Watch Out, World's Largest Country Has Growing Appetite For Gold Jewelry - World Gold Council
(Kitco News) - China’s improving wealth is expected to renew growth injewelry demand, creating long-term support for global gold demand andperformance, according to the World Gold Council (WGC).
In a report published Wednesday, the WGC said that China’sjewelry renaissance has come as a result of a “painful period of reinvention”that saw the industry evolve to meet a rapidly changing middle class.
“China’s middle-class is evolving and, over recent years,the profile of China’s jewelry consumers has changed,” the report said.
Gold still faces challenges in the the world’s largestconsumer market, however. A 2016 consumer research finding by the WGChighlighted two important trends: consumer preferences differ by region andtastes differ across age groups.
In large metropolitan areas, also known as Tier-1 cities, goldjewelry faces a growing millennial demographic that favors technology andfashion with their disposable income.
“When asked what they would buy if they were given RMB5,000, only 9% of those between 18-25 years opted for gold jewelry, comparedwith 31% who chose technology, such as smartphones or wearable technology,” thereport noted.
Consumers in Tier-1 cities contribute around 40% of totalnational spending, meaning that trends that start amongst core demographics inthese regions will eventually filter through the rest of the consumerlandscape.
“Successfully engaging with these consumers is the key tothe future health of China’s gold jewelry market,” analysts at the WGC added.
The jewelry business in the world’s most populous countryhas responded in kind to the changing consumer landscape by adopting two mainstrategies: diversifying the scope of the product range and integrating onlineand offline retail experiences.
Fresh product offerings, including 22ct and 18ct gold inaddition to traditional 24ct gold jewelry has sprung up to meet the demands ofa younger audience. Lower budgets amongst millennials have also prompted thejewelry industry to shift to thrift with 3D hard gold technology.
“A special chemical process makes 3D gold four times harderthan 24ct gold. Yet it uses only one-third of the gold that traditional jewelryuses to produce a same-sized piece, making it much more affordable,” the reportsaid.
Despite the growing prominence of online retail, researchhas shown that of those who begin jewelry purchases online, only 4% completethose purchases, owing to a preference for touching the product before buying,as well as concerns around online security.
Although measures are taken to retain a younger consumer’sinterest online, such as offering lighter-weight pieces below RMB 2,000(US$300), the WGC projects that in the short-to medium-term, online shops are“unlikely to take more than a small share of the market.”
Long-term, drivers of gold jewelry demand are explained notonly by the current price of gold, but importantly, consumers’ income.
“China’s shift towards a consumer-driven economy should bodewell for jewelry demand over the coming years,” the WGC said.
Gold jewelry demand in the country has more than tripled inthe past 15 years, placing China amongst the largest gold jewelry markets inthe world, accounting for 30% of global demand.
By David Lin
For Kitco News
Follow @davidlinMTL
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