Growth in global demand for jewelry may slow from the 5.2 percent Compounded Annual Growth Rate (CAGR) it registered since 2000, to 4.6 percent by 2010 or 2015, unless appropriate collective action is taken by players in the industry. This was the conclusion reached in a special report titled “The Global Gems and Jewellery: Vision 2015: Transforming for Growth” released jointly by The Gem & Jewellery Export Promotion Council (GJEPC) of India and financial and management consultants, KPMG.

 

The projection is based on an assessment of the impact of eight key business trends that the two bodies believe will affect the performance of the industry. These trends include: the local beneficiation in the mining countries; fragmentation of supply sources and an increase in rough supply; consolidation across the value chain; rise of new centers for jewelry manufacturing; growth in the use of synthetics and non-precious metals in jewelry; a decline in demand for plain gold jewelry; organization and consolidation in the emerging markets of India and China; and intense competition from other luxury goods.

 

Based on the findings, the report estimates that worldwide jewelry sales will rise from $146 billion in 2005 to $185 billion in 2010 and $230 billion in 2015.  However, it stresses that if the industry as a whole focuses on “growing demand for jewelry as a category” and “strengthening industry-level and enterprise-level capabilities” in the “next 12-18 months,” sales could reach $280 billion in 2015, registering a CAGR of 6.7 percent.

 

The action programs outlined by the report include:

• Develop Demand for Jewelry as a Category: This entails a united promotional effort across all categories of metals, stones, and other raw material jewelry; identifying new product and consumer segments and managing different markets.

• Strengthen Industry Level Capabilities: The recommendation is to transform the image of the industry as a traditionally closed one; to one that ensures access to modern, low cost funds.

• Players to Select Strategic Position and Enhance Individual Capabilities: Individual players will either have to grow in size and scale, or develop specialty capabilities in niche segments

Speaking at the launch of the Report, GJEPC chairman Sanjay Kothari observed that the report was one of the first to study the precious metal jewelry industry as a whole. Though the industry is facing challenging times, with a professional approach, individual players could help the industry advance to the next level. He called upon leading trade organizations to work in synergy and play a pivotal role as facilitators.

 

Bakul Mehta, immediate past chairman of GJEPC, during whose tenure the project began, stressed that while the report had laid out a broad road map, it was essential for the industry bodies to undertake periodic reviews of the direction in which the industry was moving and make corrections if necessary.

 

Summarizing the thrust of the report, Neelesh Hundekari, director, Advisory Services, KPMG said “Transformation is necessary for growth. The industry has the potential to successfully compete against the luxury goods industry and preserve its traditional domination of the consumer’s discretionary spending.”

 

 

Key Findings of GJEPC KPMG Report “Vision 2015”

 

The report on the perspective for the global jewelry industry released by The GJEPC and KPMG offers some projections of the global gem and jewelry industry in 2015.

 

Some of the statistical highlights include:

 

• Gold and diamond jewelry will continue to dominate the market, accounting for about 82 percent of  overall market share

• Diamond jewelry will be the slowest growth segment at a Compounded Annual Growth Rate of 3.3 percent

• Synthetics will have sales of close to $2 billion at wholesale price by 2015, and will impact sales of natural diamond jewelry to the extent of $6 billion at the retail level

• Palladium is expected to establish itself as an alternative metal for jewelry fabrication

• China (13 percent) and India (12 percent) together will emerge as a market equivalent to that of the US share (26% percent)

• Middle East (9 percent) will be another large market

• China, Turkey and India will emerge as new centers for jewelry fabrication

• Value addition in diamond processing will increase from 29.3 percent to 34.1 percent

• India’s share in diamond processing will drop from about 57 percent by value to 49 percent

• China’s share in diamond processing will rise to 21.3 percent

• About 9 percent of world’s diamond will be processed locally by mining countries

• Centralized distribution of rough will drop from 55 percent in  value to 40 percent

• Rough sold through traders will account for 45 percent

• Value addition in diamond trading will fall from 12.9 percent to 9.9 percent

The report also envisages the emergence of six to seven large conglomerates with a presence across the value chain who will be the leaders of the industry. Some of the business models that may emerge are:

 

• ‘Big Brother’ companies – with a presence across various segments of the value chain

• Volume Players – Companies with depth and large capacity in a single segment whether mining, diamond manufacturing or retailing

• Specialists – companies that develop specialized expertise in niche areas at various points in the chain

• Straddlers – companies who shuffle resources across two segments