Jewellery Russia JUNWEX Magazine by JUNWEX

J E W E L L E R Y RU S S I A

№ (9) April, 2013

Official REPRESENTATIVE in Russia

m aga zine I

Contest Recognition of St. Petersburg Russian Jewellery Market: Analysis of Customer Behaviour Russian Jewellery Trade Club

me o lc ssia e W o ru t

Ekaterina Chugunova Senior Sales Manager RESTEC JUNWEX Media-Holding

YOUR GATEWAY INTO THE RUSSIAN JEWELLERY MARKET XII International Jewellery Show

XXII International Jewellery Forum

Junwex

JUNWEX

29 May — 2 June, 2013

5–9 February, 2014

New Russian Style All-Russian Exhibition Centre, Moscow

St. Petersburg IX Jewellery Wholesale Trade Fair

Junwex Moscow Junwex Watch

LENEXPO, St. Petersburg

14–18 September, 2013 All-Russian Exhibition Centre, Moscow

Media-Holding RESTEC JUNWEX www.junwex.com

For further information: +7 812 303 98 60 overseas@restec.ru

Necklace GRYOZY (Reveries) KAST Jewellery Factory St. Petersburg, Russia

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.

JUNWEX — Jewellery Russia Magazine is the official media partner of CIBJO (World Jewellery Confederation) in 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 G. Cavalieri, President of CIBJO 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 J. Ribalova, Designer V. Revelisov-Krumer, Project Director L. Lebedeva, Proofreader A. Vasilyeva, Subscription Department A. Andronova, Circulation Department I. Kadzhaya, International Department Manager 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.

Editorial Events

4 6 18 30 40

JUNWEX St. Petersburg Recognition of St. Petersburg Contest JUNWEX Moscow Russian Watch Salon JUNWEX Watch JUNWEX New Russian Style

Jewellery Market

Russian Jewellery Market: Current Situation and Analysis ofÂ Customer Behaviour 26 One Step Forward, Two Steps Back 51 Market Environment Analytics

11 44 48

Golden Hopes of Jewellery Business Where Next for Retail Chains? Production Reacts to Demand

Expert opinion

Jewellery Trade

14 36 38

16 32

Gateway to Russia This Will Happen, You Just Have to Wait! Russians Have Good Taste

Russian Jewellery Trade Club Mysterious Ways of the Jewellery Trade

4 | Events | JUNWEX Magazine

S T . P etersburg The 21st edition of the “JUNWEX St.Petersburg” international jewellery exhibition held recently in the Northern Capital — marking the industry’s first major forum of the year — was the site of serious decision-making and the elaboration of development plans for the immediate future.

Total expo area 26 000 m² Number of exhibitors 639 Number of visitors 40 130

Number of trade visitors 18 932 (10% of whom were attending the exhibition for the first time)

Events

he uncertainty typical of sceptics on the eve of the exhibition was dispelled by the numerous buyers arriving at Lenexpo to take in the city’s favorite jewellery show. “JUNWEX Petersburg” confirms: jewellery shops have a consumer, though stiff competition and the increasingly supply-packed market require new approaches to that buyer. Certainly, the expo’s impressive attendance figures were predicated on the unprecedentedly-broad advertising campaign organised by Media-Holding RESTEC® JUNWEX, encompassing the involvement of almost one hundred exhibitors. Thus, the statistics indicate that there is indeed demand. But is there supply? Of course there is — and not just on the part of domestic enterprises. This time, the Office of the Russian Jewellery Trade Club emerged as the site of meetings with the large delegation of Italian companies that gave presentations of their capabilities for Russian partners. The series of briefs was kicked-off by the company Jewels of Italy, which piqued tremendous interest thanks to its platinum jewellery line. The Giansante brand demonstrated specimens of “soft” bracelets made of metal elastics. Auraria unveiled some luxurious items at a high price point. Energetic business negotiations were held between the Italians and Russia’s major market players on joint cooperation, touching on the most pressing issues of price formation and customs procedures. The business program of “JUNWEX St.Petersburg” also encompasses the presentation of official awards to industry leaders from the Northwest Federal District. The best companies received certificates of distinction from the General Director of RIA RusJewellerExpert, O. Mironova, and

Within the scope of the exhibition, 170 people representing 53 companies from various Russian cities underwent training. the Chairman of the Northwest Jewellers’ Union, A. Gorynya. This year, the honorary guest of the official award ceremony was E. Fensky, Head of the Northwest Inspectorate of the Russian Assay Chamber. This year’s exhibition was particularly abundant in terms of festivities and fantastic gifts. The forum’s event-packed program was capped-off by the official award ceremony for the winners of the XXI National Jewellers’ Competition for the Cultural Capital Prize “Recognition of Petersburg”.

According to admittance-ticket proceeds, onethird more visitors registered at the 2013 expo than last year. Deemed a success was the circulation of complimentary tickets on the official JUNWEX expo website featured on the social networking service vkontakte: roughly 1500 visitors, having already picked out their favorite jewellery pieces from among the new products showcased on the group site, used them to attend the exhibition.

Recognition of St. Petersburg February 9, 2013 the award ceremony brought to an end the work of XXI All-Russian competition for the jewellery industry in the city on the Neva " Recognition of St. Petersburg 2013." 65 companies were involved in the final of the competition, represented by 158 items. Work of the nominees were evaluated by: Galina Kovaleva — Chairman of the jury of the Programme "Jewellery Russia” competitions, the president of the International Fund for Support of jewellers the "Form", Elena Ivanova — fine art expert, head of the department of arts and crafts of the State Russian Museum; 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.

GRAND PRIX

Necklace GRYOZY (Reveries) KAST Jewellery Factory St. Petersburg, Russia

Events

Jury strongly reacted to the choice of nominees, as the result, 48 of 158 products won prizes in 11 categories. When analyzing various materials in presented works, the jury paid attention to the frequent use of colored gemstones by jewellery companies. This season, the color palette used in products have become more intense and diverse, and the combinations more unexpected and delicious. Jewellers began to pay more attention to rare stones. Mixing different facets and dimensions of stones in one product allows you to create totally unexpected design solutions. The jury is not always unanimous in choosing the highest reward, but this time Grand Prix was unanimously awarded by all the members of the Jury to a unique piece of work — a necklace "Necklace GRYOZY (Reveries)", brilliantly executed by jewellers V. Ivanov and S. Sumenkov. Author’s design necklace of V. Chernova is one of the best works of the St. Petersburg School of Design. Diamond and gold lines repeat or cross the wonderful rhythms of agate modules. Nature and man have created a unique graphic motives. Bravo to the management of "Kast" company that provided an opportunity to its employees to create these masterpieces! Bravo to golden hands of masters of St. Petersburg!

Exclusive products with colored stones I place

Sets "Dawn", "Fire extravaganza", "Beethoven" The company "Diamonds of Kostroma" (Kostroma)

I place

Sets Touch me..., La dolce vita, The one, the collection "Marquis" "Master Diamond" company (Kostroma) Author: R. Vasiliev. Goldsmith: Maslov

Ring desing

Classics of XX century II place Collection "P.S. I love you" The company "Miriada" (Kostroma)

II place

I place

Ring with garnet "Facets of perfection" Jewellery House "Alexandrov and Co" (Barnaul)

Diamond rings of incomplete cut from the collection Une Femme Brand "RINGO" (Ekaterinburg) Author: S. Korolev

Earrings "Choice", "Russian Beauty" from the collection of earrings "Russian Fairy Tales" Creative workshop "Dyko" (Kostroma) Author: M. Moklokova Goldsmith: I. Loktionov

II place Set "Beep" from the collection "Russian Patterns" The company "MUZ "Elite" (Moscow)

8 | Events | JUNWEX Magazine

Jewellery experiment I place Collection Paleohit "Workshop of Sahakyan" (Moscow) Author: Saakyan

