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J E W EL L ER Y RUS SI A

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AmberWorld Kaliningrad International Amber Industry Forum Overview of Russian Jewellery Market

Jewellery & Gem Fair – Europe (JGF Europe) Hall 1 - Booth 1D12

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JEWELLERY & GEM FAIR – EUROPE (JGF Europe) Messe Freiburg, Germany 1 - 4 April 2014 Hall 1 booth 1D24

620041, 3 Uralskaya str. Yekaterinburg, Russia Tel/Fax: +7 (343) 380 76 76 e-mail: info@ringo.info www.ringo.info www.facebook.com/tmringo


Necklace BIRDS of PARADISE ERMY Company Ekaterinburg Authors: N. Rukhlenko, T.Fakhreev


Dear Readers! L

Valery Budny, Head of Media-holding RESTEC JUNWEX

et us introduce you the latest issue of international edition of JUNWEX Jewellery Russia Magazine – a project of RESTEC JUNWEX Media-Holding, JEWELLERY RUSSIA Publishing House and RUSSIAN JEWELLERY TRADE CLUB. This issue includes the most interesting and actual for international jewellery market information: analytical reviews, comprehensively characterizing jewellery business in our country, and articles about operational experience of foreign companies on the Russian market, as well as interviews with representatives of the industry reflecting prospects of cooperation with foreign partners. JUNWEX Jewellery Russia, established by the RUSSIAN JEWELLERY TRADE CLUB and RUSJEWELLEREXPERT Consulting Agency is the most distributed and reliable В2В edition in the Russian jewellery market. The target audience of the magazine are investors, CEOs, commercial directors, top-managers, heads of sales departments, commodity researchers, jewellery enterprises of small, medium and large scale, and everybody who is interested in further development of business in the jewellery industry. The magazine JUNWEX Jewellery Russia is distributed: • By address base of RUSSIAN JEWELLERY TRADE CLUB covering more than 7000 most significant jewellery stores in Russia; • by address base covering all manufacturing enterprises of the jewellery branch; • Among participants and visitors accredited for all JEWELLERY RUSSIA PROGRAMME Exhibitions; • by VIP-mailing (state officials, regional administrations, business elite); • by subscription. The materials of this edition represent the whole range of information relevant for jewellery business. JUNWEX Jewellery Russia is a professional tool for establishing partner relations and effective promotion of business. We are sure that every reader of the English edition of JEWELLERY RUSSIA Magazine will find on its pages not just interesting but also necessary and helpful information regarding the Russian jewellery market.

JEWELLERY RUSSIA Publishing House is a recognized leader in the market of mass-media industry in terms of volumes of publishing: 2 500 000 hard-copies of B2B JUNWEX Jewellery Russia magazine annually and this figure is constantly increasing. It also publishes B2C “The Best Adornments in Russia” magazine (155 000 copies, 8 issues per year) which gives the key information about the latest trends in jewellery industry. In 2012 a new edition was launched — JEWELLERY BESTSELLER. It is a catalogue of the most demanded jewellery collections on the Russian market, a indispensable directory for the retailer.


J E W EL L ER Y RUS SI A

10 March, 2014

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AmberWorld Kaliningrad – International Amber Industry Forum Overview of Russian Jewellery Market

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First cover image: KOSTROMA DIAMOND 156019, Kostroma, 2G Lokomotivnaya str. +7(4942) 42-20-23 www.bril-kost.ru

Jewellery & Gem Fair – Europe (JGF Europe) Hall 1 - Booth 1D12

JUNWEX — Jewellery Russia Magazine is an english didgest with information about Russian Jewellery market printed by publishing house "Jewellery Russia" EDITORIAL BOARD V. Budny, Head of Jewellery Russia Programme B. Borisov, First Deputy Director of Russia Assay Office O. Mironova, General Director of RusJewellerExpert Consulting Agency A. Gorynya, Chairman of Russian North West Union of Jewellers G. Kovaleva, Chairman of Judges of a Jewellery Contest within the Jewellery Russia Programme D. Percossi Papi, Jewellery Designer, Italy T. Noskova, Deputy Chief Editor V. Puryguin, Director of Jewellers Guild GOLDEN RING of RUSSIA K. Avakyan, President of FORMIKA Company V. Meshalkin, Federal Jewellery Holding GOLDEN STANDART ESTABLISHER Russian Jewellery Trade Club RusJewelleryExpert Consulting Agency EDITORIAL STAFF V. Budny, Publisher T. Noskova, Editor-in-Chief I. Fedorova, Script Editor J. Runova, International Department Editor A. Dobrov, Art Director D. Besetskaya, Designer V. Revelisov-Krumer, Project Director L. Lebedeva, Proofreader A. Andronova, Circulation Department I. Kadzhaya, International Department ADDRESS 12 Petrozavodskaya St., St.Petersburg, 197110, Russia Tel.: + 7 812 303-98-60, +7 812 320-80-99 E-mail: overseas@restec.ru www.junwex.com Printed by ScanWeb OY, Korjalankatu 27, 45 130, Kouvola, Finland. 5 000 copies. Materials are not returned and not reviewed. All rights reserved. No part of this publication may be reproduced in any form without the written permission of Jewellery Russia Magazine. Reference to the journal is required. Jewellery Russia Magazine is registered by Federal Service for Supervision of Legislation in Mass Communications and Protection of Cultural Heritage in the Russia’s North-West Federal District. Registration Certificate PI #FC2 — 8476.

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Editorial

EVENTS

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JUNWEX St. Petersburg Recognition of St. Petersburg Contest JUNWEX New Russian Style JUNWEX Moscow AmberWorld Kaliningrad – International Amber Industry Forum


JEWELLERY TRADE

28 30 32

Russian Jewellery Trade Club What do we spend our money on? Goods well bought are half sold

ANALYTICS

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Overview of Russian Jewellery Market


6 | Events | JUNWEX Magazine

S T. P E T E R S B U RG 2 014 Each year the increasing scale of JUNWEX St. Petersburg undeniably proves constant growth of the Russian jewellery industry and successful start of Russian jewellers in the global jewellery market.

XXII International Jewellery Forum JUNWEX St. Petersburg 2014 is: 9987 exhibitors from 562 domestic and international companies; 41 420 customers, and among them 19 332 accredited wholesalers and retailers.

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UNWEX St. Petersburg exhibitors are reliable seasonable suppliers of precious novelties to jewellery chains of Russia and the CIS countries. It is no wonder that the exhibition business programme involved not only government and social organizations’ representatives, but also business representatives. As usual, all events started with a grand opening ceremony, in the framework of

which the leaders in overall jewellery production in the Russia’s North West Federal District in 2013 were awarded. The winners were announced and certificates were presented by O. Mironova, General Director of RusJewellerExpert Consulting Agency and A. Gorynya, Chairman of the Russian North West Union of Jewellers and the Order of the Badge of Honour ‘Jewellery Russia’ cavalier.


Events

Despite the fact that the industry keeps showing good results, I have to emphasize that we still lag behind the figures of 2008 regarding both gold and silver. That’s why we still have room for improvement! But it is also worth mentioning that this year has seen a significant breakthrough in the field of jewellery art. Alexander Gorynya

A diverse exhibition programme involved events organized by The Russian Jewellery Trade Club. For the Matchmaking service which has become of vital importance to exhibitors and wholesalers, the organizers arranged round table meetings dedicated to solving specific problems, for instance customer rights protection in terms of integration of the Russian jewellery industry into the global market. As well as in previous years, JUNWEX St. Petersburg featured a detached display of equipment and technologies for jewellery industry - JUNWEX Tech, and all significant enterprises of this industrial segment exhibited in it. It is this display where the guests will be able to learn about innovative methods and the latest materials for jewellery manufacturing. As well as all leading projects of the JEWELLERY RUSSIA Programme, JUNWEX St. Petersburg cannot be imagined without the All-Russian Competition for jewellers RECOGNITION of St. PETERSBURG. This time, 55 companies showcasing 156 products took part in the Competition. Annually the Competition demonstrates impressive and comprehensive range of jewellery collections. Despite the fact that this time no one was awarded the Grand-Prix Award, the Competition prize winners surprised and cheered spectators with genuine works of art, shown not only at exhibitors’ stands, but also on the large screen during the grand closing ceremony. XXII International Jewellery Forum JUNWEX St. Petersburg 2014 became a milestone of this project, because in the coming year the February exhibition will be held at the brand new venue. EXPOFORUM Convention and Exhibition Centre will become a new hospitable house for JUNWEX St. Petersburg and will start hosting the largest international business events almost right away after the opening.

