This article first appeared in the JNA September/ October 2022 issue.

The year 2022 is almost over but China’s jewellery sector is still reeling from the lasting effects of the pandemic. In the first half of the year, the country’s Covid-19 situation escalated, forcing the government to enforce stricter lockdowns. Shopping malls and stores in major cities were closed while jewellery e-commerce, which saw unprecedented growth in the last two years, suffered from logistical challenges, intense competition and declining profits. Traditional jewellers meanwhile faced rising prices of raw materials, the continued impact of Covid-19 and fierce competition from online businesses.

The pandemic has also altered buying behaviours and the way companies are responding to emerging realities in a post-lockdown scenario.

Continuous innovation

Established in 1991, Hong Kong-based Luk Fook Jewellery Group entered the Chinese mainland market in 1994. It has a vast product portfolio of gold and gem-set jewellery, and more than 2,800 retail outlets worldwide. Nancy Wong, executive director and deputy CEO of Lukfook, remains upbeat about post-pandemic prospects. She shared, “Once the situation in China stabilises, we expect consumer demand to recover strongly. Without overseas tourists, local consumption is powering the Chinese economy.”

Rising demand for lighter, daily-wear luxury jewellery is a potential source of growth, noted Wong. Consumption patterns have likewise changed, with more customers becoming more accustomed to online shopping. The overall online penetration rate in the industry will continue to increase, revealed Wong, adding that the market will see more companies using combined online and offline sales strategies.

Younger buyers meanwhile are looking for diversified products. In response, Lukfook has developed innovative and trendy sub-brands and product lines to cater to customers’ varying preferences and further strengthen its market share. An example is the Code of Light diamond ring, which uses light and shadow effects to project words in the gift box. This was specifically designed to meet younger consumers’ need for unique products. The company’s NEW 365 concept, which involves unveiling a new jewellery piece every day, is also proving effective.

Personalised, uber-stylish and cost-effective silver jewellery has also become popular among young people. Lukfook launched the Silververse series to meet this emerging demand. In 2021, the company opened independent stores and in-store shops for Lukfook Joaillerie, which targets the upmarket jewellery consumer. It provides a wide selection of high-end and award-winning jewellery pieces.

The company has so far opened more than 100 sub-brand stores, providing different product lines, disclosed Wong.

Diamond products meanwhile remained popular even during challenging times, which was evident in the strong demand for Lukfook’s diversified diamond jewellery offerings.

Wong noted, “We are always determined to expand our products and provide customers with more choices. In addition to our own design and production, we also cooperate with Italian fine jewellery brand DIRCE. We have also collaborated with the Dunhuang Museum to launch licensed products based on Chinese culture and art.”

Shenzhen Ganlu Jewelry Co Ltd, a major player in China’s jewellery industry, also offers an expansive range of products, with categories covering k-gold, diamond setting, platinum, gold, enamel and high-end jadeite.

Zheng Shengsheng, vice chairman of Ganlu, explained that with increased geopolitical, economic and Covid-19 uncertainties, consumers have become more sensible in their purchases. Gen Zs, for instance, are gravitating towards more sophisticated choices. Demand for trendy, self-purchased products and for personalised styles is also rising. “This is a big change in jewellery demand since Covid-19,” noted Zheng.

Continuous innovation is key amid the rapid development of consumer markets. Ganlu places high importance on research and development (R&D). Zheng said a closed-loop chain involving product design and development, supply chain management, marketing promotion, channel construction, training and education and incentive mechanism is crucial to what she termed as “hot” sales.

Products should resonate with consumers while companies should use a pricing strategy that gives consumers value for their money.

At present, Ganlu has nine production lines, focusing on a varied range of products such as enamel, batch pipe and fine electroforming, among others.

Ganlu provides exclusive product services to brand customers through differentiated design services, capacity to support quantitative production and top-quality processing technology.

Chinese culture

Beijing Guohua Shopping Center, built more than 30 years ago, is a comprehensive retail complex mainly dealing in gold, platinum, diamond and jade jewellery. Its location on Xuanwumen West Street gives it a unique business advantage.