I place The composition "Him — Her" Jewellery House "Chrysos" St. Petersburg Author: V. Demidov Jewellers: V. Demidov, M. Shilin

The magnificence of jewellery

I place

Big Easter Egg "Presidential Jubilee" Big Easter Egg "Presidential" The company "Three A Gold" St. Petersburg Authors: V. Josan, R. Kachanovsky, M. Ivanov; Jewellers: V. Shvilpo, R. Korolev

I place Dagger "Glimpse" Author: A. Linnik, Artists' Union of Russia St. Petersburg

Fashion trends

I place I place

Branded collection of rings Jewellery House "Chrysos" (St. Petersburg)

Set "Paradigma" Earrings "Dream" Jewellery House "Tulupov" (Ekaterinburg)

Events

Best collection of mass production

I place Collection of items with mother of pearl and diamonds "Romantic elegance" Jewellery Company "Cameo" (Moscow)

I place Collection Bravo ("Bravo") Jewellery Factory "Sanis" St. Petersburg

The best piece of jewellery or a collection of the season I place Set "The Tale of the North" "Simeh" (Yakutsk) Author: G. Mahnachevsky

I place Collections "Lace" and "Ocean" "Rifesta-Holding" (Ekaterinburg)

I place Collection Diamond Jeans "Jewellery House of Kabarovskie" (Kostroma) Author: A. Martynov

Modern historicism I place Set "Bliss" and decoration on a velvet ribbon Author: E. Kostrigina St. Petersburg

10 | Events | JUNWEX Magazine

Religious items

I place The image of Our Lady of Kazan and the Cross "inviolable wall" "Sofia embankment" (Moscow) Authors: N. Sazhina, V.Cherkasov

I place Lamp and icon of St. Nicholas Authors: Dontsova and D. Dontsov (St. Petersburg)

I place Cross chest "Old Believers" and set "Early Christian symbols" "Workshops of Yuri Fedorov" St. Petersburg Author: Y. Fedorov

Jewellery and masonry plastic I place Souvenir "Great Russia" Stand for pens "Quartet" "Academy" (Taganrog) Author: V. Ananich Jewellers: А. Shebankov, O. Zavorin

I place Interior decoration "For her..." St. Petersburg Jewellery Factory "Jewellers of the Northern Capital" (St. Petersburg) Authors: Kabukaev T., G. Grunberg Jewellers: A. Skosogorenko, E. Vaganova

Analytics

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Golden Hopes

of Jewellery Business

Growth in prices for metals has caused ripples on the surface of already troubled waters of jewellery business: whether gold rivers run dry or not, whether silver ones stay as affluent and whether or not the tributaries of platinum or steel dilute them? Within the exhibition "JUNWEX St. Petersburg", Analytical Department of RusJewellerExpert conducted their depth research of jewellery production volumes, as well as established, where most often the owners of jewellery factories moor — the gold or the silver coasts.

y February panic in the market retreated — jewellers calculated last year's expenses, weight risks and went to the exhibition with cautious optimism. More than half the jewellery companies are seeing an increase in the production volume in 2012 — that was the answer of 58.5% of respondents. About a quarter of respondents did not see any change — 27.3%. The decline of was admitted by only 14.2% of the respondents. After the raging financial storm in the fall it would be desirable to believe that the encouraging results show that the market is relatively stable. Unfortunately, the statistics do not provide full transparency: the deep waters of the jewellery market hide many undercurrents. World growth of prices for precious metals does not stop: to replenish their gold reserves jewellery plants have to invest more and more resources. In other words, each new gold ring cost producers more, and profitability is falling rapidly: cost part is now growing faster than sales. The fact that companies continue to boost production, proves good accumulated reserves and sound business strategy, but not of the occurrence of golden time. It is also interesting to trace how and at what items volumes of domestic jewellery production

increased, or rather, which metals Russian jewellery factories prefer. A couple of leaders virtually have no competition: gold and silver jewellery scored 39.6% and 31.2%, respectively. Non-standard solutions were supported by less than 20% — Russian factories are not interested in the development of market of palladium jewellery or steel. But high quality jewellery has got its share of mind — it is referred to 14% of respondents. It draws attention the fact that manufacturers mention an increase of gold range primarily, while an increase in the market silver jewellery has been the main trend of recent years. A similar trend can be noted in the wholesale trade: 36.0% of representatives of retailers reported an increase in sales of gold products, 34.7% — silver. In order to draw the right conclusions from the growth of the production volume of more expensive market segment, it is necessary to consider the problem from different angles.

Silver outlook

How the Russian market of silver jewellery has changed can be measured by the "silver" pavilion at the February exhibition "JUNWEX Petersburg": Things in a small building were humming, and the list of participants in comparison to last year was

12 | Analytics | JUNWEX Magazine

% growth of silver jewellery volume in 2012 compared to 2011

27,3

14,2

% 58,5

increase decrease no change

% growth of jewellery volume in 2012 compared to 2011 gold

6,1

silver

which gave a strong impetus to the development of the silver sector. Appeal to a more democratic metal was not only an effective way, but also very popular, having significantly raised competition among producers of silver. As a result, a fresh solution gradually lost its freshness, which partly explains the slowdown in production volumes. Those who would like to work with silver, has already begun to do so. In turn, increased competition hit the "indigenous" silver market sectors — small business initially specialized in more democratic products. If large companies renew range, repeating their gold collection in silver metal, small firms have to invent more and more new models to stay competitive. Opposing if not the expulsion, then to the pressure from large jewellery factories, many companies are forced to develop new market territories. Some change technology, some are looking themselves in private orders, and others are moving away from silver to more democratic jewellery or even refuse production, switching to wholesale purchases of mainly imported jewellery. These internal market processes do not affect consumer preferences: According to RusJewellerExpert, 36.6% of respondents — visitors of "JUNWEX St. Petersburg" came to buy silver jewellery — it is 12% more than last year. Silver jewellery market remains very promising, although not so easy, what seemed a few years ago.

If you really want ...

14 2 0,7 3,2

39,6

platinum steel palladium

31,2

non-precious metals other

filled with many well-known names. This is not surprising. During the last global crisis, silver has become a lifesaver for many Russian companies,

The situation with gold sector is also difficult. Rising prices for this precious metal is headache for jewellers all over the world, and the international debate on the issue are more like a reception at the district hospital, where patients share medical advices. For example, in a French pharmacy prescription first item are products made of gold lower than 9 K. Due to the small content of the actual gold metal in the alloy — 37.5% French ironically call it "gold of the poor", those who can not longer afford more expensive jewellery, but "if there is a strong wish, it is possible". From 2011 to 2012 the quantity of bought products from gold of 9 K increased from 1,6 million to fantastic 4,1 millions. The French statistics for certain reflects

Analytics

growth of popularity of a gold segment in jeweller counters, however in this case it is impossible to forget that all that glitters isn't gold. Though in Russia gold of 14 K remains the most popular, is undoubted that thoughts of domestic jewellers go in the same direction — towards technological innovations which will allow not to reduce production, but to reduce its cost. The example of chain making jewellery companies is demonstrative: Such large Russian manufacturers as "Adamant", USS, Krastsvetmet actively rely on the promotion of hollow gold chains. There are less grams of gold in these products, so their cost is lower and therefore production is much more profitable. At the last moment of the last year, the first hollow gold ring appeared in Russia — December 12, 2012 Jewellery Factory "Unigold" has issued a patent for the innovation. In the future, the production of rings of hollow form will reduce the weight of the product by 40-50%, which will result in significant cost savings.