The leading jewellery manufacturers in 2013 (from the North West Federal District of Russia)

Gold jewellery without stones, with colour and synthetic inserts: • YUVELIRY SEVERNOY STOLITSY Company • SANIS, St. Petersburg Jewellery Factory • VIP-2000 Company Silver jewellery without stones, with colour and synthetic inserts: • St. Petersburg Mint — the branch of Federal State Unitary Enterprise GOZNAK (by weight); • ELIZAVETA Company (by quantity); • RUSSKIYE SAMOTSVETY Company. Silver tableware manufacturing: • RUSSKIYE SAMOTSVETY Company Gold jewellery with 1st group inserts: • VIP-2000 Company • DIAMOND-DESIGN Company • KAST Jewellery Factory Platinum and palladium jewellery with 1st group inserts: • GRINGOR Company Jewellery export: • RUSSKIYE SAMOTSVETY Company

EXPOFORUM Convention and Exhibition Centre is: • 6 exhibition pavilions with 100 000 m2 exhibition space, and additional 40 000 m2 of the outdoor exhibition space; • congress centre for 4 270 persons and 52 conference halls for 8000 persons; • several hotels of various star ratings (Hilton Hotels & Resorts, Hampton by Hilton etc.); • customs and logistics centre; • business centre with 25 000 m2 of space.

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8 | Events | JUNWEX Magazine

ecognition of St. Petersburg

February, 8 2014 the award ceremony brought to an end the work of XXII AllRussian competition jewellery industry in the city on the Neva "St. Petersburg Recognition 2014." 55 companies were involved in the final of the competition, represented by 156 items. Work of the nominees were evaluated by: Galina Kovaleva – Chairman of the jury of the Program "Jewellery Russia” competitions, the president of the International Fund for Support of jewellers the "Form", Natalia Korovina – fine art expert, art critic, Olga Kostyuk – Ph.D. in art history, senior researcher of the State Hermitage; Larisa Peshehonova, fine art expert, a senior researcher of the Moscow Kremlin, Anna Ratnikova – fine art expert, senior researcher at the Russian Museum of Ethnography, Galina Smorodinova – fine art expert, a leading researcher at the State Historical Museum.

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Necklace BIRDS of PARADISE ERMY Company Ekaterinburg Authors: N. Rukhlenko, T.Fakhreev


Events

EXCLUSIVE PRODUCTS WITH COLOUR STONES I place Pendants AQUA

and GREEN PEAR DROPS Author and goldsmith: Vladimir Alyushin St.Petersburg

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Collection MOJITO JF CARAT Company Ekaterinburg Authors: S. Koptelkova, A. Stepina, Goldsmithes: D. Rychkov, A. Mosin

BEST JEWELLERY OR SEASON COLLECTION

I place Tourmaline set from the collection SWEET DREAMS and rhodolite set from the collection SUNRISE MASTER BRILLIANT Company Kostroma Author: T.Rozhdestvenskaya Goldsmith: A.Maslov

I place Collection FREEDOM

SMOLENSK DIAMONDS Jewellery Group Smolensk Author: Stefano Ricci

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of RUSSIAN BALLET SADKO St.Petersburg Author: T. Khromoseeva Goldsmith: T. Khromoseeva

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10 | Events | JUNWEX Magazine

PROHIBITED WISH

FASHION TRENDS I place

Sets MAGIC of LIFE, ISLANDS of LOVE, AMAZON, PROHIBITED WISH, INFLORESCENCE

INFLORESCENCE

ISLANDS of LOVE

MAGIC of LIFE AMAZON


Events

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CLASSICS OF XX CENTURY I place

Set SNOW QUEEN JF CARAT Company Ekaterinburg Author: D. Rychkov

MODERN HISTORICISM

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LADLE Authors: A. Dontsov and D. Dontsov St. Petersburg

Set PETERSBUGSKY RUSSIAN SAMOTSVETY Company St.Petersburg Author: D. Volodina

RING DESIGN I place

Series of rings DIVINE MESSAGE RUSSKIYE REMESLA Centre Yaroslavl Author: S. Chiriev Goldsmith: I. Klemin

BEST COLLECTION OF MASS PRODUCTION I place

Collection SOLO RIFESTA Holding Ekaterinburg


12 | Events | JUNWEX Magazine

PEARL I place

Set LUNAR CALENDAR CHRYSOS Jewellery House St.Petersburg Author: K. Lovygina Goldsmith: K. Lovygina

MAGNIFICENCE OFÂ JEWELLERY

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Man wristlet DARKHAN WAY URAN SAKHA Company Yakutsk Author:G. Bylkov Goldsmith: G. Mikhailov


Events

JEWELLERY EXPERIMENT PERSIA

NEOFUTURISM

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Sets: SWIRL, PERSIA, NEOFUTURISM Rings: FREDO, SHURUM-BURUM Earrings ALIGNED PLANETS CHRYSOS Jewellery House St.Petersburg Ring FREDO

Earrings ALIGNED PLANETS

SWIRL Ring SHURUM-BURUM

RELIGIOUS OBJECTS I place

Icon of the Right-believing Saint Aleksandr Nevsky Authors: A. Dontsov and D. Dontsov St. Petersburg

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14 | Events | JUNWEX Magazine

JEWELLERY PLASTIC ARTS I place

Sugar pot BUTTERFLY HUNTING Caviar dish WINTER FISHING ALTMASTER Company Kostroma Author: I. Rumyantsev Goldsmith: M. Scheglova

WATCHES DESIGN

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Exclusive watches: METAMORPHOSE, GAGARIN, GRAPE VINE, BLUE HORSE, DAINTY FLOWER NIKA, Group of companies


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NEW RUSSIAN STYLE

JUNWEX NEW RUSSIAN STYLE

The annual May exhibition JUNWEX New Russian Style-2013 left many issues to consider: marketing trends, retail demand conflicts, future development strategies in the framework of WTO etc. Media holding RESTEC JUNWEX introduced the coming 2014 year as a year of active integration of the Russian jewellery industry into the global market.


