2023 Chinese jewellery market insights: Gold continues to lead the market

2023 Chinese jewellery market insights 

Chinese jewellery retailers have expressed mixed feelings so far in 2023. Follow the end of pandemic restrictions, 2023 has seen improved gold jewellery demand compared to 2022. Our Gold Demand Trends report shows a 17% y/y rebound in China’s gold jewellery consumption in H1 (328t). The post-pandemic economic revival was the major contributor. 

But the recovery story is not all roses. Many retailers told us that sales fell off a cliff after the International Women’s Day in March. Our data also indicates a stark q/q drop in Q2 (-37%). The weaker-than-expected economic recovery, a record-high RMB gold price and seasonality drove this decline.

Structural changes are also of concern to retailers. For instance, changes in product pricing models and consumer purchasing motivations became a double-edged sword for many. And as product popularity shifts, retailer inventories must adapt.

The economic recovery remains uncertain. This, together with the structural trends mentioned above may present challenges to gold jewellery demand. It will be crucial for retailers to be aware of the latest and key market trends if they are to identify and pre-empt opportunities.

Against this backdrop we undertook the fourth annual Chinese jewellery retailer survey in cooperation with China Gold News. To capture a comprehensive picture, we collected 538 validated responses from jewellery retail shop managers and regional market directors at both national chains and local brands in 76 cities located within 21 different provinces (Chart 1).

Fieldwork took place between July and August 2023 via both online questionnaires and face-to-face interviews. Our random sample includes stores in malls (57%) as well as those on streets (43%), reflecting the current divide in the market and mitigating possible biases arising from store types.

Chart 1: The 2023 survey covered 538 market participants from 76 cities

Gold’s dominance rises further

Gold continues to dominate Chinese jewellery retailer inventories (Chart 2). Retailers told us that gold products account for 67% of their inventories as of H1 2023, a notable pick up from 2021 (52%) when we last tracked retailer inventory composition.¹ This is followed by diamond products, which make up 17% of retailer inventories, a lower level than 2021.

Chart 2: Gold’s dominance in retailers’ inventories rose further

This is closely related to the outperformance of gold compared to other product categories. Most respondents told us that they have witnessed growth in gold product sales compared to 2022 and pre-pandemic 2019 (Chart 3). This is followed by gem, pearl and other jewellery products, reflecting their increasing allure to consumers.² Only a few retailers experienced growth in diamond and platinum product sales, which partially explains the declining share of these items in their inventories.

Chart 3: Gold products significantly outperformed other categories

Heritage and Hard-Pure gold: shining brightly

Turning to gold-specific product ranges, Heritage gold jewellery is the largest category in retailer inventories, accounting for nearly 28% of the total (Chart 5). And mass-appeal products maintain a significant share at 24%. As its popularity rocketed, Hard-Pure (24K) gold jewellery has also held a crucial place in inventories, at 23% .⁶ 

The rise of “Guochao” – as noted in our previously reports – has been a major driver of Heritage gold’s popularity. According to JD Research, the number of “Guochao” consumers increased by 74% between 2019 and 2022 while related consumption surged by 335%.⁷ Innovations from the industry, such as lightweight Heritage gold jewellery with different gem inlays, sustained vitality in this product range.

Chart 5: Retailer gold inventories mainly consist of Heritage, mass-appeal and Hard-Pure products

Hard-Pure gold jewellery is a relative newcomer, relative to other products. The enhanced hardness of these 24K items enables greater flexibility in product design and attracts fashion-savvy young consumers. Furthermore, the combination of 24K fineness and intricate design has won over many 18K and 22K gold jewellery consumers. As the RMB gold price reached record levels, the affordability of these lightweight products further increased their allure to consumers.

Chart 6: Sales of Heritage and Hard-Pure gold products were outstanding

Mass-appeal gold jewellery products have been and are likely to remain a key component of most retailer inventories. After all, traditional consumers make up a large proportion of China’s gold jewellery market – and whether their motivation is buying for good luck or investment purposes, they prefer simple products with reasonable labour charges. And we believe the industry’s efforts to innovate and upgrade traditional mass-appeal product design has also helped improve attractiveness.

The inventory composition reflects the sales performance of these different gold jewellery products shown in Chart 6. In general, sales of Heritage, Hard-Pure and mass-appeal gold jewellery products outperformed other categories. 

Chart 7 provides another explanation for retailers’ decisions about gold product inventory shares. Due to their stylish designs and affordability, Hard-Pure gold products contribute the most to retailer profit margins. Heritage gold jewellery items are a close second. But their price competition is becoming fiercer as this niche market gradually reaches saturation, potentially putting downward pressure on product margins. 

It is obvious in Chart 7 that new products bring the most profit. The outperformance of both Heritage and Hard-Pure gold jewellery have both outperformed other products in sales and profitability proves that product innovation is key to unlocking the potential for growth.