Crisis hardening

Having survived the first impact of the global economic crisis, and a few years of financial turmoil and uncertainty, jewellers have established themselves in the thought that the crisis — it is a long time. It is useless to try to sit it out, wait, suffer it through, or do something else with the prefix "re-". It's time to learn to live with it. This means that temporary half-measures are not enough: managers of jewellery plants are ready to bring major changes in the technology and begin to work with other metals, to develop new concepts and advertising strategies — that is, to include the crisis in long term planning. This is confirmed by enhanced collaborative work of enterprises with RusJewellerExpert. The fact that more and more manufacturing companies are thinking in the long term, going beyond the next 5-10 years, is a good indicator of the growing vitality of the market. The times when the jewellery business brought fantastic returns with relatively little investment, have sunk into oblivion, and with them those of a shell companies, which saw the jewellery industry as a way of

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Plan you to pass your business to the descendants? yes

no, it is a risk business

35,6

7,5

42,7

I wish, but the heritors are not interested

early to think about it

10 4,2 other

soft snap and were not prepared for difficulties. Crisis and rapid growth of prices for metals have provided these difficulties: In order to survive in the current environment it is necessary to be literate and multilateral professional with flexibility, creativity, thoughtful and analytical approach, and tempering precious metals, also temper a character. The seriousness of intentions of the Russian producers in relative to the jewellery industry was decided to test asking whether the owners of jewellery companies plan to transfer the business to children? The survey showed that jewellery makers are very serious about their jewellery mission: Almost half of respondents — 42.7% see their name engraved in the eyelids and plan to pass their jewellery business to descendants. Only 4.2% of respondents deprived their children of an inheritance saying that the jewellery business is longer safe. 10% chose "yes, I would, but kids are not interested." A considerable number of respondents were at all outraged by our question: about 7% of the respondents returned the questionnaire, assuring that are not going to die. Such combative mood among the Russian jewellers is the reason to rejoice!

14 | Expert opinion | JUNWEX Magazine

Your Gateway to Russia I

n 2012, reports of a vast quantity of high-quality diamonds resting beneath a Siberian meteorite craterrocked the diamond and jewelleryworld. Such quantities of diamonds, reportedly numbering in the trillions of carats, couldsignificantly alter the world diamond supply — and diamond prices — for years to come. Later it was revealed these meteorite-made diamonds, while twice as hard as normal diamonds, are not of gemstone grade and, therefore, would have little impact on the diamond market, and this forecast is proving true. Despite uncertain worldwide economic conditions, retail sales of diamond jewelleryin 2012 reached a new high, growing 18 percent from 2010. Given the demand for diamond jewellery, it is no wonder trade shows such as JUNWEX St. PETERSBURG, held annually in St. Petersburg, attract a wide audience. In 2012, nearly 50,000 visitors attended JUNWEX St.PETERSBURG, one of more than 100 diamond andjewellery trade shows that take place each year across the globe and one of five international jewellery shows produced by RESTEC JUNWEX throughout Russia. These showsdraw suppliers, dealers, retailers and others from around the world who want to grow their businesses and explore new opportunities in the Russian jewellery market.

Your Gateway to Russia

One of the most promising markets for diamond jewellery is Russia, an area traditionally considered a logistical challenge for trade show exhibitors. “Some people have the impression that exhibiting in Russia is too complex,” says Anastasia Senotrusova, who heads Brink’s customer service department in Russia. “While there are unique regulatory factors to consider, there are ways to work within these requirements to penetrate a new market that is virtually untapped by foreign companies; a market hungry for new designs and new suppliers.” One of the ways exhibitors can take part in the country’s lucrative diamond

and jewellery business is to work with secure logistics experts such as Brink’s to help them navigate the complexities of exhibiting in Russian diamond and jewellery shows. “Brink’s Global Services pioneered secure trade show service for the diamond and jewellery industries,” explains Senotrusova. “Brink’s is a certified member of the C-TPAT program, a joint government business initiative to build co-operative relationships that strengthen overall supply chain and border security.” The benefits of working with Brink’s Russia are many. First, members of the C-TPAT, or Customs Trade Partnership Against Terrorism, program receive a reduced number of inspections, which results in shorter border times, an assigned account manager, access to the C-TPAT membership list and an emphasis on self-policing. Further, Brink’s knows the process. Leveraging decades of experience and knowledge of customs regulations and requirements worldwide, Brink’s can help exhibitors with a variety of trade show services, from door-to-door secure pick-up and delivery and on-site security at the show to trade show insurance and overnight secure storage. “Foreign exhibitors may be confused by the ATA Carnet, the customs process that governs temporary importation of goods for exhibition purposes,” adds Senotrusova. “Although Carnet prohibits exhibitors from selling their goods at shows in Russia, Brink’s makes bringing goods into the country for trade shows seamless so potential buyers can feel and touch real goods — an important step in building long-term relationships, finding new business partners and signing contracts.” Another benefit to using Brink’s as your gateway to Russia is trade show support. Brink’s staff members are always on-site, usually at a Brink’s booth, to explain and help with emerging issues and offer advice to customers. “There’s no substitute for experience, and Brink’s has the diamond and jewellery experience to make exhibiting at Russian trade shows a simple decision,” says Senotrusova. “The opportunity is tremendous, the market is ripe for new and exclusive jewellery designs and, with Brink’s, the challenges of bringing trade show goods into the country are virtually eliminated.”

Expert opinion

Planning on exhibiting at upcoming diamond and jewellery shows in Russia contact Brinkâ&#x20AC;&#x2122;s. AÂ qualified trade show expert will help you through the customs process and serve as your gateway to the Russian market which hosts exciting opportunities for those in the diamond and jewellery business.

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e-mail: import@brinks.ru Tel: +7-495-234-08-74 Fax: +7-495-775-62-52

16 | 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

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 dealers

Jewellery Trade

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From January to March, 2013 over three hundred owners of "gold" cards and about a hundred owners of "platinum" cards obtained re-accreditation in the Club. 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. Jewellery salon GOLD, SP, Voloshina N. P. (Lesnoy) 2. Network of stores "Russian gold", SP Fedorenko A. V. (Protvino) 3. Network of shops "Yuvelirtorg", JSC "Yuvelirtorg" (St. Petersburg) 4. Jewellery House "Crystal" (Lipetsk) 5. Network of salons "Golden Alliance", SP Nazarova O. V. (Volgograd) 6. Network of shops "Ruby", SP Onishchenko N. A. (Stavropol) 7. TH "Golden Rus", SP Shevelev E. K. (Khabarovsk) 8. Network of shops "Zolotnik", LLC "Triton" (Yakutsk) 9. Network of shops "Sapphire", SP Soboleva L. V., (Ulan-Ude) 10. Network of shops "Precious Orchid", SP Shvetsova L. A. (Perm) 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

18 | Events | JUNWEX Magazine

M o s c ow

2012

Exhibition area

37 710 m2 Number 715 companies of exhibitors Total number of visitors

39 347 people 17 961 people

Number of trade visitors

Events

| 19

“J

UNWEX Moscow 2012” has tallied the results of its annual JEWELLERY RUSSIA Programme, setting the trajectory for future industry growth. Participation in the exhibition represents a key event for market players, demanding their concerted mobilization of all available resources. Aside from the commercial tasks that were quickly addressed by the many exhibitors and invited trade specialists during the first days of the expo’s work, important factors determining the success of today’s business include open professional communication, the discussion of pressing issues, and the formulation of a strategy for ongoing cooperation within the retail-supplier system. The attendance of trade representatives from different Russian regions is the most objective indicator of the current market climate: where there’s demand for precious jewellery, the retail sector tends to activate. In this connection, it was particularly heartening to see some new faces at the exhibition: this time, the proverbial address book of the Russian Jewellery Trade Club was augmented with the contact information of almost four hundred separate companies. A key role in attracting regional market players to the federal projects implemented under the JEWELLERY RUSSIA Programme, as well as in improving the operating standards of individual jewellery stores located in the country’s most far-flung corners, is played by the Club’s representative offices. It would be difficult to overstate, for example, the activities conducted by the Ural branch headed by N. Lysko. The results of this work were showcased by the expo’s now-traditional Ekaterinburg Jewellers’ Day. Participants of the roundtable devoted to the particular nuances of Far East trade advanced an initiative geared towards facilitating the more convenient coordination of regional chains via relocation of the Club’s Far East representative office from Yakutsk to Vladivostok, with office operations headed by N. Tkachenko. Worthy of increasing recognition is the Club’s international activity, namely the “Business & Leisure” programme. The members of the Russian delegation, who were travelling to the Hong Kong International Jewellery Show and had gathered at the Club Office to discuss issues related to the upcoming trip, were greeted by СIBJO President G. Cavalieri.