Events

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Number of exhibitors:

612

Number of trade visitors:

Exhibition space:

7 231

25 300 m2

Total number of visitors:

31 016

2014 – the year of Russia’s integration into the global jewellery market

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n May 2013 at the grand opening ceremony the leaders of the Russian jewellery business shared one table with the first Vice-president of UBM Asia Ltd. W. Diener and the General Director of Fiera Milano in Russia P.P. Lodigiani. Mr. Diener reminded the guests of the agreement on cooperation in exhibitions organization signed by UBM and RESTEC JUNWEX. “As you all are well aware about,” one of the UBM Asia Ltd directors said. “We represent the world leading company in exhibition business, that’s why we have chosen RESTEC as our Russian partner. Both parties are interested in this partnership, thus we expect fruitful work with the Russian market. In his welcome address Mr. Lodigiani announced that the MACEF exhibition, held for the 2nd time along with JUNWEX New


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ussian Style, has already doubled its scope. “It’s a great honour for us to organize the exhibition with RESTEC JUNWEX in Russia,” he stated. “Thanks to this, we face significant growth of our project and increasing interest of the customers. We hope to contribute a small part of internationally recognized Italian flavour to the Russian style”. The following guests attended the opening ceremony among other guests: the representatives of Economic and Commercial Affairs Chancellery at Embassy of the People’s Republic of China in the Russian Federation, the representatives of coordinating department of Gems and Jewellery Trade Association of China with diplomatic mission from China and Hong Kong, and the representatives of such editions as Jewellery news India and Jewellers Today. The head of media holding RESTEC JUNWEX Mr. V.Budny addressed the guests: “We have long studied the market, but now it’s a high time to move directly forward and we are sure we’ll get a warm welcome of the global society! Russian companies have a great opportunity to showcase their products on the frontlines of the largest international exhibitions, as well as to compete in popular creative and professional international


Events

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contests. While establishing partnership with UBM Asia Ltd we first of all issued the challenges concerning promotion of our enterprises and we, as well as previously, will support their ambition of global market integration and enhance the image of the Russian jewellery art”. RESTEC Group President Mr. S.Trofimov emphasized efficiency of the May exhibition as a marketing tool and its importance for industry business stability, and wished everyone “business contacts sure to develop into contracts!”. As for economic aspect of the exhibition, most of JUNWEX New Russian Style exhibitors appreciated its commercial results highly. The 12th May exhibition now has its own easily recognized trademark. The project’s spring spirit is manifested in unique spring-like and fresh design of stands, optimistic mood of exhibitors, a wide range of new vibrant summer collections and numerous PR actions aiming to draw attention of sophisticated visitors in Moscow. In this regard, the company ADAMAS showcased a set of Medals for the Olympic Games 2014. Each visitor could not only take pictures of these precious artefacts, but also enjoy the genuine manufacturer’s adornments with the Olympic Games Symbols. Collection design combines the images of Olympic mascots, as well as a ‘patchwork quilt’ motive symbolizing cultural traditions diversity of people of the Russian Federation.


M O S C OW

Activity and optimism


Events

JUNWEX Moscow, being the key event of the jewellery industry in Russia, addresses the most urgent issues in jewellery business and determines not only successful work in the current year, but also potential development guidelines for companies. This year the exhibition demonstrated the revival of the jewellery industry in anticipation of market recovery.

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hanks to such a large-scale representation of market participants from various countries, we may talk about high business activity of the exhibition. As part of the grand opening ceremony of JUNWEX Moscow the Award Ceremony was held; the awards were presented to trade companies - the winners of Reliable Partner Competition, the medals were presented to the cavaliers of the Order of the Badge of Honour ‘Jewellery Russia’, and the certificates were handed out to the leaders of TOP-10 rating, who excelled in the marketing push-pull strategy.

JUNWEX Moscow 2013 is:

2 most prestigious pavilions of

the All-Russian Exhibition Centre (VVC);

10 511 representatives of

718 Russian and international companies;

40 360 customers, among them 18 854 accredited

wholesalers&retailers and more than 7000 members of the Russian Jewellery Trade Club.

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“Execution of such a large-scale event contributes a lot to the jewellery industry development in Russia. JUNWEX Moscow proved to be not only an exhibition featuring works of jewellery art from throughout Russia and all over the world, but also an efficient venue for establishing new business contacts and concluding agreements. I’m also sure that participation of representatives of the Russian State Assay Office in the exhibition will facilitate cooperation between government structures and business representatives of the industry!” A. Markin, Director of the Russian State Assay Office

Among other distinctive features of this exhibition is the JUNWEX Tech extended display. The following significant trade visitors specializing in equipment and supplies for jewellery manufacturing exhibited at JUNWEX Tech: Vek, Gallery Steinberg, Clio, KovrovUpak, Lasso, Sisma, Fasti Industriale, PromTech, Ruta, Sapphire, Fabrika Vek, Juvin, Jmo etc. The exhibition was held in two pavilions. Pavilion 75 hosted companies specializing in packaging, software, trade and demonstration equipment. Such placement allowed jewellery manufacturers and retail specialists getting the recent information on innovations in these industry sectors. Pavilion 69 hosted mainly manufacturing equipment and tools (besides, the great influx of visitors to this display of JUNWEX Tech proves the rising activity and optimism of the market. Thanks to developing partnership between media holding RESTEC JUNWEX and UBM


Events

Corporation, the international display and its guests received increased attention at the exhibition. Among other guests of JUNWEX Moscow, the Vietnam Gold Trade Association visited the exhibition with the official support of the company ‘Ringo’ and the Vietnam-Russia Friendship Association in the Sverdlovsk Region. Representative stands of jewellery exhibitions Bangkok Gems & Jewellery Fair (Thailand), Inhorgenta (Germany), Fiera di Vicenza (Italy) displayed their events for the first time for the Russian participants in their home country. Italian companies Fratelli and Athena made presentations for their potential partners in Russia in the framework of the Business Matchmaking of The Russian Jewellery Trade Club. In order to develop international cooperation and to help Russian companies enter the global market, media holding RESTEC JUNWEX offered

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40 companies from

16 countries

exhibited at the show. all possible options and assistance to all Russian companies interested in working abroad. In this regard, the presentation of Russia’s country pavilion will be organized in the framework of Jewellery and Gem Fair – Europe which is to be held in Freiburg (Germany). Also at this Fair the terms of potential cooperation will be discussed. At the meeting ‘Business & Leisure’ the travelling plan of Russian official delegations to the world largest exhibitions in Hong Kong, Las Vegas, Basel, Vicenza, Istanbul, Dubai, Sri-Lanka etc. At the same time, a joint invitation allowing visiting 20 various UBM and RESTEC JUNWEX trade shows was demonstrated at the exhibition in Hong Kong. In 2014, the exhibition will open its doors for exhibitors and guests on October 1-5, 2014.


24 | Jewellery Market | JUNWEX Magazine

KALININGR AD GOVERNMENT OF KALININGRAD REGION

AMBER UNION ASSOCIATION

KALININGR AD

11–13 JULY 2014 WITHIN THE CITY ANNIVERSARY FESTIVITIES

YANTARNY SPORT COMPLEX


| 25 INTERNATIONAL AMBER INDUSTRY FORUM 11–13 July 2014 Jewellery Market

‘The trade show including a scientific conference and workshops for manufacturers, a display of machinery for the industry will surely be a great event attracting local amber processing enterprises and manufacturers of amber products from many countries. Our objective is to make ourselves known not only as a Russian region concentrating practically all global amber deposits. We also wish to demonstrate our growing capacities in raw amber processing, good prospects for organization of manufacturing enterprises, “a city of craftsmen” at the existing industrial facilities”. Nikolai Tsukanov, Governor of Kaliningrad Region

Forum Information The International Amber Industry Forum AMBERWORLD aims at promoting companies and achievements of the amber and jewellery industries of the Kaliningrad Region on the global markets and at retrieving its status of “amber capital”. The AMBERWORLD forum will invite not only amber processing enterprises from Kaliningrad and Russia, but also from all countries where this jewellery sector has been under development: Poland, Lithuania, Ukraine and many other countries. It is expected that only the number of large companies will exceed 200, while the total area of exhibition venues will be over 3000 sqm. AMBERWORLD is an opportunity to: • strengthen partner relations with Russian and international companies; • establish new business links; • find new distribution channels; • determine price and marketing policies for further operation; • assess competitiveness of own products and define technological policy.

Advantages of Kaliningrad Region The Kaliningrad Region is located on the southeastern coast of the Baltic Sea and the westernmost region of the Russian Federation completely separated from the country’s main territory by land borders of foreign countries and international waters. The Kaliningrad Region is a special economic zone with privileged economic conditions for foreign business. A simplified and expedient clearance of products for temporary import to the trade show is performed under АТА Carnet.

