelry not only in Russia. Along with other luxury items (antique furniture, Chinese ceramics, collectible watches, vintage cars, etc.), jewelry is included in the Knight Frank Luxury Index. Over the past year they have risen in price by 4%, over 5 years - by 49%, over 10 years - by 142%. Among Knight Frank's top ten luxury goods, jewelry is second only to classic cars in terms of profitability over a long investment horizon, and.
What is easier to make money on?
Not all jewelry is suitable for investment. Mass-produced products are usually not suitable for these purposes; it only makes sense to invest in products that meet a number of criteria. When buying jewelry, experienced investors follow rules much the same as when buying art. Not all paintings will rise in price in the future, but you can safely invest in works by top artists and universally recognized masterpieces.
Experts say that ordinary jewelry designed for mass buyers is not an investment instrument. The products that fill the windows of chain jewelry stores are sold at a very high markup, not to mention taxation. According to Otkritie Broker analyst Andrey Kochetkov, such jewelry costs 2-3 times more than the precious metal and precious stones from which they are made. After purchase, jewelry immediately loses value, since upon resale it will not be possible to compensate for various markups - they will only look at the cost of the material and artistic value, if there is one.
Only certain categories of jewelry can increase in price in the future. According to the General Director of the Guild of Russian Jewelers Eduard Utkin, these include:
- Jewelry decorated with large natural stones. It makes sense to invest in them, since stones rise in price much faster than precious metals. Large gemstones are considered to be from 1 carat and semi-precious from 5 carats.
- With the second category everything is more complicated. Only a specialist will be able to assess the complexity of making jewelry and determine the potential for price growth of a product that is of historical value or a piece of modern art.
In any case, such investments involve expenses amounting to hundreds of thousands of rubles. If we are talking about a product of the 21st century, then perhaps it will only be appreciated in 20–30 years. Rarely does anyone manage to make quick money in this area.
According to the president of Singapore Castle Family office, Eldiyar Muratov, investing in jewelry is a privilege for wealthy investors. This is done only by the wealthy public, who are not concerned with immediate benefits, but expect to earn good money in the future. By rich investors, Eldiyar Muratov means people who manage $5 million or more of their own funds.
However, not all experts agree with Eldiyar Muratov. For example, Andrey Kochetkov claims that you can make money on relatively inexpensive products intended for the mass consumer. One of the options involves taking a train to the UAE. In the Emirates, a large assortment of gold jewelry is always on sale, which by weight is only 10–15% more expensive than scrap gold. Such an investment can bring profit quite quickly.
Pros and cons
It is not without reason that jewelry has been used for many centuries as a tool for savings. Their prices rarely show a sharp rise, but almost never fall. Usually, after purchase, it remains constant for some time, and then gradually increases depending on the dynamics of prices for stones and precious metals, as well as on how interesting the product is to collectors. It is almost impossible to lose money on such investments. Another plus is the high capital intensity of assets. Expensive jewelry solves the problem of concentrating a large amount of money in a small item. A safe the size of a shoebox can store a fortune.
Main disadvantages: low market liquidity, long investment horizon, prohibitively high entry threshold for many. The optimal investment horizon is approximately the same as at 20–30 years. In order to have enough funds to purchase a suitable item at an auction, it is advisable to have $300–400 thousand. The exact amount that may be required is difficult to determine. It happens that bidding starts at $100 thousand, but in the process of competition for the possession of a promising lot, the bar rises to $2 million.
It is very difficult to sell jewelry profitably and quickly, since prices rise slowly, and the associated costs are high: you have to pay a commission to an auction or other intermediary. The purchase also involves serious expenses: you need to pay for the examination and ensure safe transportation. The appraisal of the jewelry will cost at least 35 thousand rubles, the commission to the intermediary will be 0.5–3%.
According to Muratov, you can make money on jewelry within one to two years. The profit in this case does not come from the fact that the jewelry becomes more valuable from a historical point of view (you need to wait 10–20 years for this), but from the rise in price of precious metals and stones, increased demand and the ability to find a buyer. It is rare to succeed in such a business; it requires a certain amount of luck.
