Chinese Jewelry's Enterprises Journey to Go Global

Author：BotaoXu

Intern：Feifan Zhou

Such scenes play out in jewelry stores every day. The prices of jewelry products are expensive, and the global jewelry industry is enormous. Currently, the global jewelry market is worth $310.9 billion. However, what Xiaolin does not know is that China’s jewelry industry is currently facing severe challenges.

Global prices of gold and silver are rapidly rising. The reasons behind this include, first and foremost, the increasing demand for safe-haven assets due to global wars and geopolitical instability. Countries and large institutions are stockpiling precious metals to strengthen financial security and reserve value. Secondly, inflationary pressures are driving investors to buy gold and silver as a hedge. These combined factors are tightening market supply and pushing up gold and silver prices globally and domestically, reflecting the far-reaching impact of global market volatility and uncertainty on domestic precious metal prices.

Additionally, due to the rising costs of raw materials and the appreciation of the US dollar, the domestic silver jewelry industry is facing much higher costs compared to the international market. The rise in silver costs has had a significant impact on Chinese silver jewelry wholesalers, as they face higher procurement costs, which squeeze their profit margins and increase sales pressure. This, in turn, weakens the competitiveness of Chinese wholesalers in the international market, as they are unable to offer products at more competitive prices.

The Moon in America is Not Rounder than in China, but the Price of Silver Is Lower

As of July 22, 2024, the price of silver in the U.S. market is $0.94 per gram, which, at the current exchange rate of 1 USD to 7.26 RMB, equates to 6.82 RMB per gram. In comparison, the domestic market price for silver is 7.105 RMB per gram. It is clear that silver prices in the U.S. market are slightly lower than in the domestic market. This price difference further exacerbates the competitive disadvantage of Chinese silver jewelry wholesalers in the global market, forcing them to make tough choices between maintaining profit margins and market share. Additionally, with domestic manufacturing costs gradually exceeding those of some developing countries, the previous advantage of profiting from labor cost differences is also losing its competitive edge in the global market.

When talking about precious metals, we must mention the global competitiveness of China’s lab-grown diamond industry. China is the largest producer of lab-grown diamonds globally, accounting for 56% of the global market, with most of the production concentrated in Henan Province. China’s production capacity in lab-grown diamonds has not only earned it more influence in the global diamond market but also provides a stable supply of raw materials for the domestic jewelry industry, reducing its dependence on imported natural diamonds.

In recent years, lab-grown diamonds have gained significant importance in the global jewelry industry due to their characteristics and technological attributes. Lab-grown diamonds are created under the same conditions as natural diamonds, produced through high temperature and high pressure over a short period, resulting in products identical in quality to natural diamonds. Although modern laboratories still struggle to produce high-carat, high-quality lab-grown diamonds like natural diamonds, this could change as technology advances. The obsession with natural diamonds, particularly the preference for rare and precious natural items, keeps demand for natural diamonds strong in the high-end market. However, smaller diamonds (such as those under one carat) are more easily replaced by lab-grown diamonds, as technological improvements make them increasingly similar in quality and appearance to natural diamonds while being more affordable.

Acceptance of lab-grown diamonds is steadily increasing globally, especially among price-conscious consumers. The younger generation is particularly open to lab-grown diamonds, suggesting that lab-grown diamonds still have significant market potential in the future. Acceptance varies by region. In price-sensitive markets and among younger consumers, lab-grown diamonds are gaining popularity due to their lower cost. These diamonds closely resemble natural diamonds in terms of quality and appearance, making it difficult to distinguish between them, even with instruments. In other markets, natural diamonds still dominate. For instance, while some believe lab-grown diamonds could capture 50% of the U.S. market, the reality is different.

Overall, lab-grown diamonds initially yielded high profits due to limited competition, but as supply increases and competition intensifies, profit margins are shrinking. To address these challenges, Chinese jewelry companies need to actively expand into overseas markets, identifying growth opportunities through in-depth market research and improving their competitiveness internationally. In the following sections, we will explore key insights into the expansion of Chinese jewelry companies into various countries, including target market selection, market entry strategies, and the specific challenges and opportunities they face.

Middle East Gold and Silver Jewelry Market: Annual Sales Measured in Tons

In Latin America, China's primary markets for silver jewelry include Panama, Colombia, and Brazil. These markets favor silver and platinum-plated products, preferring the natural colors of silver and platinum. While these markets offer lower unit prices, they generate large orders. Wealthier consumers typically purchase gold, while those with more modest economic conditions tend to prefer silver jewelry, which can be melted down and reused for greater value.