Regional Jewellery Market The Kaliningrad Region plays an exclusive role in the global amber industry and possesses major developed deposits of amber including amber suitable for the jewellery industry needs. Currently the annual output of raw amber averages about 340 tons. The larger part of raw amber is exported. As reported by the customs, such exports totaled 1922 tons during the last four years.


26 | Jewellery Market | JUNWEX Magazine

KALININGR AD Forum Programme INTERNATIONAL TRADE SHOW INTERNATIONAL FESTIVAL AMBER AUCTION WORLD AMBER ASSEMBLY

• Investment Forum • Plenary Meeting “Investment Opportunities of the Amber Region” • Business Contacts Exchange “Joint Ventures in the Amber City” • Bank Hour “Leasing Schemes for Machinery Supply” • Teleconference “Tourism Opportunities of the Amber Region “ • Roundtable meeting “Socio-professional assessment of the Russian legislature in the sphere of the amber industry development under the market conditions” • Historical detective examination “Amber Room 20.14: New Facts, Hypotheses» • Seminars and workshops specialists in amber processing • Lecture on up-to-date designer solutions “Amber. Image and Form”

Main Sections of the Trade Show • Russian and foreign amber adornments • Semi-finished products and inserts of amber • Jewellery • Author works • Hospitality products and business souvenirs • Amber therapy • Shop and display equipment • Machinery for amber and jewellery industries from

$0.06

ART EXHIBITION • Unique exhibits from museum and private collections • Gallery of laureates of international competitions of items using amber • Amber Room replicas • Vernissage of amber pictures tons

300

15 125 km2 is area of the Kaliningrad Region

of raw amber is produced annually

954 773 people live in the Kaliningrad Region

95% 30% is annual growth of the amber products market

of global amber deposits pertain to the Kaliningrad Region

is a starting cost of raw amber in Russia

over

500 000 from

155

$

is a starting cost of raw amber in China

tourists per year


| 27 INTERNATIONAL AMBER INDUSTRY FORUM 11–13 July 2014 Jewellery Market

K o t e m o c l e W

! d a r g n alini

To exhibit, please contact us at: Tel.: +7 812 320 80 99, e-mail: junwex@restec.ru To attend, please contact us at: Tel.: +7 812 235 83 83 e-mail: info@jewellerclub.ru www.junwex.com

VISIT THE FAIR

EXHIBIT IN THE FAIR

(UNDERLINE TYPE OF YOUR PARTICIPATION)

COMPANY NAME: POST CODE: PO BOX CODE & STREET: TEL.: E-MAIL: BANK NAME: IBAN: ACCOUNT NUMBER: RESPONSIBLE PERSON: JOB TITLE: PRODUCTS TO BE EXHIBITED: MARK COMPANY TYPE:

Authorized signature: _____________________

COUNTRY:

CITY:

FAX.:

CELL: BRANCH NAME: SWIFT:

PRODUCER

Stamp : ____________________ Contact Person: Mr. Igor Kadzhaya E-mail: overseas@restec.ru Tel/Fax: +7 812 303 9860

WHOLESALER

EXPORTER

Date: «_____» ____________ 2014


28 | Jewellery Trade | JUNWEX Magazine

Russian Jewellery Trade Club North Western Federal District 1223 shops Central Federal District 2786 магазинов

Urals Federal District 520 shops

Volga Federal District 662 shops

Far Eastern Federal District 286 shops

Siberian Federal District 520 shops

Southern Federal District 597 shops

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n many countries professional associations play a very important role: similar business associations serve as a link between business and government, not just performing public functions. They are actively involved in the distribution of investments and decisions that affect the interests of the industry. Cooperating with the government, they give full support to the policy aimed at economic development. In addition, their work brings valuable to community results in such areas as professional ethics, scientific and market research, statistics and information support. The club "Russian Jewellery Trade" took on challenging mission on unification of market players in the Russian jewellery industry. It is founded by the Russian information-analytical agency "RusJewellerExpert" with the support of regional public organizations of jewellers. There are well known jewellery networks from different regions of the country among the members of the Club: "Russian Gems", "Gold of Yakutia", "Elana", "Alvamani", "Aquamarine", "Golden Rus", "Phianit", "Zlato Rossov", "Zanzibar", as well as large jewellery shops: "RossYuvelirtorg" (Omsk), "Pearl"

Today the Club is the largest professional association in the industry not only in wholesale and retail trade, but also manufacturing companies, which are interested in the formation of the modern market mechanisms and the development of business cooperation and partnership.

Official representatives of the Club are opened today in the Urals, Central, Far Eastern, Siberian and Volga federal districts, as well as in the Republic of Karelia. (Angarsk), "Russian Gold" (St. Petersburg), "Golden Rabka" and "Agate" (Ekaterinburg), Gold Infinity (Vladikavkaz), "Clementine" (Apatity), "My sun" (Khabarovsk)," Diamond Yard" (Ufa), "Diamond" (St Petersburg), "IFC Company" (Novosibirsk), "Nizhny Novgorod Jeweller" (Kstovo), "Art Salon" (Petrozavodsk), "Crystal of the Dream" and "Silver World" (Moscow), "Golden Chain" (Krasnoyarsk), "Russian Jewellery Company" (Kaliningrad) and many others. Why do Russian consumers prefer shop, which is part of the Club, and not sale outlets of competitors around? Taking care of customers, the Club supports only reliable companies. High customer service standards and offer of high quality products have become the main principles of corporate retail chain. Club membership implies the absence of false information with intention to disorient the customer, in particular offering huge discounts on initially overly inflated prices and features of inserts. Belonging to a leading industry association proves the professionalism and stability of the company, so participation in the federal action "Buy in sops of the "Russian Jewellery Trade" club provides such shop with unconditional trust of customers. It is no coincidence that the best jewellery factories and


Jewellery Trade

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dealers of foreign companies cooperate with the club shops — who are the participants of major exhibitions organized by the media holding "RESTEC JUNWEX". The club developed a "Business & Leisure" program, to be visited by experts of the world's most important forums in the framework of the official Russian delegation. Each trip is a great opportunity to give a new impetus to the development of the company and also learn about the culture of another country. Italian expression, Hong Kong scale or ancient Istanbul — everyone can choose a program to suit the taste, and, most importantly, goals. Club membership has two formats, confirmed by "gold" or "platinum" cards, which is awarded to companies that consistently work in the jewellery market of Russia, and confirms the importance of the enterprise and its belonging to the elite professional associations. "Gold Card" proves higher specialist status of the holder and ensures comfortable working conditions in all exhibitions of media holding "RESTEC JUNWEX", as well as various bonuses by PH "Jewellery Russia" and the Training centre "JUNWEX". "Platinum" card proves VIP— status of the company under the Uniform exhibition program "Jewellery Russia" and is issued to the "gold" card holders, stable on the industry market for at least three years. The decision on the issue of "platinum" card shall be made by the Board of the Club. The owners of this card are associated members of the International Jewellery Confederation CIBJO. This is a personalized document with identification number, which has a high degree of protection against forgery. "Gold" and "platinum" cards are subject to annual re-accreditation. Another successful project of Club — Annual federal competition "Reliable Partner". Each participant of the exhibitions of the "Jewellery Russia" program may provide recommendation to the organizing committee of ten trading partners, proven excellent join work. Companies with the highest number of votes from different suppliers become winners. "Reliable Partner" is a competition in which it is necessary to go rounds and fight for places. It is enough to be a conscientious wholesale buyer and to have as many vendors willing to vote for you as possible. Awards ceremony is traditionally held as part of the September exhibition "JUNWEX Moscow." The winners of the contest "Reliable Partner 2012" 1. ZOLOTOY AZHUR (Mineral 1, Vladivostok), network of shops 2. NORIS (Kamensk-Uralsky), network of jewellery salons 3. OLIVIN (Barnaul), network of shops 4. MERKURY Trade House (Porkhov) 5. DEALER JEWELLER (Makhachkala, Dagestan Republic), network of shops 6. RUSSKOYE ZOLOTO (Protvino), network of shops 7. ROSSYUVELIRTORG (Omsk), network of shops 8. TRITON (Yakutsk), network of shops 9. KRISTALL jewellery house (Lipetsk), network of shops 10. SAMOTSVETY (Belgorod), network of shops For the first time salons of hour trading participated in the contest, the leaders of which were: 1. TC "Slava" (Moscow) 2. TD "Polet" (Moscow) 3. Hour design bureau Timelounge (Moscow)

RUSSIAN JEWELLERY TRADE Club RUSSIAN JEWELLERY TRADE Club is the biggest business association at the Russian jewellery market uniting more than 6500 wholesalers and retailers from 806 cities of Russian Federation.