Wang Yi, general manager of Beijing Guohua Shopping Mall, said she had indeed expected pandemic-induced changes in consumer demand. She explained, “In Beijing, demand for gold categories is rising compared with other categories. From the Chinese consumer’s perspective, gold is an adornment and an investment product.”

Over the past two years, Chinese traditional style has become popular, with sales of antique gold jewellery driving the business. Licensed collections and Chinese-style products are also more highly desired, including 5G gold, 9999 gold mounting and diamond, gold with enamel, hollow gold, and geometric three-dimensional styles. Gold jewellery is gradually shedding its “traditional” reputation as younger buyers start posting trendy gold jewellery on their social media platforms.

Wang said, “During the first half of 2022, sales of general gold products with lower labour costs increased, which is rare. This shows that jewellery, as a non-essential product, has an impact on consumer income.”

Demand for gem-set products, on the other hand, is divided, Wang observed. Lightweight, low-priced products have become highly popular in the accessories market while luxury consumers still pursue high-carat gemstones for value preservation. Consumption of gemstones among middle-income buyers meanwhile has been affected by Covid in the past two years, added Wang.

Wong of Lukfook has the same view on gold jewellery. In addition to general jewellery products like the Heirloom Fortune collection and 5G series, the jeweller also provides fashionable and playful ornaments. “During the New Year, we launched a variety of gold products like Golden Windmill, which has movable elements to symbolise good luck,” Wong disclosed.

Chinese consumers seem to have adjusted well to living with the pandemic and their jewellery purchases have become more meaningful, shared Shenzhen Yuehao Jewelry Co Ltd. The company said, “Consumers buy jewellery not just for self-expression or to accessorise. Jewellery is viewed as a symbol of good luck and safety. Popular gold jewellery with traditional craftmanship combines blessings and cultural inheritance.”

Supply chain

The pandemic also altered the supply chain mechanism, indirectly affecting the product structure of retail enterprises.

Before Covid-19, Beijing Guohua’s purchasing team would travel to Hong Kong, Japan and Italy to do business, touch base with other industry players, learn about developments in the global jewellery industry and research on design trends. Over the past two years, however, the team was not able to travel. International logistics has also become unstable. Wang said the industry is banking on the reopening of borders and eased travel restrictions so jewellers can once again attend international jewellery fairs.

Ganlu sees opportunities in the resumption of international supply chains. In recent years, Ganlu actively explored developments in jewellery design and manufacturing. Its showroom functions as a wholesale platform, with continuously improving systems to meet customers’ needs. The company has cooperated with major jewellery factories in Italy and Turkey, to name a few, to develop its showroom as a one-stop procurement platform for customers.

Intelligent manufacturing

Ganlu also aims to be an “intelligent jewellery manufacturer” that understands consumers and anticipates their needs through differentiated product strategies and by providing more valuable jewellery.

To achieve this goal, Ganlu set up an exclusive team for first-line brands in the jewellery industry – from products to marketing and design – to create exclusive product solutions for brands. Secondly, Ganlu invests a great deal in its own jewellery research institute to study precious metals, technological innovations, standardisation, and utility model patents, among others.

After five years of development, the jewellery research institute serves as a channel for final output of products to the market. The company also successfully cultivated a team of “product managers” – a job category that is still in in its infancy in jewellery production, according to Ganlu. Their main responsibility is to solve product redundancy and homogenisation in the industry and guarantee increased product competitiveness.

Technological advancement is also at the heart of Zhejiang Mingr Jewelry Co Ltd operations. The company, which has two decades of jewellery manufacturing experience, has been upgrading its technology and design for 24-karat gold jewellery over the past five years. The result is a gold product focusing on Chinese culture, which has now become attractive to younger buyers.

Yuehao Jewelry, for its part, aims to serve customers with diversified products. The company said different brands have different R&D needs. Through sufficient communication and comprehensive market research, combined with efficient production processes, Yuehao Jewelry vows to provide brands with new and exclusive product development programmes.