20 | Events | JUNWEX Magazine

Alexei Shamaev,” CJSC Rubin (Volgograd): “As a gemmologist, it’s extremely important for me to constantly improve my knowledge in order to meet the highest professional standards, and the seminars put on by the Learning Center, particularly those organised in conjunction with leading international institutions, help me to gain a well-rounded understanding of the principles behind the appraisal of jewellery pieces. I was also attracted by the opportunity to earn an IGI Diamond Grader certificate, which significantly boosts the market value of the industry specialist. The classes fully lived up to my expectations. It was interesting to compare the Russian and European work systems: our Western colleagues stand out for their deeply-professional, even pedantic approach to diamond certification. What’s more, I learned a lot about the modern equipment that our Western counterparts have been working with longer than we have.”

The business programme of “JUNWEX Moscow 2012” included events prepared by the organisers and exhibitors alike. The conference entitled “The Jewellery Industry: Marketing, Competitiveness” served as the platform for a discussion of issues related to the current state of the market. Production Alliance Kristall hosted not only a press conference with the enterprise’s General Director and Chairman of the Board of the Russian Association of Diamond Producers M. Shkadov, but also

Nadezhda Tkacheno, Mineral-1 (Vladivostok): “I regularly take part in the seminars offered by the JUNWEX Learning Center, and have always been happy with the results. The issue of training frontline staff who directly interact with clients is particularly relevant to companies based in the outer regions. Such classes make it possible to more effectively pass on practical experience to local employees and elevate the overall professional level of workers in the jewellery-sales industry. Complex theoretical material is presented in a highly-accessible form and augmented with vivid and memorable examples.”

a practical seminar in conjunction with Smolensk Diamonds, devoted to the situation in the diamond sector. The Gemmology Center at Moscow State University organised a seminar entitled “Treating Precious Stones,” while the Moscow Gemmological Center at the Russian State Assay Chamber arranged a presentation called “Reliable Assay-Chamber Certificate = Consumer Confidence.” Timed to coincide with expo work were regularly-scheduled meetings of the Board of the Jewellers’ Guild of Volga-Vyatka Region and the Public Expert Council of Federal Public Institution “Assay Chamber of Russia at the Russian Ministry of Finance” on the issue of “Strategic Objectives for Development of the Jewellery Industry.” A presentation was held by “ДГТС.РУ” (Certified Diamonds & Gemstones Auction) — Russia’s first specialised Internet trading platform for the sale and purchase of certified diamonds, as well as other cut precious and jewellery stones. In terms of its importance to the Russian market for diamonds and precious stones, this young yet ambitious project is comparable to Diamond Dealers Automated Exchange (DIAMDAX). BigSoft hosted a complimentary information seminar entitled “Automation and Improving Sales Effectiveness.” Aquamarin, in keeping with its charted course, once again awarded its best partners with valuable prizes. The St. Petersburg-based factory Russkiye Samotsvety organised a centennial. Prominent art historian and Senior Research Associate at the State Hermitage O. Kostyuk introduced the expo’s participants and guests to the best traditions of K. Faberge, which have found their continuation in the artistry of the reknowned enterprise’s distinguished masters. Retail buyers visiting the company’s booth were treated to a daily trivia contest held under the banner “Win a Prize for Being Brand-Wise.” The September session of the JUNWEX Learning Center also stood out for its phenomenal depth and variety.

Events

The thematic range of seminars, training sessions and master classes encompassed issues related to visual merchandising and the nuances of working with VIP clients, financial monitoring and interacting with different oversight agencies, conflict management and the relative effectiveness of wholesale instruments, competition between small shops and major retail chains, and counteracting consumer extremism. The heightened interest of the audience was captured by the special intensive course “Diamond Diagnostics,” organised jointly by the Learning Center and the International Gemological Institute (IGI), at the end of which participants received the official certificate IGI Diamond Grader. Yet another fine tradition of the expo is Technologist’s Day. The events devoted to advanced innovation processes in the field of jewellery production gathered a broad range of interested participants at the Business Center of Pavilion № 69. Artistry is an integral part of the jewellery industry. The most recent installation of the competition entitled “Russia’s Best Jewellery” did more than simply affirm the outstanding level of execution mastery and sublime artistic taste of recognized maestros of the jewellery arts — it introduced many new and talented names as well. The official award

ceremony of the competition struck the final note in the successful work of “JUNWEX Moscow 2012.” The analysis of “JUNWEX Moscow 2012” results and market monitoring conducted by RIA RusJewellerExpert is thus far insufficient to allow for a conclusion that the industry has finally emerged from the crisis. Yet, according to the objective evaluation expressed by the majority of expo participants and guests, “JUNWEX Moscow”

| 21

Jean-Mathieu Mangnay, Senior Instructor, IGI, Belgium: “We are constantly expanding the Institute’s sphere of activity, and place particular emphasis on the holding of courses and seminars throughout the world, insofar as today, more and more people are interested in improving their professional level in the area of gemology. The primary objective of the three-day classes held within the framework of “JUNWEX Moscow 2012” is to give Russian jewellers an understanding of our system of appraising diamonds and the basic principles of working with them. This represents a new operational format for us, and thanks to the exhibition’s fine organisation, we were able to achieve significant success.” Vyacheslav Darvin, Darvin Jewellery House (Kaliningrad): “Our company is planning to start producing diamond pieces next year, which is why I immediately responded to the Learning Center’s invitation to take part in its gemological seminars. In order to speak the same language in dealings with industry professionals, it’s important to immerse yourself in the material and study the specifics of working with diamonds. I think I got the most out of the time that I spent at the expo. The classes that I attended, where theory was augmented with practical work, introduced me to a new and fascinating world — one where I felt quite at home, despite the fact that I was not a professional gemmologist. I was able to quickly and easily absorb even the most complicated concepts thanks to repeated practical exercises. The predictable difficulties in the translation of specific jewellery terminology turned out to be quite manageable: the services of the standby interpreter quickly became obsolete during the first lesson. As concerns the instructor, I was completely dazzled by him. I’ve studied a lot in my life, so I’m in a good position to evaluate the methodological level of instruction. Jean-Mathieu Mangnay is a fantastic teacher, and I’m very glad that I participated in the training.”

was an indicator of the positive growth dynamic of the jewellery industry as a whole. As indicated by one exhibitor, the exhibition demonstrated the converse law of the dialectic — the “shift of quantity to quality”: whereas in recent years, less was bought at a higher price point, quality is now gradually shifting to quantity, the number of consumers is steadily climbing, and the cost of the pieces they’re buying isn’t falling!

22 | Jewellery Market | JUNWEX Magazine

Russian Jewellery Market: current situation and analysis of customer behavior This market analysis was conducted by RusJewellerExpert on the basis ofÂ polls and research done within the framework of the exhibition JUNWEX Moscow-2012, Quarterly Reports of the Assay Chamber of the Russian Federation and the Federal State Statistics Service, as well as materials prepared by Executive Director of the Step by Step agency Olga Timofeicheva for the Conference Jewellery industry. Marketing. Competitiveness.'

efore 2007, the jewellery market was one of the fastest growing markets in Russia, with its annual growth up to 30%. The situation changed in 2008. First decline in turnover was not significant, but in 2009 the volume of production decreased by 15%, mainly affecting the gold jewellery sector, where the drop was 40%. A marked increase in production of goldware began only in 2012.