BUSINESS ACTIVITY Buy at the stores of RUSSIAN JEWELLERY TRADE Club — Integrated corporative action for strengthening Club members’ competitive ability. Business Contacts Exchange — Establishment of business links between manufacturers and trade companies to arrange active supplies to the jewellery stores of Russian Jewellery Trade Club. Regional project — Russian Jewellery Trade Club supports regional shows within the framework of Jewellery Russia Exhibitions in Ekaterinburg, Kazan, Kalinigrad, Kostroma, Makhachkala, Perm, Samara, Yaroslavl. The main purpose is to represent the interests of the Club members in regions by developing and maintaining customers loyalty.

COOPERATION WITH RUSSIAN JEWELLERY TRADE CLUB Buyer’s Programme — delegations of trade visitors; Direct-marketing — a program specifically designed to build the booth traffic; Match-making service — Business Contacts Exchange — assistance in scheduling the business meetings. Tel./fax: +7 (812) 235 83 83 E-mail: club@rjexpert.ru | www.junwex.com


30 | Jewellery Trade | JUNWEX Magazine 30 | Jewellery Trade | JUNWEX Magazine

What do we spend our on? T

he Federal State Statistics Service provides some interesting information on how Russians distribute their budgets among various product groups. According to this data, the population has started to spend much less money on purchasing non-food goods in recent years. For example, in 2005 the distribution was as follows: 46.7% on food, 54.3% on other product groups. In 2011, food expenditure increased to 49.1%; and in 2013 the ratio was 47.8% and 52.2% respectively. In other words, buyers' interest in non-food consumption has reappeared, but the pre-crisis level has not yet been reached. These figures show that incomes are lagging far behind inflation. It is significant that, even with an increase in demand in the food segment, demand in this market has moved to lower price niches. The situation in the non-food market is different. Of all the items covered by the Federal State

Statistics Service, demand has recently increased for only two: medicines and jewellery. If we take consumption of all non-food products as 100%, Russian expenditure on jewellery in 2006 accounted for 0.5% of their personal budget, and today this amounts to 0.8%.Although this figure is rather small, it is just over the 0.7% spent on purchase of notorious mobile phones. Moreover, unlike the jewellery market, this segment is experiencing some stagnation: the 0.7% share has remained unchanged for several years in succession. Watchmakers deserve some sympathy: our compatriots' expenditure on watches has almost halved in recent years to 0.1%, occupying the last place in the non-food product rating. As to the top items on this list, the unsurpassed leader is still alcohol with 7.6%, though in 2005 it was even higher, at 9.6%.

Psychologists have noticed a paradoxical phenomenon: large social shocks make consumers spend more money. The fact is that purchasing restores a feeling that things are stable and the belief that everything will be OK. For example, statistics shows that after the nuclear disaster in Japan, the population spent 26% more on luxury goods than in the previous stable period.


All you need is ...

junwex.com


32 | Jewellery Trade | JUNWEX Magazine

Goods well bought are half sold

A recent survey of retail trade specialists carried out by the Russian Jewellery Trade Club has helped RusJuwellerExpert to analyse consumer preferences.

T

he item in the company’s range that was most in demand in 2013 was still rings. Chains, which ranked third last year but have moved up to second place in the ranking, account for a slightly smaller share of jewellery sales (at the same time, domestic production of chains and bracelets in 2012 fell 22% according to the Federal State Statistics Service). Earrings rank in third place.

Ranking of demand for jewellery items (according to a survey by trade specialists) • Rings (26%). • Chains (25%). • Earrings (13%). • All the same (3%). • Sets (2.1%). • Bracelets (1.4%). • Crosses (1.4%). • Pendants (0.7%). • Beads (0.7%). • Male jewellery (0.7%).

A number of participants in the survey (3%) expressed the opinion that sales of all jewellery types are the same. It seems that these companies do not keep the relevant records and purchase goods in a speculative fashion. In response to the question, “What has changed in buyers' behaviour in 2013?” the respondents were only unanimous on one 1 thing - that the purchase cost had gone down. As regards the 31 frequenc y of purchases, the retailers’ experience is vastly different: 39% believe that jeweller y has been bought more often but more cheaply, 13 while 31.4% believe that purchases have 16 been both less frequent and cheaper.

%

Not specified

39

More often and more expensive More often but cheaper Less frequently and cheaper Less frequently but more expensive


Jewellery Trade

1

19

%

5

28

Diamonds Diamond sprays Precious stones Semi-precious stones

5 10

Among the remaining 10%, diamond jewellery is in greater demand. If last year retailers complained that demand for diamond jewellery had gone down, today this jewellery group has pulled ahead and has even overtaken jewellery with coloured semiprecious stones, traditionally preferred by Russians. As regards the latter, the best seller for several years in a row has been topaz jewellery. Garnets are unexpectedly ranked second in popularity in this group, with amethysts in third place.

Mix Stoneless jewellery

15

% 36

39

% 22

17

8 18

The general opinion is that 90% sales are accounted for by lightweight articles and jewellery in the low-price segment.

No information

32

| 33

Sapphire Emerald Ruby Alexandrite

Topaz

42

Garnet Amethyst

Among jewellery with precious stones from the first group, it is sapphires that have become the favourite for the first time, having overtaken the former favourite, emeralds. Photos of sapphire jewellery have regularly featured in fashion magazines recently which has certainly caused an increase in consumer demand.


34 | Analytics | JUNWEX Magazine

ccessories Fair - June

JUNE

Hong Kong Jewellery & Gem Fair

1,800 exhibitors from 37 countries and regions Over 25,900 buyers from 113 countries and regions Over 64,000 square metres of exhibition space

Over

Theme Pavilion Highlights: FINE DESIGN PAVILION FINE GEM PAVILION The Fine Design Pavilion (FDP) and Fine Gem Pavilion (FGP) in the Grand Hall of HKCEC are dedicated to the world’s finest jewellery. The elegant setting of FDP and FGP befits the top-quality jewellery, diamonds, gemstones, pearls and other exclusive one-offs. It also offers a cozy atmosphere that guests are sure to enjoy. HONG KONG PREMIER PAVILION Coupled with the excellent facilities and prime conditions, the Hong Kong Premier Pavilion (HKPP) in Halls 1D & 1E of HKCEC is the perfect setting for the city’s homegrown brands to promote their exceptional jewellery designs to the world’s luxury markets.

