Jewellery Traders Remain Cautious: The HKTDC Hong Kong International Jewellery Show Survey 2021

A poll of more than 800 buyers and exhibitors at the Hong Kong International Jewellery Show 2021 and the Hong Kong International Diamond, Gem and Pearl Show 2021 indicates that traders remain cautious about prospects for this year and next as the Covid-19 pandemic lingers.

In line with the cautious outlook, jewellery traders are more confident on everyday items that are priced under US$500, giving rise to an increasing popularity for more affordable melee and non-investment-grade diamonds. Yet pearl and jade traders remain more focused on the big-ticket items.

The Covid-19 impact

The poll has unveiled how the pandemic has taken its toll on the jewellery trade, with some 80% of the respondents seeing sales or revenue declines. Other than that, exhibitors have been coping with rising logistics and production costs, while buyers are struggling with scaled-down operations and business-model changes. 

Cautious market outlook

As the situation surrounding the pandemic remains notoriously fluid, an overwhelming number of respondents remain wary of future business prospects despite last year’s low base and a brighter economic outlook for the global economy.

Buyers in general are pessimistic about the market outlook, with 66% expecting another year of sales setbacks and falling retail prices, indicating their life today is not only worse than that of the exhibitors (39%), but also the 2016 market downturn when the city’s and mainland China’s fine jewellery exports fell 10% and 29%, respectively. 

This well explains why the majority of buyers are operating on a shoestring sourcing budget this year, leaving little room to accommodate higher prices and bigger order sizes. In view of the weak market demand, exhibitors, on the other hand, see little chance of transferring the cost increases to their clients.

Challenges and opportunities

The overall pessimism indicates how various Covid-led challenges continue to trouble traders, despite the recent rebound of export performance.

As the spread of new, more contagious coronavirus variants clouds the pace of the global economic recovery and market reopening, jewellery buyers and exhibitors see lingering travel restrictions and the uncertain global economy as their major business challenges in 2021. Exhibitors are also wary of the cost pressure and buyers are busy coping with the challenges arising from the e-tailing boom.

Buyers, in general, have mixed feelings over e-commerce. They not only regard e-commerce as one of their top business challenges and opportunities for 2021, but also one of the most disruptive technologies for the industry in the coming three years, followed by social media and artificial intelligence.

As both buyers and exhibitors are becoming more aware of the importance of digitalisation after the first year of the pandemic, more resources are likely to be put into the exploration of new, industry-specific applications.

Mainland stands out

In line with many economic and trade forecast, including the latest HKTDC Export Index, the mainland market, due to its enviable economic-growth forecasts and the domestic demand-sustained dual circulation strategy, is likely to continue to outperform other major economies. It goes without saying that mature economies with successful vaccination rollouts and economic stimuli, such as Western Europe and North America, are also topping the list.

E-tailing vital

The Covid-19 crisis has elevated digital channels as a must-have for both jewellery buyers and exhibitors. Despite little changes over the past three years, they both showed a higher intention to develop or further expand their e-tailing businesses, with 46% of the respondents planning to do so in the next two years, up from 14% in 2019.

Buyers, in particular, have benefitted from the e-commerce boom since the onset of the pandemic, with 45% (17% in 2019 survey) of them seeing a 30%-plus sales contribution from e-tailing. Exhibitors, on the other hand, see the sales contribution from e-tailing up 3 percentage points to 6%.

More encouraging is that about 90% of the respondents expect the growth momentum to continue. Pinning their hopes on e-commerce, some 40% of jewellery buyers expect their e-tailing business to grow by more than 20% in the next two years, while less than 10% of exhibitors are that optimistic. This could somewhat be explained by the fact that the Covid-driven digital transformation has been asymmetric across export/import trade and retail. 

Tilting lower 

As a fragile recovery awaits, buyers generally have weaker confidence across all retail price ranges for 2021, while reorienting themselves towards the lower end of the market. This year, the low-end market segment – items priced below $500 – is expected to replace the mid-ranged market segment, which commands a retail price from $501 to $5,000, as buyers’ favourites.

Everyday accessories

The majority of diamond buyers believe that diamond jewellery for daily wear (50%) and diamond jewellery for special occasions such as engagement and wedding (25%) will outperform other categories in 2021 as most coronavirus social-distancing restrictions will likely remain in place for the rest of the year.

The more fragmented nature of everyday wear somewhat explains why jewellery buyers and exhibitors are less unanimous towards which types of jewellery products – solitaire (33%), melee (32%) or solitaire-cum-melee (36%) – will be the most popular this year.

When it comes to diamond settings, the classic prong setting (37%) remains the most sought-after for solitaire items, while far fewer respondents are opting for the gypsy setting (6%) this year. Meanwhile, micro-setting (17%) has replaced channel-setting (14%) to become the most popular for melee diamonds.

Based on carat weight, clarity and colour, diamonds are classified into investment grades and non-investment grades. In line with the rising demand for everyday items, diamond buyers and exhibitors have shown greater confidence in non-investment grade diamonds.

Respondents opting for less-than-one-carat diamonds have hovered at about 45% in the two most recent surveys (2019 and 2021), up from 33% in 2018. Their preference for non-colourless grade diamonds has also soared to more than 50% in the past two surveys, up from 38% in 2018. Their appetite for diamonds with medium purity or below also climbed to 53% this year, up from some 30% in 2018 and 2019.

In terms of the cut of diamonds, the classic round-brilliant-cut diamonds (46%) are highly endorsed by the respondents this year, while fewer of them are opting for an ideal-cut diamond (7%). Heart-shaped diamonds (11%), on the other hand, have replaced baguette-cut diamonds (10%) to become the most popular cut for non-round diamonds. 

Jades and pearls

Both the geopolitical tensions in Myanmar and the Covid-driven supply chain disruptions have threatened the worldwide supply of high-quality jadeites. But jade buyers and exhibitors still believe natural jadeites (74%) will dominate the market and the more affordable “B” jade (5%) will only have limited, short-term popularity.

On the other hand, pearl buyers and exhibitors expect South Sea pearls (33%) will regain the throne from Akoya pearls (24%) and become the darling of pearl traders in 2021. It goes without saying that the more affordable freshwater pearls (21%) continue to come in third.

Profile of respondents 

• 286 exhibitors – major markets in Hong Kong (27%), North America (27%), mainland China (22%), Asia excluding Hong Kong and mainland China (13%) and Europe (5%).
• 520 buyers – major markets in Hong Kong (47%), mainland China (18%), Asia excluding Hong Kong and mainland China (13%), North America (11%) and Europe (8%).

The Hong Kong International Jewellery Show 2021 and the Hong Kong International Diamond, Gem and Pearl Show 2021 took place from 25-29 July 2021 at the Hong Kong Convention and Exhibition Centre.