Jewellery of what kind of metal you prefer? Non-precious metals Platinum Silver Red gold Gold White gold 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

According to the Federal State Statistics Service, in 2011 they sold 20% more jewellery than in the previous 2010, but this is in money terms, solely due to increase in metal prices. At the same time, the Assay Chamber registered a decrease in the total number of manufactured products by 9%, which in weight terms means a 16% decrease in the volume of production. Moreover, these figures were mainly due to the changes in the sector of silver products, while gold positions declined little â&#x20AC;&#x201D; both by weight and by number of pieces sold. During these years, only production of palladium increased: the volume of production in 2012 was 2 times more than in 2008. Jewellery does not belong to the category of urgent products and is not a part of consumer goods basket of the average Russian. Demand for jewellery to a large extent depends on income, rate of unemployment and consumer activity. Reduction of income during the crisis and entry into the Russian market by global fashion market retailers have led to the fact that the jewellery market came into a headon competition with the imitation jewellery

Jewellery Market

market. Before jewellery was considered to be a good investment, now it only plays the role of accessories. Products of yellow gold 585° and silver 925° are most popular jewels in Russia. People in Moscow prefer white gold jewellery (according to poll conducted within the framework of exhibition JUNWEX Moscow-2012). In regions, they still prefer products made of red gold (according to the data from Russian Jewellery Trade Club). As for the range of products, the bulk of the market is occupied by jewellery without stones: their aggregate share is 41%. The aggregate share of products with stones is 37%; with most of them are jewels with semiprecious stones, followed by products with precious stones, while diamond group products make up only 3% of the total. A significant part is chains and bracelets — both in terms of production volume and demand from end customers. According to surveys of Club members from different regions of Russia, the dominant positions in the modern market of jewellery are low and low/ medium price segments; the share of high-price and luxury segments is about 15 — 20% of the total industry production. For categories of jewellery, the ranking is as follows: rings and earrings are still the leaders, bought by 45% and 41% of customers respectively. Necklaces and pendants (30%) and chains (28%) are less popular. 14% of respondents prefer bracelets. The study of demand revealed a growing demand for men's jewellery: cuff links, tie clips, watches, and business accessories. However, sales in this segment certainly cannot compare to the sales volumes of women's jewellery. On a geographical basis, there are two groups of customer audience: metropolitan and regional customers. People in Russian province usually buy stock-produced articles. These are people with average income and traditional preferences. Fortunately, they mostly rely on products of Russian jewellery factories. Mass-market customer mostly likes lightweight casting products

| 23

(2.5 to 5 g earrings, rings, necklaces, pendants, and chains). The second group consists of those whose income is sufficient to evaluate not only the metal the jewellery is made of, but also the brand and exclusivity of products. These people more often choose to buy imported products.

Rating of customer’s preferences (by product groups) 9

Chains

Bracelets Pendants Earrings

Rings

Breakdown of retail sales in districts of Russia Far Eastern Federal District

6 11

North Caucasian Federal District Northwestern Federal District Siberian Federal District Volga Federal District Southern Federal District

8 8

Urals Federal District Central Federal District

24 | Jewellery Market | JUNWEX Magazine

Age of buyers 10

4 22

20–30 years

Under 20 years 30–40 years 40–50 years Over 50 years

Recently, the age of the customer audience have changed. If seven years ago the main customers of jewellery stores were mature people over 45, today the age limit is lower. According to polls conducted in Moscow, this year the number of buyers aged 20 to 30 years decreased to 22%, and the number of buyers aged 30 to 40 years increased to 31%; most solvent customers are 40 to 50 years old (33%). Survey taken by the Federal State Statistics Service has shown a slightly different situation: 34% are young people aged 20 to 24 years; 29% are customers aged 25 to 34 years. Today's product mix in jewellery stores is meant for all ages of clients ranging from birth (a baptismal cross) to infinity! But most buyers are people aged 20 to 50 years (86%).

How often visitors What is the average sum of your purchases of exhibitions go to jewellery shops during exhibition 11

4 15

Under 1000 roubles

Under 5000 roubles 19

% 22

Under 10 000 roubles Under 30 000 roubles

Under 50 000 roubles

Over 50 000 roubles

26 Once per month Once in 2–3 months Once in 6 months Once per year Once per several years

Jewellery Market

All this testifies that the audience is getting younger, and the current generation is much spoiled with a variety of attractive offers by brands in other consumer goods markets. They receive excellent service, bonuses, constant updating of range by players in other markets, and increase their demand. And we can only adapt to their desire. Market specialists call buying jewellery a "low-frequency purchase". Thus, more than 50% of customers buy jewellery once a year or less. According to surveys of JUNWEX visitors who certainly are the most loyal to this product, the picture is somewhat more optimistic. An important factor in the industry retail sales is a high degree of seasonality of interest to the jewellery; the demand is high in pre-holiday days: New Year's eve — Christmas and February 14 — March 8. These periods account for 80% of annual sales. Traditionally, the lowest sales rates are in summer. Jewellery market is a classic special case of the "market of emotions". Marketing Agency Step by Step offers classifying jewellery buyers by their motivations. According to RusJewellerExpert, design of jewellery is critical for 65% of customers. Almost 55% of buyers, both women and men, pay much attention to price and workmanship. According to marketing experts, main factors affecting the client's choice of jewellery store include: • Location; • Wide range of products; • Quality of products; • Promotional events/discounts available. Jewellery trade loses to many other segments of consumer goods market for strength and frequency of impact on a potential customer audience. Manufacturers are reluctant to spend money on advertising their products. Promoting jewellery is mainly done by retailers. All sorts of promotions and discounts are widely occurring in the retail jewellery market. The technique of "discount" is well accepted by customers and gives retailers the opportunity to increase sales several times during the campaign.

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What influences on your choice when buying jewellery? Desire to invest Preparations for engagement, wedding Necessity of making a present Giving a present to the relative Desire for which I’ll try to find money Availability of free money 10% 20% 30% 40% 50%

On what do you pay your attention first of all? Actuality Design Popularity of the brand Quality Price 20%

40%

60%

80%

100%

26 | Jewellery Market | JUNWEX Magazine

One Step Forward,

Two Steps Back

A lot of things were expected of the year 2012 — an economic growth, a leap in price of resources, an Internet revolution and a second wave of crisis, a design breakthrough and a jewellery market restructuring after Russia's WTO accession. Most expectations were not realized: through the last winter, spring and summer the industry business was "put on hold", with a fragile balance maintained. The recent years have taught Russian jewellers to save money and energy, to exercise extreme caution and prudence, and to choose proven promotion and advertising patterns. This strategy helped to overcome the crisis, but did not lay basis for the future — jewellers continued to wait for better times but in the end got a sharp drop of sales last fall. Much ado about the WTO

One of the main amusements for industry analysts last year was guessing about the fate of domestic jewellery business after Russia's WTO accession. Someone was preparing for emergence of new competitors, and someone — for increase in the cost of retail space. However, many experts were sceptical about chances of success of Western companies in the unfamiliar Russian market. The most simple and obvious promotion pattern for foreign jewellers is to find an authorized distributor who is familiar with the local context. This promotion pattern has already been successfully tested in Russia by many foreign brands. Last August Russia finally became a member of the WTO, but pulse of the jewellery market remained equable. Perhaps the change is expected in the following years, but now it is safe to say one thing — no revolution in the market is going to happen.

In first half of 2012, domestic jewellery business, in general, felt great security seeing no threats. According to a survey traditionally taken by RusJewellerExpert in the JUNWEX exhibitions, most manufacturing companies have found a way to restructure their work during the crisis given the prevailing circumstances. 36% of companies said the crisis had not had any material impact on them. Only 6% of manufacturers said they had been fighting to come through the adverse changes in the market. The biggest threat for jewellers was seen in the growing raw material price — according to 50.4% of respondents. 42.2% were afraid of a decline in customer solvency, and 35.6% were afraid of a drop in demand for jewellery. The fears were not idle: customers did not have more money by the end of the year, and the demand fell. And the customers themselves were seeing in 2012 with a fair share of pessimism. 45% of respondents asked by RusJewellerExpert were

Jewellery Market

preparing for deterioration of their financial situation. 25% were going to save money, and 13% â&#x20AC;&#x201D; to invest in real estate. In both cases, jewellery stores were outside the financial interests of customers. A huge proportion of spending was pulled away by loans that are becoming increasingly popular.