Special Pavilions: Theme Pavilions

Group Pavilions

Hong Kong Premier Pavilion

Antwerp Brazil Mainland China Germany India Israel Italy Japan Korea Sri Lanka Taiwan Region Thailand

Fine Design Pavilion & Fine Gem Pavilion Jadeite Gallery Fine Jewellery Antique & Vintage Jewellery Silver Jewellery Diamonds Pearls Gemstones Corals Mounting Jewellery Jewellery Accessories, Packaging, Tools & Equipment

Turkey The United States International Colored Gemstone Association

Hong Kong Convention & Exhibition Centre

Hong Kong Convention & Exhibition Centre

Grand Foyer

Grand Hall

Fine Design Pavilion Fine Gem Pavilion

Halls 5B, 5C, 5D & 5E

Halls 5F & 5G

Silver Jewellery, Pearls, Gemstones, Corals, Mounting Jewellery

Fine Jewellery

Asia’s Fashion Jewellery & Accessories Fair - June

Diamonds

Mezzanine 2 Fine Jewellery

Halls 1A, 1B & 1C

Halls 3F & 3G

Halls 3D & 3E

Halls 3B & 3C Diamonds

Hall 1 Concourse Jadeite Gallery

Gemstones

Mezzanine 4 Antique & Vintage Jewellery

Halls 1D & 1E

Convention Hall

Hong Kong Premier Pavilion

Expo Drive Entrance

Jewellery Accessories, Packaging, Tools & Equipment Harbour Road Entrance Loading Dock Car Park

June Hong Kong Jewellery & Gem Fair Asia's Fashion Jewellery & Accessories Fair • June

June Hong Kong Jewellery & Gem Fair

Information as of 28 February 2014


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One of

ASIA’S TOP THREE Fine Jewellery Events JUNE Hong Kong Jewellery & Gem Fair

19 - 22 June 2014

Hong Kong Convention & Exhibition Centre

UBM Asia Ltd Tel: (852) 2585 6127 Fax: (852) 3749 7344 Email: visitjgf-hk@ubm.com

www.JewelleryNetAsia.com

| 35


36 | Analytics | JUNWEX Magazine

Overview of Russian Jewellery market RusJewellerExpert consulting agency with support of Russian Jewellery Trade Club prepared a large analytical report with plenty of graphics, diagrams and statistics. Such a wide analytical research is based on the survey of all market-players (producers, retailers and visitors) in terms of jewellery exhibitions JUNWEX that take place in Moscow, St.Petersburg, Ekaterinburg and Kaliningrad. MAIN CENTERS OF JEWELLERY INDUSTRY AND CLASSIFICATION OF RUSSIAN MANUFACTURERS

Historically there were four Russian jewellery manufacturing centres: Kostroma, Red - on-Volga and their surroundings, St Petersburg, Yekaterinburg and Chelyabinsk, Moscow and Moscow region which still dominate in the manufacture of jewellery. In recent years gaining strength enterprises located in Yaroslavl, Ivanovo , Rostov, Orel , Saratov now could affect general trends of the Russian jewellery market . Large industry production arises in Yakutia and the Far East. The rest of the territory of Russia is poorly covered by the domestic jewellery industry. The leading position of modern jewellery industry centers can be explained by their geographical location and by presence of former state jewellery enterprises on their territory. Educational institutions for professional training and traditions of jewellery mastership are presented there. All jewellery manufacturers in Russia can be divided into four categories according to their ligature mass of produced products:

1. Around 2 % of the total number is almost 100 large enterprises which are producing more than 50 kg of jewellery per month; 2. Around 8 - 9% of the total number of enterprises are factories producing from 10 to 50 kg of products per month. Today they are the fastest-growing industries producing the basic mass of commodity output. They produce about 65 - 70 % of the total output of goods at the jewellery market. Thus, 10% of the total number of enterprises produce about 90% of all commodity output. In addition, these companies are trying to conquer foreign markets; 3. About 50 % of the total number of manufactures are enterprises producing from 1 to 10 kg of product per month. Now there is a stable development of this segment, but the volume of products produced by these companies still cannot significantly affect the jewellery market in Russia; 4. Up to 40 % of the total number of enterprises - are private entrepreneurs and artists-jewelers working with custom design. Annual change in the number of registered enterprises varies within 70-80 units.


Analytics

Most of specialists have a tendency to deal with certain types of raw materials, which is particularly noticeable in the industries located in the centers of jewellery sector of Russia. Most of the fastest-growing enterprises have already identified a niche and established at the market as producers of a certain type of jewellery.

RETAIL JEWELLERY TRADE

A stable demand for jewellery and financial capability of the population to buy it is in the European part of Russia. In Russia there are over 22,000 enterprises engaged in trade of jewellery. “Russian Jewellery Trade Club" is the largest trade union which includes more than 7,000 jewellery stores in 492 cities of Russia. 150 -300 well-known jewellery networks successfully compete in the market, mostly owned by major manufacturers and distributors of jewellery. Cycle "production - trade - production" provide these companies an ability to hold competitive prices. While the information from stores allows them to pick up fashion jewellery trends and, as a consequence, to make quick adjustments to the product range. Russian jewellery market has no straight division of commercial companies to wholesale and retail, which is familiar to the West. Historical centre of jewellery trade has no more than 5 % of companies with a clear target of business. A major part of the jewellery trade in Russia operates within the framework of wholesale and retail trade. Stores accomplish wholesale purchases from a manufacturer and sell products to a consumer by retail. As a result of such scheme stores are moving away from agent services.

IMPORT

The largest importers of jewellery in Russia are: Italy, Germany, China, Thailand and India. Import into the European part of Russia from Italy and Germany goes through clearly built system of customs control and State Assay Office, while import in the eastern part of Russia is poorly controlled. Shadow market is developing due to the lack of state control of foreign products imported to the eastern regions.

PROSPECTS OF THE DEVELOPMENT OF JEWELLERY INDUSTRY IN RUSSIA

According to the experts, the power of large jewellery factories in Russia for production of gold jewellery is used by only 60 %, the production of diamond jewellery - only 20 - 30%. Meanwhile, in the world today there are about 300 000 jewellery stores and potential of the domestic jewellery industry allows to estimate the share of Russian producers as 10% of all sold products, that gives ground to forecast revenue growth of domestic industrial enterprises for many hundreds of million dollars. Priority of the Russian jewellery industry may soon become the largest consolidated promotion of the leading jewellery manufacturers, their associations and unions in the foreign market. Operating since 1999 Diamond Chamber of the Russian Federation plays a big role in this sector and includes more than 40 market participants. World practice shows that the most effective form of implementation of the diamond products is diamond exchange. The largest diamond exchanges in Belgium and Israel are the centers of world trade of diamonds. For example, through the diamond exchanges of Antwerp (Belgium) takes up 90% of all diamonds in the world and 50 % of all brilliants. Russia takes a leading part on the world diamond market and it is necessary to actively develop the functioning of the Diamond Chamber. It is very important to bring the legal framework in line with international standards, especially in matters regulating a trade in the domestic diamond industry , to create favorable conditions for the development of the internal market , as well as the promotion of Russian products on foreign markets.

RUSSIAN JEWELRY INDUSTRY

According to preliminary estimates, the volume of Russian jewellery market at the end of 2013 according will be about $ 7.8 billion. Main factors influencing the market in 2013: • Instability of prices for precious metals. • Marketing policy, stimulating demand.

| 37


Название |раздела JUNWEX Magazine 38 | Analytics | JUNWEX Magazine

40 30 20

The volume of the jewellery market. $ billion In % to the previous year:

10 0 -10 -20 -30

2008

2009

2010

2011

2012

Value of the whole jewellery market of the Russian Federation 2008-2012 and the forecast for 2013 5,4

5

6,5

7,2

7,8

3,9

2008

2009

2010

2011

2012

2013 (forecast)

Growth rate of the jewellery market value in the Russian Federation 2008-2012 and the forecast for 2013 40 30 20 10 0 -10 -20 -30

2008

2009

2010

2011

2012

2013 (forecast)

2013 (forecast)

• Decrease of the purchasing capacity of the population. These factors have a different effect, so the final increase rate of the market in 2013 may be even lower than in 2012 . As we can see from the diagram, after the market recovery in 2010 there is a gradual decline in the rate of growth. The cost of raw materials (precious metals and stones) forms 80% of the market volume. Therefore, the share of value added in the jewellery products in Russia is much lower than imported.