Chart 7: Innovative products bring the most profit

Lighter and cheaper products are more popular

The surging local gold price, combined with an uncertain economic recovery, led many consumers to cut their gold jewellery budgets. Our survey results show that products lighter than 10 grams have made the largest contribution to H1 revenue for retailers (Chart 8). Since lighter products naturally have a lower per-unit ticket price, we can draw the conclusion that they have a notably higher turnover ratio than heavier ones.

Chart 8: Lighter products contributed the most to retailer revenue

Similarly, over 35% of retailer revenue comes from products selling for under RMB2,000; this is the most popular price range (Chart 9). Products ranging from RMB2,000 to RMB5,000 make up another major category, accounting for 28% of sales. Compared to 2022, we can see that consumer preference is shifting to cheaper products. The share of products with unit-total prices below RMB2,000 jumped from 18% in 2022 to this year’s 35%, while the contribution from more expensive ones (between RMB2,000 to RMB10,000) fell. 

Other than affordability, we believe industry innovation has played a vital role in the rising popularity of lightweight products. By combining various gems with these items and constantly upgrading designs, the industry has successfully grabbed the attention of the younger consumer.

Chart 9: Low-cost products are increasing in popularity

Analysis of sales by city-tier provides interesting results (Chart 10). We see similar trends overall: low unit-price products contribute the most to retailer sales. But gold jewellery items costing more than RMB10,000 are more popular in first- and fourth-or-lower-tier cities than they are in others. The strong economic growth in first-tier cities provides support for expensive product sales. And consumers in fourth- or lower-tier-cities usually favour items that are high carat with low labour charges, as this satisfies their investment motivation.

Chart 10: While most cities share similar trends, differences exist

The shift in pricing models: towards a more transparent future

The retailer inventory share of per-gram priced products is rising. Survey results show that 66% of gold inventories are made up of per-gram priced products while the rest are priced per-piece. Compared to 2021, it is obvious that the per-gram pricing model is being increasingly adopted by retailers (Chart 11). 

The price of a 24K gold jewellery product includes:

• the labour charge 
• the cost of the gold, based on weight and the store’s gold price, which is often higher than the Shanghai Benchmark Gold Price as it includes other expenses such as store rent and brand premium. 

Chart 11: Retailers are increasingly adopting the per-gram pricing model

But nowadays more and more young consumers demand higher pricing transparency. As we mentioned in a previous report, younger consumers tend to research products before making a purchase decision. And vagueness in pricing is exactly what they are trying to avoid. And the per-gram pricing model has the advantage of making costs clear to these customers. 

The industry has made strides towards a healthy and sustainable future by increasing its pricing transparency. Our survey results show that 52% of Hard-Pure gold products are per-gram priced (Chart 12).

Chart 12: More than half of Hard-Pure gold products are sold with clear pricing structures

Looking ahead, 57% of our survey respondents say that they will increase the use of per-gram pricing method to offer consumers more clarity. This is a notable improvement on the 43% recorded in 2021. We believe a transparent price presentation, reasonable labour charges and designs that meet consumer taste will benefit both consumers and retailers.

Chart 13: More and more retailers are increasing transparency in pricing

In our view, offering consumers greater pricing transparency by specifying weight and labour charges is the best way to gain their trust. Various surveys have pointed out that young consumers, driven by self-indulgent consumption, are economical – always practical in purchasing necessities – but at the same time they are openhanded – willing to pay for premium products that suit their tastes.⁸

Has China’s gold jewellery market reached saturation?

Major Chinese gold jewellers have been expanding rapidly over recent years. Based on available data from the annual reports of listed jewellery companies, their point of sales (POS) expansion has averaged 17% per year over the past five years (Chart 14). And the pace remained elevated even during the pandemic, averaging 18% per year between 2020 and 2022.

Chart 14: Chinese jewellers are expanding their point of sales*

As China’s gold jewellery consumption has contracted over recent years, mainly due to the local economic downturn and the pandemic, the question naturally follows: is there still room for expansion? 

The answer is, “limited…but yes” (Chart 15). Survey results show 73% of our respondents believe that their cities already have enough gold jewellery retail stores, or even have too many. But the remaining 27% think there is still room for more.

Chart 15: While the majority believe there is no room for expansion, some disagree

Interestingly, most of the retailers who believe there is still room for more gold jewellery stores are in high-tier cities where competition is fierce. This is likely driven by retailers’ optimistic expectations of economic growth in high-tier cities as well as the fierce competition itself, which constantly weeds out poorly performing shops and leaves opportunities for upcomers. 

Most retailers who plan to expand want to open stores in large commercial complexes (Chart 16). This has been the top choice for retailer expansion in recent years. They know that young consumers are more likely to spend their money and time in commercial complexes with their various entertainment and dining options. 

They also told us that stores between 100m² and 1,000m² are the choice should they decide to expand (Chart 17). But relative to others, retailers from high-tier cities are more likely to open smaller shops (<100m2). We believe this is mainly due to cost, as rent and employee salaries are higher in large cities than in other regions.

Chart 16: Large commercial complexes are the favourite expansion option for retailers

Chart 17: Stores between 100m2 and 1,000m2 are the popular expansion choice