How did your company survive in crisis?

Credit history

According to Sberbank statistics, this year retail credit facilities increased by 41.6% as compared to 2011. According to PF Ministry of Economic Development and Trade, spending on apartments increased by 22%, but they also need cars and summer residences; and foreign affordable resorts are beckoning! Living on credit being well-proven overseas draws people into a long-term financial slavery, and there is no place for luxury and jewellery. Generational change among visitors of jewellery stores can only add to the problem: loans are more necessary and appropriate for young people, while jewellery products are not promoted to young audiences as desirable and attractive products. According to RusJewellerExpert survey, the "mass consumer segment" gave under the mostÂ â&#x20AC;&#x201D; 88.4% of respondents pointed out falling-off in sales. This blow was particularly painful for the companies: if demand for mid price and luxury jewellery for the past few years had been consistently low, it was the expensive jewellery that helped the producers to stay afloat in crisis. Though the situation looked quite predictable, industry players were not ready to fight for customers who can afford to buy jewellery in theory.

Who is going to pay for the lack of payment?

Customer behaviour has changed over the past year: 77.6% of professional respondents said the customer became more exacting. When assessing jewellery stores by a five-grade scale, as a key buying factor, a good service was identified by most customers (over 90%); less customers (over 80%) mentioned a wide range of products

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18 6

% 36

adopted to new conditions without any problems heavily still struggling worst is still to come other

Most actual problems for you in 2012? Lack of employess Bureaucratic barriers High taxes Lack of operating assets Low purchasing capacity Possibility of the second crisis wave Growth of prices for raw materials Decline in demand 0%

10%

20%

30%

40%

50%

28 | Jewellery Market | JUNWEX Magazine

Monitoring of labor market – mood of the buyers 13

Waiting for deteriorating of situation

Saving money Looking for a new job in case of redundancies Invest money into real estate

Mass product sales in autumn 2012 8

4 decreased

increased stable

88 Do you agree that branded product can be sold for a higher price? 10

Yes

% 88

and (over 70%) a high-quality advice; while for over 60% of customers, atmosphere in the store was the bottom line. All this feedback relates to the level of service — the Achilles' heel of the Russian trade. But if more and more selling companies are ready to trade to put vases of flowers and air fresheners in the display area, or bring up adequate staff, the most relevant request of the customer — to get detailed information — often remains unsatisfied due to poor training of salespersons. Only the best of the best trade managers during the year paid attention to sales staff development. And this is only 9% of jewellery retailers, an order less than, for example, for makeup retailers.

On the prospects of advertising

The jewellery business cannot be accused of a total blindness: about 61% of specialist respondents from Russian Jewellery Trade Club said this year the customer has become more responsive to advertising. Manufacturers support retail: 88% of factory representatives were convinced that branded goods would be sold better than products that were not advertised or promoted. However, there is a huge gap between the theory and practical steps. When asked about promotion techniques manufacturing companies apply to their brands, the vast majority of respondents (76.1%) said it was a discount policy. Undoubtedly, price is a key issue in any business relationships, but even a substantial discount would not solve all the problems. Another poll was very illustrative; factory representatives were asked to name employees that were most important for the company, in their opinion. Maximum number of votes were cast Operations Manager — 73%, while for Sales Manager — only 23.2%. Last places of the ranking draw a special attention: Marketing Consultant (9.6%) and Promotion Manager (3%) were outsiders. This explains lack of demand for training programmes proposed by RusJewellerExpert for this specialist category. Most believe that only salespersons should be trained.

Jewellery Market

Advertising activity in brand promotion of businesses fell 30%: if in late 2011, 48% of respondents planed allocating more resources to brand promotion, in practice only 21% of respondents increased their advertising budgets. Consequently, most magazines have lost their frequencies and reduced their rather small numbers of copies to a minimum, and if someone is still alive, this is only through random donations. Advertising is a spot advertising now. There is enough money only for those magazines that are directly related to exhibitions collecting the most likely buyers. Only exhibitions and some good players can create an advertising background to maintain the positive image of a jewellery gift. The quality of advertising is also doubtful: one-time infusions of money are often just as ineffective as the complete lack of investment in the promotion, since the problem of advertising campaign is not only to create a set of associations in the head of a buyer, but also to make the brand recognizable, popular and widely promoted. Having assessed the advertising activity of factories in the context of falling demand and strengthening fight for customers, RusJewellerExpert through the Club Secretariat recommended members of the trading community as anti-crisis measure to pay attention to products of factories with most recognizable brands.

Crisis of ideas

When describing most important personal qualities of a successful manager, representatives of the jewellery industry were unanimous in their passion: the top three was hit by "professionalism", "strategic thinking" and "the ability to create a team", while fewer votes were cast for "creativity" (10.6% of manufacturers, and 4.5% of retailers). Unfortunately, for most business people, the term "creativity" still means drawing red horses on easels at the week-end, and not search for fresh unconventional solutions. Meanwhile, the modern jewellery market lacks noticeably innovative marketing ideas. Restraint, fearfulness and tunnel thinking of most part of the jewellery community can be seen

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Who is the key employee in your company? Head of sales department Chief accountant Head of production CFO Marketologist Designer Jeweller 0%

20%

40%

60%

80%

Marketing and promotion budget for this year

Increased Decreased 20

in all areas â&#x20AC;&#x201D; from product design to brand policy. Customer feels this uncertainty unerringly, once he or she steps over the threshold of jewellery store. And then the customer makes the conclusion. Assay Chamber of the Russian Federation in 2012 noted import growth: for gold by 2%, and for silver by 2.3%. This means, our customers do have money for jewellery â&#x20AC;&#x201D; and we must fight for it.

Stable

30 | Events | JUNWEX Magazine

Union of watchmakers and jewellers

or the third year together with the largest jewellery wholesale trade fair “JUNWEX Moscow” a watch salon "JUNWEX WATCH" will be held. According to the participants, the exhibition "JUNWEX WATCH" has proved itself as the best place to work with wholesalers, of both watch, and jewellery. Russian watch salon "JUNWEX WATCH" is a professional exhibition, which lasts less than a week and works on the development of the hour business 365 days a year. Due to the implementation of two exhibitionsin at the same time and on the same site at once, trade representatives fill up

assortment in their watch and jewellery salons, shops and networks. The leading Russian manufacturers of watches, as well as distributors and wholesale trade leaders on the watch market participate in the III Russian watch salon "JUNWEX WATCH" : Time & Technologies, Watch Company Romanoff, watch company "Polet-Chronos", Sky Time the Office of the Time Club, Sky Time Office "UTAH", the Trading House "Polet", the Chic & Sauvage, the Trading House "Slava", the Slim Group, OPTIM, TBN TIME, "Business and watch", "Polet Classics" (Denisov), "The Storm", "North Watch Company", Wencia, OOZOO, SH "NIKA", "Inter-Chas", "Chronoluxe", "Maktime", "Anlina"," West Alpha", Fantesso and others. The exhibition presents the following watch brands: Adriatica, Aerowatch, Aigner, Anne Klein, Appella, Bruno Sohnle Glashutte i.SA, Bulova, CASIO, Charm, Christina Design, Chronotech, Citizen, Clyda, Continental, Cover, D&G, ECCO, Edox, Elite, ElleTime, Epos, Essence, FREELOOK, Gc, GL, Guess, Hermle, Hip Hop, Hugo Boos, Ingersoll, Jacques Bogart, John Galliano, Jеnnifer Lopez, Just Cavalli, Kolber, Lancaster, Le Chic, Morgan, Moschino, Nautica, Nina Ricci, OOZOO, OPEX, Orient, Paris Hilton, Philip Lourence, Philip Watch, Pilot Time, Police, PRIOSA, Petroff, RG512, Roberto Cavalli, Rodania, Romanoff, Romanson, Salvatore Ferragamo, Sauvage, Sector, Skagen, Storm, Ted Lapidus, Tempus, Timex, Versace, Victorinox, Wencia, "Denisov", "Derzhava", "Nika", "Polet", "President", "Russian Time", "RFC", "Senator", "Slava", "Specnaz", "USSR" Status of a leading industry business event in the watch community firmly become permanent for the exhibition "JUNWEX WATCH" due to the high level of its organization, which meets all European exhibition standards. That is, the union of watchmakers and jewellers has already taken place. And the success of the alliance is confirmed with the commercial results of exhibitors.