VOLUME OF THE PRECIOUS METALS PROCESSING IN THE JEWELLERY INDUSTRY

• In 2012 jewellery factories processed more than 80 tons of gold, and because of these volumes, Russia became the fourth in the world, after China, India and the United States. • In the first half of 2013 Russian jewellery industry has increased the use of gold for manufacturing products by 19.3 % and reduced silver utilisation by 1.3%. (In comparison with the same period in 2012) • In 2013 production of platinum and its alloys increased by 11.4% for 7 months. • Production of palladium and its alloys for 7 months 2013 decreased by 1 % (compared to the same period in 2012.)


НазваниеAnalytics раздела

According to some experts, the industry has more than 4.5 thousand industrial enterprises. Only two of them are public: Moscow Special Alloys Plant and workshops at the Presidential Administration of the Russian Federation. Meanwhile there are only about a thousand actively working industry productions.

ALTERATION OF SHARES OF THE RUSSIAN MARKET BY THE USED MATERIALS (INCLUDING IMPORTS).

In 2013 neither the amount nor the total weight of gold jewellery will reach pre-crisis levels, although the level of 2012 will be exceeded. Growth rate for the total mass in 2013 exceed the growth rate in the quantity of 2.3 times. Annual growth rates of gold production in 2013 decrease, comparing to 2012, both by quantity and by mass. Decrease in quantity will be the most remarkable.

MAJOR PROBLEMS IN RUSSIAN JEWELLERY INDUSTRY.

Currently companies are negatively affected by the following factors: • The high cost of Russian products in relation to similar foreign products. The reason is the high stakes of the current Russian tax and custom duties. It does not increase the competitiveness and leads to growth of import share in the Russian market. It also prevents the entrance of domestic jewellers into the international market. • Fluctuations in the real prime cost of production due to the volatility of raw material prices within the relative stability of market prices for processed stones.

JEWELLERY MARKET ALSO DEPENDS ON OBJECTIVE NONINDUSTRY FACTORS:

• Foreign trade policy of the state concerning precious stones and metals. • Changes of the regulatory environment and tax system. • Changes in the world prices for precious metals and stones. Fluctuations of the national currency.

| 39

Number of branded products from gold 20082012 and forecast for 2013 2013 (forecast) 2012 2011 2010 2009 2008 0%

10%

20%

30%

40%

Weight of branded gold jewellery in 2008-2012 and forecast for 2013 120 100 80 60 40 20 0 2008

2009

2010

2011

• Level of the refinancing rate of Central Bank of RF • Seasonal demand and changes in consumer preferences and capabilities.

2012

2013 (forecast)


40 | Analytics | JUNWEX Magazine

SEPTEMBER

Hong Kong Jewellery & Gem Fair

3,600 exhibitors from 48 countries & regions Over 52,000 buyers from 154 countries & regions Up to 135,000 square metres of exhibition space Over

Theme Pavilion Highlights: The FINE DESIGN PAVILION hosts around 70 internationally renowned jewellery companies, bringing to the city exquisite jewellery set with luxurious and rare diamonds, gemstones and pearls, as well as top-quality bejewelled watches, invaluable antique and vintage jewellery and exclusive one-offs from around the world. The FINE GEM PAVILION is dedicated to the world’s finest loose diamonds, pearls and gemstones. Over 50 esteemed exhibitors from around the world will display a variety of loose gems of the highest quality. Hall 2

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| 41


Название |раздела JUNWEX Magazine 42 | Analytics | JUNWEX Magazine

Indicators of PEST- analysis of Russian jewellery market development. 1. «P» - POLITICAL FACTORS FACTOR DISPLAY AND CONSEQUENCES 1.1 Russia’s accession to WTO Bankruptcy of small jewellery businesses 1.2 Tax legislation High rate of VAT makes enterprises uncompetitive. 1.3 Competition in the global market of diamond production Unprofitability of rough diamond treatment on the Russian territory 1.4 Custom legislation High custom duties, discrepancy to international standards. 2. «Е» - ECONOMIC FACTORS 2.1. Growth of prices for rough diamonds Decrease of the sales volume of finished products 2.2. High interest rates on loans to banks loans Decrease in the share of credit resources involved in the investment projects 2.3. Compulsory stamping High prime cost of products 2.4. Instability of diamond cutting industry Unprofitable business 3. «S» - SOCIAL FACTORS 3.1 Low purchasing power of the population Low labour productivity 3.2. Change of youth values Unattractive image and working conditions, discouraging young specialists. 4. «Т» - TECHNOLOGICAL FACTORS 4.1 Old equipment Low labour productivity 4.2 The slow introduction of technologies Lapidary waste production are not in use 5. INTERNATIONAL FACTORS FURTHER SHOULD BE ALSO TAKEN INTO ACCOUNT 5.1. The expansion of foreign jewelry companies Growth of import of cheap goods from Turkey and the countries of Southeast Asia 5.2. Low production quotas from the side of leading Impact on the final financial result diamond mining companies

MENTIONED COMBINATION OF FACTORS LEADS TO THE FOLLOWING UNFAVOURABLE EFFECTS:

• Curb of the growth of domestic production, • Exceeding of prices of domestic jewellery in comparison with foreign analogues • Indirect import promotion and development of the black market. • Enlargement of jewellery companies that is motivated by the desire of entrepreneurs to minimise the tax commitment and optimise the management resources. Such a development could lead to a significant reduction of small and medium businesses in the industry. As a result, the possibility of the development of Russian jewellery market is reducing. Despite the growth of gold jewellery production after the

crisis, the level of 2008 has not yet been reached on either the quantity or mass of branded products. For example, the total number of tested and branded gold jewellery in 2012 amounted to 36.54 million units, that is 16.77 % less than in 2008.

MAJOR BARRIERS, PREVENTING THE DEVELOPMENT OF RUSSIAN ENTERPRISES.

Despite the fact that the concept of " Russian gold " and " Russian cut " are perceived in the world as a "quality mark" , the economic feasibility of the legal production of jewellery in Russia continues to decrease. As opposite to other sectors of the economy, the problem of jewellery production attractiveness in Russia is not in labor costs compared with the countries of Southeast Asia, but in the costs of


НазваниеAnalytics раздела

producers. They are caused by the out of proportion high level of regulation in the field of precious metals and stones from the State and inflated custom duties on imported raw materials - precious, semi-precious and synthetic stones. Overwhelming proportion (over 80%) in the prime cost of jewellery is necessary only for raw materials: precious metals and stones. Because of the small sized of jewellery and inserts, law enforcement agencies are unable to effectively deal with smuggling. Therefore, only economic irrationality of smuggling, in comparison with the legal trade, can ensure the development of a civilised market.

THE MOST SIGNIFICANT BARRIERS THAT EXIST TODAY IN THE DEVELOPMENT OF THE INDUSTRY.

1. Number of legally imported products in 2012 in comparison with 2011 practically hasn’t change: Number of gold decreased from 2.06 to 1.93 million units, while silver rose only from 11.06 to 12.23 million units. These figures allow to suggest that the major part (20 billion) of the revenue growth formed by selling illegal products and products imported by the "gray" schemes. It means that illegal or "grey" products substitute domestic products on the market. This situation constitutes a serious threat to honest manufacturers and must be overcome together by public authorities and businesses themselves. One of the important factors to stimulate demand for jewellery is to increase consumer confidence. Most of them still remain very high degree of confidence in the state mark of assay, which guarantees that the product has the correspondent content of precious metal. Data obtained by specialists of " RusJewellerExpert " as a result of the survey of participants , visitors and professionals of the exhibition JUNWEX MOSCOW ( September 2013 ), allows to make the following conclusions : The overwhelming majority of all respondents insist on the need to preserve the procedure of state jewellery branding. Representatives from the B2B and B2C sectors are agree with visitors in the question of the