One of Singapore Castle's clients recently made good money by reselling a gold ring with a rare blue diamond. He bought this jewelry from a private collector for $2.1 million, and during the bargaining process the price was reduced by 8% from the original. After 4 months, the investor sold the ring at a closed auction for $2.75 million, the profit exceeded $500 thousand.
Nuances of choice
Among the factors influencing the cost of jewelry are: the name of the jeweler, uniqueness, history of ownership, characteristics of the stones and time of manufacture. The quality of the product, of course, must be at its best. The cost of jewelry is largely determined by the gemstone. When purchasing, an investor should pay attention close attention for its uniqueness and quality.
Irina Stepanova claims that there is now a good demand for colored diamonds, emeralds, sapphires and rubies. Also recently, non-precious stones have become more expensive: beryl, aquamarine, turquoise and tourmaline. The dynamics of them can be traced differently, but some stones seriously increase in price. For example, 15 years ago a carat of aquamarine cost $15, but now it costs about $300.
According to Muratov, if an investor wants to make money on the rising price of a precious stone, then it may make sense to order jewelry from professionals. This is not difficult to do: you need to buy a stone without a setting and find a jeweler whose work is in demand on the market. An exclusive product will be easier to sell for good price. The cost of work will be 2-3 times less than if you buy a similar decoration in a store. Savings will be achieved due to the absence of an intermediary and logistics costs. The total cost of the stone, precious metal and work is always less than the finished product in the store.
Another important nuance- origin of the product. Typically, jewelry worn by famous personalities appreciates in price faster, and there is greater interest in them from collectors. You can get information about the history of jewelry from jewelers. Jewelry houses usually keep archives; it is often possible to find the customer by the registration number of the product.
As for jewelry houses, Buccellati, Bulgari, Cartier, Chopard, Harry Winston, Graff, Mikimoto, Piaget, Tiffany & Co and Van Cleef & Arpels are now popular. However, not all products of these companies become more expensive every year. Exclusive jewelry is valued, but the cost of mass-produced items does not change much over time.
Experts recommend not letting the work of individual masters, known for their unique works, out of sight. In recent years, jewelry from Georges Braque, Peter Chang, Coco Chanel, Andrew Grima and Suzanne Belperron have been highly valued on the jewelry market.
In addition to the creations of recognized masters, the products of young jewelers are very promising. In particular, experts recommend investing in young Russian brands. So far their cost is underestimated, since wide popularity has not yet come, but the quality of work and artistic design are sometimes at a very high level. Such jewelry is clearly undervalued and will become much more expensive in 5-7 years. As examples of promising companies, Eduard Utkin cites participants in the international jewelry exhibition that was recently held in London. These are “Russian Gems”, jewelry houses: Ringo, Argentov, Kabarovsky, Chamovsky, Echo, Treasure House and Aldzen.
Jewelry that became widely known during certain historical periods can also become significantly more expensive: for example, in 1900–1920. or in the 1950s. Such jewelry is constantly increasing in price because it has cultural and historical value and is in demand by wealthy collectors. According to Knight Frank, in the last decade, antique jewelry has risen in price by 63%, products created in 1945-1975. - by 73%, products of the Belle Epoque (1971-1914) - by 93%.
When selling jewelry, collectors are in a more advantageous position. For example, if there are several Van Cleef brooches from a rare series, then such a collection can be sold for more than all the items individually. It makes sense to collect not only the creations of one author, but also jewelry of one era. By selling all the jewelry from one historical period at once, you will probably earn more. But the search for a buyer may take a long time.
Over the past 3 years of working with jewelers, I have studied all the ins and outs of this business, so I will be happy to tell you 10 secrets, knowing which, you will be able to buy diamond rings at the lowest price and with free home delivery.
And so, let's go in order:
1. Discounts of 30%, 50% or more are fake
Retail stores make every effort to get you to succumb to your emotions and make a purchase here and now. The markup on jewelry reaches 500%, so they write an inflated old price and put a new one at a discount of at least 80%, but this does not exclude the fact that in a nearby store this product is cheaper even without a discount. Don’t give in to emotions, most likely you will find this product at a price 10-20%, or even 50% lower.