In the Middle East, especially in Dubai, there is high demand for silver-plated and gold-colored silver jewelry, particularly in naturally occurring gold-silver alloy colors. Gold-plated silver jewelry is also popular. The Middle Eastern market can easily consume tons of precious-metal-colored silver jewelry annually, with consumers preferring products that closely resemble the colors of the precious metals themselves.

The jewelry shop in Dubai

Source: Interviewee's sharing

In Europe and Central Asia, consumers in Spain and Ukraine prefer gold plating but do not accept rose gold plating. They tend to prefer 14k gold, as its color is slightly lighter than 18k gold, which aligns with local aesthetic preferences. These markets have broad demand across both men and women. The Italian market, primarily male-driven, favors distinctive silver jewelry. This market places stringent requirements on jewelry accessories, and if products lack the necessary accessories, they may face clearance difficulties. Therefore, jewelry companies entering the Italian market need to ensure product quality and compliance with import regulations.

In the Asian market, preferences differ across regions such as India and East Asia (including Japan and South Korea). Indian consumers mainly prefer platinum and rose gold plating, with a lower acceptance of gold plating. They favor the colors of platinum and rose gold, making these options more popular in the Indian market. In Japan and South Korea, consumers prioritize intricate design details, making delicate 14k gold jewelry more appealing.

Overall, different markets exhibit diverse preferences for silver jewelry. Chinese silver jewelry companies expanding into overseas markets need to adjust their products and marketing strategies based on consumer preferences and market characteristics. By gaining a deep understanding of each market's demands, companies can better meet customer needs and enhance their competitiveness in international markets.

Cartier Watch Collection

Source: Cartier Official Website

From the Perspective of Jewelry Brands: Localized Consumer Preferences

From a brand perspective, companies need to deeply understand localized consumer preferences. While jewelry brands have their core philosophies and values that should not easily change due to market trends and dynamics, as a global brand, its product designs are launched worldwide but perform differently in different regions. For example, in the European market, products inspired by Japanese and Korean trends do not sell well, and similarly, European-inspired collections are unpopular in the Japanese and Korean markets.

Additionally, in developed markets like Europe and North America, more and more male consumers are flocking to the jewelry market. Based on the experience of senior executives at the London luxury brand Thialh, the proportion of men wearing and buying jewelry is rising, and more unisex styles are emerging. Men are beginning to wear designs that express a softer aesthetic, while women are increasingly opting for jewelry with a sense of strength. This reflects new fashion trends stemming from societal changes, which may also be related to the rising trend of androgynous and loose-fitting clothing styles. This suggests that societal norms regarding the male gaze on women's bodies are gradually diminishing.

These studies and findings highlight the key perspective when expanding a brand globally: "Change" itself is the only constant. This also explains why Chinese companies need to localize their operations, which is the fundamental logic and reason behind their globalization strategy.

Taking Jewelry Overseas: Local Companies Are More Unpredictable Than You Imagine

Gaining the trust of local companies is another key challenge for Chinese jewelry companies aiming to internationalize. Different countries' distributors exhibit various behaviors during their collaborations with Chinese enterprises, bringing numerous challenges to business partnerships. Chinese silver jewelry exporters have accumulated many interesting experiences and stories in this regard.

Jeulia, a Chinese jewelry brand expanding overseas

Source: Jeulia Official Website

In different countries, large local silver jewelry companies face unique problems. For example, in Turkey, internal strife among brothers is common, with many large companies splitting due to family conflicts, affecting the stability of business operations. Additionally, Turkish society is dominated by a strong sense of masculinity, with women often confined to household duties and limited work opportunities. In contrast, in India, although women can work, when an employee resigns, the company often publicly declares the employee as deceased to socially "kill" them, making it difficult for them to find new opportunities. In some of India’s large enterprises, there have even been incidents where purchasing managers colluded with outsiders to stab their bosses. Moreover, some Indian companies have faced closure due to gambling losses, with bosses even resorting to armed debt collection.

In Italy, distributors, due to their romantic tendencies, may appear overly slick in their communication with domestic companies and often have higher demands for product accessories. Failure to meet these requirements could result in customs clearance issues. Another surprising phenomenon is that the gender composition of distributors in the global silver jewelry industry varies significantly by region. In Panama and Brazil, male distributors dominate, whereas, in Colombia, female distributors take the lead. Uruguay is also male-dominated. In Chile, the silver jewelry industry is typically a father-son inherited family business, with high craftsmanship requirements but low output. In Spain, both men and women participate in the silver jewelry distribution industry, while in Italy, the industry is mainly male-dominated, with these male distributors generally being socially adept and required to handle import and export issues with accessories, or else face clearance challenges. In Ukraine, Russia, and Kazakhstan, female distributors dominate the silver jewelry industry, with limited male involvement.