importance of state branding: 74.2 % retailers and 72.3 % of buyers voted for branding. However, larger percentage of buyers thinks that people can trust only product, having nominal producer stamp (22.3% versus 13.6 % of retailers). This can be explained by a low level of awareness of the majority of visitors compared with specialists in wholesale and retail trade. Share of manufacturers, in favour of maintaining mandatory state branding is a little more than 55%, but at the same time only 18.2% among them believe, that nominal producer stamp is sufficient (it is less than the corresponding percentage of consumers). This result can be explained by the corporate “conflict of interest »: from one hand, professionals understand the need of state branding to maintain their reputation and on the other hand, they would like to eliminate the costs, associated with this procedure. Only reduction of the number of bureaucratic procedures could change the attitude to this system; it means to increase the number of assay inspections and to reduce time of all operations. 2. In accordance with world standards, Russian owner of legitimately acquired or produced precious materials has no right to dispose of this property as they see fit. Legislation restricted their legal turnover that gives the opposite effect, it provokes the development of the black market. Today only legal turnover of certified faceted gemstone is allowed, but that is not practicable for the most popular inserts of low quality and small size, as the cost of certification is often more than their own. A turnover of raw, such as collection, precious stones, for individuals is absolutely excluded in Russia. 3. Existing import duties on all gemstones, including those that are not extracted on the territory of Russia, are beneficial only for smugglers, implementing illegally imported inserts at inflated prices, supposedly considering the import duty. At the same time, such gemstones, imported into the territory of the Customs Union in finished jewellery, are legalised by importers almost without VAT and import duties, because the correct account of the customs value of the real gems in the finished product is impossible. Thus, because

| 43


Название |раздела JUNWEX Magazine 44 | Analytics | JUNWEX Magazine

The main threats of the manufacturing business. "Black PR" Raider capture Tax inspections

4,8 6 7,8

Key personnel dismissal.

12

Growth of rental rates.

17,4

Lack of the working capital

19,8

Burreaucratic barriers

20,4

Non-payment of wholesale buyers

% of responses in which thegoods threat is estimated Market glut of similar as the maximum

46,1 48,5

Increase of commodity prices

% of responses in which the threat is estimated as the maximum Other

92%

Plagiarism

72,6%

Counterfeit products

Legal import

Foreign companies

83%

42,3%

46,4%

57,5 of duties on gemstones import, the attractiveness of finished jewellery increases, and the attractiveness of production of Russian jewellery inside the country falls down. • More than half of respondents believe that the main threat of the industry is rising of raw material prices, because this factor critically affects the prime cost, and consequently, the final price for buyers. • Tardy buyer payments lead primarily to the lack of producers circulating assets, and thus affecting the ability of procurement of raw materials. • “Market congestion of similar goods” is rather a positive factor because it stimulates the production facilities of manufacturers to introduce new products and expand the range. • A much smaller role of bureaucratic barriers in comparison with the “economic” factors can be also considered as a positive trend, but it should be noted that tax audits assessed by companies of the industry as a threat, comparable to raider seizures. As can be seen, the external threats, though legal, are considered less risky than domestic,


НазваниеAnalytics раздела

| 45

Comparative importance of competitive advantage of various products Wide range of products

62,5% 48,6%

Competitive prices Company's image Compliance with fashion trends Unique design Great quality

Competitiveness of Russian jewellery products in the international market according to producers. (According to opinion polls at JUNWEX exhibition) 5 21

% 75 Russian competitive items Russian non-competitive items Competitive, if the current legislation will be changed

29,2% 33,3% 41,7% 77,8%

criminal in nature (counterfeiting and plagiarism). This result is an additional argument in favour of state branding. The responses "other" are dominated by negative opinions about the state regulation in the field of jewellery industry. Legislation, taxation, customs, assay supervision, and lack of support for enterprises at the state level are considered as threats. Most manufacturers see the main threat not in competition with imported products, but in the systemic failings of regulation and control by the public authorities. The overwhelming majority of manufacturers said that the main competitive advantages are quality and a wide range of products. By providing these advantages, price factors recede into the background, though still significant. Design and fashion trends are considered as decisive important by not more than 30-40% of Russian jewellers. The lowest position of importance takes the company image. This can be explained by the relative youth of the Russian market, where the brand advantages are not too hard.


46 | Analytics | JUNWEX Magazine

Strengths and weaknesses of Russian products in comparison with foreign. (According to opinion polls at JUNWEX exhibition) 10

16

14

45

%

% 82

5,6%

With all

55,2% 12,8%

Brazil

4%

Italy

4%

Thailand

Competitive prices

Superiority of foreign products

Russian producers can compete with the following countries (According to opinion polls at JUNWEX exhibition)

USA

Product design

77

Superiority of Russian products

With no one

Quality of manufacturing

23,2%

Turky

25,6%

China

24,8%

It is obvious that the overwhelming majority of Russian producers consider the competitiveness of its products as high, and the main obstacles to the expansion on world markets are seen in the custom and regulatory legislation of the Russian Federation that prevent this possibility. According to the Russian manufacturers’ opinion, quality of the products is their main competitive advantage, but at the same time they acknowledge the superiority of foreign products in the design and cost. More than half of manufacturers are positive minded about their opportunities in the global market, and less than 6% of respondents do not consider themselves as competitive companies. About a quarter of Russian companies prefer their products to products from Asia. Here there is a correlation with the opinion of the superiority of Russian products quality. Minimum number of manufacturers sees themselves as competitive with European and American manufacturers. Here we can see a correlation with the notion of the superiority of foreign products design.


Analytics

FUTURE PLANS OF THE JEWELLERY PRODUCERS IN RUSSIA

According to "RusJewellerExpert" average of the annual growth rate of gold jewellery market capacity in the coming year is expected in the range of 5-6 %, and silver - in the range of 1316%. Underrated currently platinum demand and a strengthening fashion for palladium products will affect the volume of production. the coming years to increase its stake in Russia's GDP from the current 1.6% to 2%. the coming years to increase its stake in Russia's GDP from the current 1.6% to 2%. In the coming years the industry can increase its share in GDP of Russian Federation from existing 1,6% to 2%. In the coming years Russian Jewellers may increase the refining of gold for 200 tons per year ( 70 tons in 2011 ), and thereby achieve the volume of production and sales of jewellery of 15-16 billion dollars , against the current 5.6 billion dollars ( expert data ) . Russian diamond cutters are able to increase their share in the world production to 12-15 % in comparison with existing 6.0 - 6.5%. (For example, in 1985 the share of diamond production in the Soviet Union was 17 % of the global volume). More than 90% of manufacturers are ready to actively promote their products to wholesale customers of the buyer, and more than 72% for retail buyers. It means the prospect of strengthening of its own retail network. 75 % of manufacturers predict an increase in the number of wholesale customers in 2013. First of all, the high level of loyalty of producer to their production should be noticed: only less than 6 % of manufacturers are going to radically change their specialisation and leave the industry. It shows the optimistic expectations of the overwhelming majority of respondents. There is also the awareness of business leaders of necessity of the business development. Fewer than 11 % of respondents are not planning any changes in the near future. The main condition for successful business development for the overwhelming majority of enterprises is the range expansion (71.5 %). With

| 47

Marketing products channels and plans to expand the range. No own retail Pawnshop

34,5% 4,7%

Internet shop

19,3%

Wholesale centre

43,3%

Manufactures' store

32,2%

Trade Net

21,1%

Plans to expand the assortment of jewellery at the expense of related products. (According to opinion polls at JUNWEX exhibition) 21 31

5

At the expense of foreign products At the expense of plate

%

At the expense of souvenir products Other

26

35

Expansion of the range is not planned

the a small difference of notes, leaders are betting on increase of promotion campaign (40.1%), the development of its own retail ( 37.2% ) and the purchase of new equipment (33.6%) . Enter to the foreign markets is planned by less than a quarter of manufacturers. Possible explanation of this tendency is uncertainty about the competitiveness of products. Almost two-thirds of manufacturers have their own retail channels, and more than two-thirds plan to expand its range at the expense of related products (mostly foreign products and souvenirs).

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