2. Prices in stores are radically different
It is important to understand that stores are wholesale buyers from jewelry manufacturers. Each store has its own wholesale price. For some it is lower, for others it is higher, depending on working conditions. Therefore, you should not be surprised that prices for the same products can differ significantly.
3. How to find the exact same product in another store cheaper
If you like a product in a store, the manager will tell you the manufacturer without any questions. You won’t be able to buy this product directly, since the manufacturers do not work with individuals, but by looking at the article number of this product on the Internet or on the manufacturer’s website, you can easily find out where else you can find this jewelry.
Required: if you choose jewelry in online stores, then compare prices with other online stores. It’s done like this: copy the article number of the product you like, enter it into a search engine and compare who sells this product for how much. By comparing even one product, you can easily understand who has what markup.
For example, let’s take a red gold ring with 1 diamond, price 14,770 rubles:
Now we copy the article, enter it into Yandex search and look at the prices of the same ring on other sites:
This is how you can easily determine who makes what markup on products. And such a markup on absolutely all products in the range.
4. Lifetime warranty, assay supervision and other certificates of conformity
On the one hand, this is important information, on the other, every production today provides a lifetime guarantee, is required to be registered with the Assay Office and has all the necessary certificates. No entrepreneur working with jewelry in Russia can work without these documents. Therefore, if in some place they give it to you for some incredible competitive advantage, then most likely they are trying to divert your attention from the inflated price :)
5. Prices are cheaper in online stores
Over the past 3 years, an endless number of online jewelry stores have appeared. In many of them, the purchasing conditions are much more favorable than in ordinary stores. They can offer free home delivery, fitting upon receipt, payment in any convenient way, and much, much more. If buying jewelry is a conscious step for you, and not a spontaneous purchase, then you can save a lot when buying in an online store. Although be careful with them, sometimes the markup there can be simply cosmic.
6. “Masovka” sells best
The best item sold in jewelry stores is “masovka.” Usually these are unremarkable lightweight products with semiprecious stones, which are already produced by everyone who can. As they say, “our people love all kinds of shit.” But be that as it may, this “shit” sells best, which means most of the store windows are full
precisely these products.
7. Manufacturers steal jewelry designs from each other
Now I will tell you the main secret.
The most expensive thing when creating a new piece of jewelry is its design and 3D model. Small handicraft industries cannot afford this luxury, and they stupidly steal 3D models of jewelry, producing exactly that very “masovka”. Accordingly, normal manufacturers employ 3D jewelry designers and come up with new jewelry every month. The birth of new products is very expensive, so manufacturers recoup their costs by producing these products only with precious stones, which increase the cost of new products, and, accordingly, the built-in profit. Therefore, every manufacturer, when releasing new collections, tries to sell as many of their products as early as possible. As soon as his products are copied by others, releasing them with semi-drugs, the manufacturer begins to lose a lot in sales. And the race for new jewelry begins. Businesses are trying to find a balance between new enticements and masking. Everyone is trying to see from each other who is producing what. This is an endless process in jewelry production that reaches the point of paranoia.
8. The more expensive the product, the more the store earns from it
Often stores don’t bother with markups and stupidly multiply wholesale price by 2 or 3. This creates a huge markup on expensive products. It’s one thing when a product retails for 3,000 rubles, but even a 2,000 ruble markup doesn’t seem terrible. But if a product costs 150 thousand or more than a million, then the margin from one sale can reach incredible sizes. Therefore, if you are buying an expensive product, be sure to ask for an additional discount and be sure that they will give it to you. And if you buy jewelry worth more than a million rubles, the store director or production owner will personally bring it home to you with a bottle of champagne and a bouquet of flowers.
9. Look for new items at jewelry exhibitions
All the latest trendy jewelry can be found at jewelry exhibitions. The largest of them, JUNWEX, takes place every year in September. Most of the stands there are occupied by our Kostroma jewelers.