Russian Jewellery Trade Club

Russian Watch Salon 14–18 September 2013 together with JUNWEX Moscow Jewellery Show

Circulation: 7000 copies Volume: 80 pages Frequency: 6 issues per year Distribution: • among members and partners of Russian Jewellery Trade Club • among the registered trade visitors, attending any event of Exhibition Program «Jewellery Russia» • through channels of partners of Publishing House «Jewellery Russia»

For further information and participation conditions please visit our website — www.junwex-watch.ru For space reservation please call +7 812 303 98 60 or e-mail: watch@restec.ru To attend please call +7 812 235 83 83, +7 812 320 93 11 or e-mail: info@jewellerclub.ru For advertisments please call +7 812 303 98 60 or e-mail: watch@restec.ru

Media-Holding RESTEC JUNWEX | www.junwex.com

32 | Jewellery Trade | JUNWEX Magazine

Mysterious Ways

of the Jewellery Trade

Everyone wants to start New year with a change: in 2013 some will launch a new collection, while others will buy 3D-printer, and some will hold a drawing among customers, when a fourth will ripe to expand to new market space. Which way should the retailer turn on a broad Russian crossroads so that the horse was safe, and he would find his destiny?

he overall growth in retail sales in 2012 increased by 8%, which barely allows to keep abreast of inflation. In comparison, not the most harvest 2011 brought a 16% retail growth — twice more reasons for optimism than in the current season. Lack of data for the last three months allows to determine the results as preliminary. It is not clear what they precede. In theory, the average

Growth of retail sales in money equivalent

2012 year

2011 year

2010 year

monthly figure could be pulled by Christmas sales, but jewellers speak about them with such sadness that inadvertently the question raises "Was there a boy?". Let us remind that not included in rankings October and November were the most disastrous period in a long time for the industry market. Although there are enough reasons for pessimism, the majority of trade representatives are set to carefully analyze the situation, to choose a strategy of movement. The time for standard solutions has passed long ago : to increase sales and simply to survive in business, you need to look for new moves. For example, to open new markets. For many, the proven choice is a Central Federal District: According to statistics of Rosstat, the largest percentage of retail sales (31%) occurs in Central Russia. A huge piece of the pie belongs to Moscow: it is 39% of the city and 3% of the Moscow region. While the capital shows robust growth in 13%, CFD in general shows a decline in sales by 2% compared to last year. Good results are here in Voronezh and Belgorod regions — by 33%, while other regions remain almost at the old rates of sale or with worse results. The most promising trend in 2012 was the North: North-West Federal District showed maximum thrust in 23%. In St. Petersburg, products of precious metals were sold for 33% more than last year — in terms of sales of jewellery

Jewellery Trade

Northern Capital has demonstrated more impressive results than the official capital. A 30% increase in retail sales occurred in the Republic of Komi, and by 19% — in Kaliningrad. Polar Murmansk was an outsider here, where sales fell by 5%: expectations of the "gas" money from the development of the Shtokman field again were not met, so the interest in the High North has significantly fallen. As a result, sales of jewellery in the Murmansk region are down together with falling fish trade, which has long been the economic base of the region. Ural and Siberian Federal districts emit moderate optimism. The proportion of the total number of retail sales increased in eastern Russia to 12%. In Siberia, the best performance was in Irkutsk (8% growth) and Novosibirsk regions (4%), in the Urals — the Sverdlovsk region (60%). At the general black background it is really record figure — eloquent testimony of effective influence of the exhibition "JUNWEX Ekaterinburg" to a prompt supply of stores in the region for new jewellery production. In 2012, the next stage of development of the project "JUNWEX Ekaterinburg", added to the "Jewellery Russia" program, opened new vistas for media holding "RESTEC JUNWEX». In the result of consultation with leading players and interviews with industry experts Organizing Committee has decided to hold another — spring exhibition in Ekaterinburg from 11 to April 14, 2013 The participants of the November exhibition noted urgent need to communicate with regional wholesalers for efficient and stable operation of the local jewellery chains. Taking into account the prospects of the region, this step seems logical and correct. The new exhibition will complement the November one, providing cyclical delivery at the local level and the ability for wholesalers to complement the range in anticipation of the summer season. According to estimates of RusJewellerExpert, sufficient supplies of products can provide (among enterprises of the region) at least eighty known in the industry plants, a list of which is planned by the Organizing Committee. Their mission is to offer to retail traditional assortment of jewellery and novelties,

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Retail sales ratio in different regions of Russia 5% 11%

31%

11% 8% 12%

11% 11%

Central Federal District Far Eastern Federal District Siberian Federal District Ural Federal District North Caucasian Federal District South Federal District Volga Federal District North-West Federal District

activating the spring-summer trade. In the period between exhibitions prompt delivery is to be provided by the main wholesaler in the region — the company "Gold standard", on the basis of which the representation of the "Russian Jewellery Trade" Club works. This scheme is tested and completely proved its value in previous years. The April show is an addition to the existing supply chain, the need for which was confirmed by the experiment itself, and exhibitors — suppliers of jewellery collections in the region. Experience in supporting the formation of a large wholesaler, received in Ekaterinburg, will be used by the Club in planning the new steps of development to the East — in Novosibirsk and Vladivostok, which will allow full use of the potential of these areas and will have a positive effect on the growth of retail sales. Although the share of the North Caucasian Federal District in relation to sales across the country rose from 8% to 9% growth in the region slowed — especially after the decline in sales in Dagestan. Unfavorable political and economic situation affects not in the best way here: for 2012, the volume of retail sales fell by 5%. Trade by precious products in Karachaevo-Cherkessia and Chechnya also significantly declined, but the Stavropol territory begins to play increasingly important role in the district, the amount of sales of which grew by 30%.

34 | Jewellery Trade | JUNWEX Magazine

Change in retail sales in 2012 (in comparison with 2011) 2011 year 2012 year

Responding quickly to the situation, calculated by RusJewellerExpert, the "Russian Jewellery Trade" Club has also decided to use in the region successful experience of increasing sales and development of local market, obtained in Ekaterinburg. These measures are aimed at unification of interests of jewellery business in the post-recovery space, restoration of business links between the players considering new market realities.

Economic ties

Central North-West Volga South North Caucasian Ural Siberian Far Eastern Federal District Federal District Federal District Federal District Federal District Federal District Federal District Federal District

The drop in sales in the Caucasian republics is unpleasant factor, since jewellery traditions are strong right here: jewellery is still the main indicator of status and wealth, and a significant part of the population is involved in the jewellery business. The example of Adygea may serve as indirect confirmation of the fact that the interest to the jewellery is constrained by only adverse political conditions, although it formally belongs to the southern Federal district, in fact, it remains the Caucasian Republic. For 2012, the level of sales in Adygea has increased by 80% — it is the result of many years of stability, security and the powerful development of tourism, which gives a rare opportunity to see the beauty of Caucasus without risk for life. The Southern Federal district regained its position a bit, however, growth in 6% after last year's fall by 27% is hardly convincing. Rostov region showed good data — 18% increase. The lion's share of sales is still owned by the Krasnodar Territory (62%), but every year the lions become smaller, threatening to turn into kittens. In 2012, sales growth in the region was only 6%, which is too small, given the large financial flows coming out of the capital to Sochi, as well as an aggressive advertising campaign of the Black Sea resorts.