These phenomena fundamentally boil down to issues of business trust. In the local silver jewelry industry, the most trusted individuals who are chosen to travel to China often possess specific gender characteristics. Internal corporate issues are also an area of learning when dealing with local partners. The frequent "trust" issues Chinese companies encounter in their dealings with local firms reflect the cultural and commercial logic differences. Next, we will explore the specific trust issues that jewelry companies face in different markets.

The Three Pillars Driving Jewelry to the Global Market: Compliance, Channels, and Branding

One of the key issues in the globalization of the jewelry industry is compliance. In developed countries, registering a jewelry company and complying with regulations is a complex and critical process, mainly due to the high risk associated with offline profits. Jewelry companies in developed regions are generally more likely to obtain loans and open bank accounts. For example, in Hong Kong, it is extremely difficult to secure a bank account, B2 license, and sales rights. Companies must provide extensive documentation to gain the trust of banks and successfully open accounts. Additionally, due to the high value of jewelry, many jewelry companies are also regulated by local legal institutions to prevent money laundering risks.

In developed countries like North America and Europe, the jewelry industry faces various restrictions and high taxes, making market entry more complicated. For example, in North American markets, the tax rate on certain products can be as high as 20%. High taxes and complex compliance requirements increase the operational difficulties for jewelry companies in these markets.

In developing countries, the jewelry industry faces different challenges. For instance, operating a jewelry business may involve risks such as robbery, threats from organized crime, and policy changes. This environment makes market entry and operations in these countries more complicated. Companies need to conduct thorough market research and adjust their strategies to adapt to different countries’ legal environments and market demands. This shows that jewelry companies not only need to compete in the market but also face stringent compliance and legal challenges, including meeting banking scrutiny, adhering to local business regulations, and ensuring that all operations are transparent and legal.

In terms of branding, to earn consumer trust, jewelry companies also need to work hard to tell their brand stories and manage their marketing channels effectively.

The jewelry brand David Yurman conducts marketing through Instagram.

Source: David Yurman Official Instagram Account.

Although online channels have seen sales growth over time, offline remains the traditional sales model for the jewelry industry. However, with the rise of key opinion leaders (KOLs) and the increasing influence of online communities on consumers, online sales have shown unique advantages. Through social media platforms and content marketing, jewelry brands can reach potential customers who are not in the local area, thereby effectively reducing the high costs and risks associated with offline operations. However, this also means companies need to invest significantly in photography and content creation. If the content is of high quality and the price is reasonable, jewelry priced within a few thousand yuan can even sell online. In terms of content creation, localization is particularly important. If content aimed at the Japanese or Korean markets is launched in the European or American markets, local consumers may not readily accept it.

Despite the unique advantages of online sales, offline sales still account for the majority of revenue in the jewelry industry. Most consumers pay greater attention to the experience and brand story when purchasing high-priced jewelry, which are key factors that offline sales can provide.

In terms of branding, to successfully establish a brand image in the global market, the following key actions are crucial:

Maintaining Core Philosophy and Values: When creating a brand, companies should clearly define their core philosophy and consistently adhere to it. Regardless of market trends, sticking to the core philosophy helps establish a unique market position. For example, some jewelry brands focus on traditional craftsmanship and precious materials as their core, and this consistent quality commitment allows them to stand out in a highly competitive market.

Adapting to Market Changes: While the core philosophy should not be easily altered, brands still need to respond flexibly to market changes. For instance, within the framework of their core philosophy, brands can make small adjustments to cater to the demands and trends of different markets. Even in unfavorable market conditions, brands should continue telling a consistent brand story to maintain stability and recognition.

Emphasizing Personalization and Taste: High-end consumers increasingly value personalization and unique taste, and they tend to choose jewelry that reflects their personal style. Brands should meet this demand through distinctive designs and customization services. For example, some high-end jewelry brands offer custom services, allowing consumers to design unique pieces based on their preferences, which attracts high-end clients seeking individuality.

Building Consumer Trust: The foundation of branding is building consumer trust. Through consistent storytelling and core philosophy, brands can earn consumer trust. Trust-building involves more than just product quality; it also includes transparency, customer service, and after-sales support. For example, offering clear product origin explanations and comprehensive after-sales services can enhance consumer trust in the brand.

By following these recommendations, companies can establish a strong brand image in the global market, attract more loyal consumers, and stand out in the fiercely competitive market. Maintaining core values, responding flexibly to market changes, focusing on personalized design, and building consumer trust are all key factors in successful brand building.