10. Free delivery to your door
Online stores are often more motivated by service than offline sales stores. They don’t see the client in person and cannot persuade him to buy here and now. Therefore, we are forced to offer additional services that may be convenient for the buyer. And this could be free shipping products to your home, the opportunity to try on and reject the product, payment upon receipt and all kinds of gifts. Be sure to study the terms of purchase in the online store. Why adapt to the store and pay more when there are those who offer good conditions and a good price.
P.S.: Let me remind you that I live in the Kostroma region, where more than 1,200 jewelry enterprises operate and which is rightly called the Jewelry Capital. Well, if we translate this into human language, then approximately 9 out of 10 products that you see on the shelves of jewelry stores are products made in Kostroma;)
P.P.S.: Lowest prices for jewelry only in the store
Representatives of the older generation have traditionally invested money in the purchase of jewelry. Partly because the list of tools for preserving and increasing money during the USSR period and the turbulent 1990s was very limited. Should you consider jewelry as an investment now? What pitfalls might such investments have? MirFin asked these questions to the experts.
Kuzma Kuzmichev, Kozmas jewelry designer:
“There is indeed a decline in demand for gold jewelry. This is due, first of all, to a sharp increase in the price of gold by almost 2 times. Secondly, the costs of jewelry production have increased: all raw materials and equipment are imported, and accordingly prices for consumables grow along with exchange rates. Today, it is more interesting for the buyer to order jewelry by providing the jeweler with his own raw materials - in this case the price will be favorable.
There is no point in considering jewelry as an investment, since it is very difficult to determine the artistic value of the finished product, in addition to the material component (raw materials). The assessment will always be different. Therefore, credit institutions do not consider jewelry as collateral, and pawn shops accept them as scrap. Exceptions include auctions and antique jewelry."
Alexey Grodno, head of the global markets department of the Nizhny Novgorod head office of Sberbank PJSC:
“Precious metals should be clearly separated: in the form of jewelry, in bars and in coins.
The cost of jewelry is based on the price of the precious metal from which it is made, but the production and sales component is very large. Therefore, investing in jewelry is the worst investment option.
Ingots - their value depends entirely on the world price, plus, in accordance with the tax legislation of the Russian Federation, value added tax, plus a small bank margin. VAT largely kills investor interest in bullion.
Coins. It is worth clarifying that we are talking about investment coins, the price of which, according to Russian law, does not include VAT. The cost of coins is closest to the price of precious metals on the world market."
Alexander Gladnev, marketing communications consultant:
“When selling it to a pawnshop, a piece of jewelry is valued at the cost of scrap. Therefore, when purchasing jewelry in jewelry store For investment purposes, you should pay attention not to beauty, but to the weight of the product and jewelry inserts. The only way to make a successful investment in this way is to track seasonal price fluctuations and promotions in jewelry stores.
The jewelry can use the most different stones, having different investment attractiveness. The most famous and therefore the most liquid precious stones are diamonds; from this point of view, their investment attractiveness can be compared with silver, gold and platinum. Currently, the price of diamonds has reached a 4-year low and is showing a further downward trend, which opens up investment prospects (but also involves high risk).”
"The simplest way to invest in precious metals, it would seem, is to buy jewelry. The method is both interesting and pleasant. But this option has many disadvantages. First of all, the price of jewelry depends relatively little on fluctuations in the precious metal, since most of the cost is created by the labor of the jeweler. Secondly, the jewelry market is low in liquidity: selling jewelry at a realistic price is quite difficult. That is, if gold, for example, rises by 15%, this may not affect the price of jewelry made from that same gold at all. In short, the option of investing in jewelry is quite risky.
If you nevertheless decide to engage in this type of investment, then among jewelry only exclusive items, not cheaper than 150,000 rubles, can bring significant profit. These are products of the largest jewelry houses, and, as a rule, limited edition items. Antique jewelry can also bring a stable income, but only if it has high artistic value, and better yet, if it also has historical value.”
Alexander Arsky, Ph.D., Associate Professor, Department of Marketing and Logistics, Financial University under the Government of the Russian Federation:
"Investing in gold jewelry may not be worth it. It should be understood that gold jewelry is, first of all, the work of a master jeweler, a product aimed at meeting current demand, satisfying trends that have developed in terms of fashion. Naturally, after 10 -15 years, and this is the period of long-term investment, gold jewelry purchased earlier will “go out of fashion”, accordingly, gold products will be difficult to sell on the market at the required price. It is worth considering that the cost of a gold product includes the cost of the “brand”, the labor of the jeweler. trade margins and customs payments with excise tax (if the products are imported). All this makes investing in gold products almost unprofitable in modern conditions.
A current area of investment is the acquisition of “pure gold” in bullion. However, storage costs must be taken into account when investing. Gold bars are not stored in the nightstand. And storing it in a bank safe deposit box or purchasing a home safe requires costs that must be taken into account when investing."
Sergey Kashin, financial analyst, president of Global Investment Corporation:
"Is it worth considering buying jewelry as an investment? It definitely is, especially when it comes to precious stones. This type investing has always been and will be a “safe haven” compared to investments in currency, stocks or real estate. If you pay attention to the chart of precious stones, even during times of crisis (1998, 2008, 2014) the price holds, trembles, but holds. On average, the annual increase ranges from 6 to 12%, depending on the type of stone."
Read about the prospects for investing in precious metals and impersonal metal accounts.
It has been declining since 2015 due to declining household incomes, low consumer activity and a propensity to save money amid currency fluctuations, as well as pronounced competition from electronics (for example, young people increasingly prefer to purchase smartphones instead of jewelry) and perfumes and cosmetics ( Jewelry is less often perceived as an expensive, profitable investment).
According to a study by the website Ssia, the turnover of jewelry under the brands MYUZ, Pandora, Tous and Swarowski in 2017 amounted to about 19.2 billion rubles. Of these, the largest share falls on MUZ and Pandora (49% and 42%). The turnover of the Tous brand in 2017 was estimated at 1 billion rubles, which amounted to about 5.6% of the total turnover of the above brands. The Tous brand is most widely represented in the cities of the Southern Federal District: Krasnodar, Sochi, Anapa and Rostov-on-Don.
Volume and dynamics of the Russian jewelry market
The volume of jewelry consumption in 2017 amounted to 224.7 tons, remaining at the 2016 level. The demand for jewelry has been declining since 2015, which is associated with a decrease in household incomes and a decrease in the target audience (young people under 30 are practically not interested in jewelry, preferring to buy smartphones, tablets and other electronics). In recent years, attitudes towards jewelry have changed significantly: the population perceives them less and less as a luxury item or expensive decoration and considers them, first of all, as accessories that should emphasize the individuality and style of the owner. For this reason, the deciding factor in choosing jewelry is price, resulting in an increase in demand for silver jewelry and the consumption of gold products is reduced.
In the medium term, jewelry consumption is expected to decline by 1-2% annually due to changing consumer preferences, growing demand for alternative and often more affordable products (perfumes and cosmetics, costume jewelry, custom jewelry made of base metals and other materials).
Volume of jewelry consumption in the Russian Federation in 2013-2017. and forecast for 2018-2025, tons (within the base development scenario)
Jewelry market structure: production, export, import, consumption
The jewelry market is dominated by Russian-made products: in 2016 it accounted for about 75.9%; at the end of 2017, its share increased to 76.9%, which is associated with a reduction in import supplies, primarily from Armenia.
Dynamics and structure of the jewelry market in 2013-2017. and forecast until 2025, tons (within the base development scenario)
Consumption structure by federal districts of the Russian Federation
At the end of 2017, the largest consumer of jewelry remains Central federal district with a share of 28.2% in volume terms. The second place with a share of 16.7% is occupied by the North Caucasus Federal District, the third is the Southern Federal District (11.9%).
Structure of jewelry consumption by federal districts in 2013 – 2017, in physical terms
Jewelry Market: Development Forecast
It is expected that in the medium term, jewelry consumption will decrease by 1-2% annually, mainly due to a reduction in the number of potential buyers in the face of changes in consumer preferences (young people under 30 in most cases do not consider purchasing jewelry, preferring to spend money on gadgets, travel or inexpensive accessories).