The dependence of sales on the economic disturbances shines in every research report, so the results of jewellery ranking are especially interesting to compare with the well-being indicators in the respective districts. Agency "RIA Ranking" conducted a regional study, which identified the leaders on 64 indicators: the scale of the regional economy and its efficiency, the development of entrepreneurship, income level of the population, demography, development of fiscal and social spheres, the degree of development of the territory, etc. As the result single index was derived reflecting the level of the region as a whole. Dispersion of indicators on the territory of Russia was significant: If Moscow it is 82 points out of a possible 100, the worst performance are in North Ossetia — "unlucky" 13 points. In general, jewellery results are correlated with general economic. The top ten of both ratings is made up of the same elements: The caravan is predictable headed by Moscow, St. Petersburg, Tyumen and Sverdlovsk regions, Krasnodar Territory. However, the economic rating is interesting not by confirming the obvious, but the assessment of the prospects. Examining a regional map of Russia — is an exercise in vigilance and attentiveness. If you do not stare at large megacities you can see many curious facts on bright as a patchwork, map. So, we have already turned to the low rates of jewellery sales in the Central Federal District. Rosstat's data show that in Orel, Vladimir, Kaluga and Tambov regions jewellery sale is from bad to worse: their position in the ranking — 49, 60, 61 and 66 places respectively. However, it is not so clear in the ranks

Jewellery Trade

Breakdown of retail sales in Central Federal District 13 5 1

9 2 1 5

4 2

3 12 3 2 3

of jewellery outsiders: when you put at one fell swoop skid regions in the black list, there is a great risk of missing "dark horses." Total integral rating leaves some regions a chance. While the Tambov region flounders somewhere in the middle of the overall economic ranking, and Orel entirely falls below the water line, it is more fun in the Vladimir and Kaluga regions â&#x20AC;&#x201D; 34 and 28 places of the economic rating respectively. Positive changes have occurred over the past few years: Kaluga began to produce more cars, in Vladimir enterprises for the production of household appliances appeared, and in 2012 the major production plant for nanomembranes began operating. Trickle of money flowing into the regions, for now skirts jewellery industry, but if the pace of development continue, the jewellery "drought" will end.

Trust, but check you must

However it is dangerous to exaggerate dependence of jewellery industry on the economic development of the region. The belief that our business is enough to follow the "ski", paved by

Belgorod region

Moscow region

Bryansk region

Orlov region

Vladimir region

Ryazan region

Voronezh region

Smolensk region

Ivanovo region

Tambov region

Kaluga region

Tver region

Kostroma region

Tula region

Kursk region

Yaroslav region

Lipetsk region

Moscow

automobile or light industry, is popular because of its simplicity and accessibility. Oil derrick is built on the hill â&#x20AC;&#x201D; and the dinner at local restaurants is served on the golden plates, and at the entrance to a jewellery store queues. The co-relation of oil, the economy and the volume of retail jewellery really exists, but it is not as unconditional, as desired. The example of the Kostroma region is demonstrative, whose 73rd final position in the integral ranking is easier to find from the end, armed with a microscope. Nevertheless, the region occupies 18 th place on the level of retail jewellery sales. This position does not reflect the leading role in the production of jewellery, but the gap of two options still raises the question. And the Khanty-Mansi Autonomous Area is the reverse example. RIA "News" awarded the bronze medal and third place in the list of the most economically successful regions to the region. Nevertheless, while sales of gold and silver there are not too success: 2012 â&#x20AC;&#x201D; complete failure with reduced sales by 23%. Statistics is like a compass: useful thing, but it is necessary to use it wisely. Even following the most accurate map, you can fall, if you have your nose in there and do not to watch where you step to.

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36 | Expert opinion | JUNWEX Magazine

This Will Happen,

You Just Have to Wait!

ithin the business program of the exhibition “JUNWEX Moscow 2012" 17 September, the VI International Trade Conference "Jewellery Industry. Marketing. Competitiveness " took place, which brought together not only the jewellery business professionals, but also representatives of the expert bodies in the field of marketing technologies. Speakers and participants discussed the most pressing industry issues, ranging from questions of law and ending with the fall in consumer demand. The president of the club "Russian Jewellery Trade" S. Vedovskiy opened the meeting, then granted permission to speak to V. Mospan, Director General of the Association "Jewellers Guild of Russia." The speaker dwelt on the shortcomings of the existing legislative system, in particular raised the issue of the new draft of the law on precious metals and precious stones, such a discussed one in the recent past. He stressed that the country could become the world leader in the production of jewellery, you just need to remove administrative barriers and modernize outdated regulatory framework. The president of the World Jewellery Confederation Gaetano Cavalieri told of the fact that Russia tipped to achieve unprecedented heights in the global jewellery market He assured that in the next twenty years we will witness the most impressive shift of economic powers in the history of mankind, in which the level of purchasing power of the overwhelming majority of the world population will increase . Analyzed the current financial performance of developing countries and states — the leaders of the jewellery market, Cavalieri admitted that it is impossible to call the current economic

Chairman of the Union of Jewellers NWFD A. Gorinya

situation too favorable, but he sees a lot of reasons for optimism. All countries show slowdown of the economy, but for India and China, President of the World Jewellery Confederation it can play a positive Gaetano Cavalieri role in neutralizing the symptoms of "bubble", of which experts say anxiously. In these circumstances, the recent entry of Russia into the WTO will lead to a more active involvement of the country in international relations. Along with India, Brazil and Japan Russia will approach the global superpowers. If the report of the President CIBJO presented the global world trends analysis, A. Gorinya report was focused on Russian market situation. The assessment of the current production base of jewellery industry and its potential was heard. Having chosen the starting point in 1991, Alexander Sergeevych noted a fourfold increase in growth of technological advancement and the level of production in the last twenty years, with a significant imbalance of production of gold products in favor of silver. This is evidence of lack of both of working capital in jewellery small and medium-sized businesses and the development potential of the industry as a whole. "I see the positive side of the situation — said the speaker, — after taking into account the rapid growth of new markets, pulling away buyers from the jewellery business, even holding former position is a success!" Among the most important achievements of the industry in recent years, the chairman of the Union of Jewellers NWFD highlighted progress in automation of all production sectors and the overall growth of technical equipment of enterprises — according to these criteria the country is now above world average level. Many companies have moved production from the major cities in provincial centers, where work force is cheaper, and the threshold of administrative difficulties is lower. With regard to business problems, the most dangerous of these is the outdated legislation, which is not consistent with modern market demands. "We have all the prerequisites for development — optimistically concluded his statement A. Gorinya — therefore, if it is complicated, we will start to work faster, increasing productivity". Read full version of the materials at the conference website at www.junwex.соm.

All you need is ...

junwex.com

38 | Expert opinion | JUNWEX Magazine

Russians Have Good Taste Interview with the President of Roure company Frederick Kare Please share with us your impressions of the show.

"JUNWEX Moscow" is a direct reflection of the Russian market. In what state is the jewellery market in Russia, you can see by visiting the event. Organizers have taken on a very important mission — to promote the development of the domestic jewellery business, and they have successfully cope with this challenge. Industry managed to keep the tradition of jewellery that has always been famous for the Russian masters. I saw a lot of interesting companies with their own creative style, vibrant collections, beautiful stylish stands ... quite active work of exhibitors to promote their brands. Would like to see in the exhibition

Expert opinion

attended by more European brands, which could bring fresh ideas to the Russian jewellery market .

Many foreign brands are likely to fear the complexities of exhibition work in Russia?

Yes, of course. Unfortunately, a number of formalities makes the job difficult, but it can be overcome. Moscow is an international metropolis, it meets international standards. I believe that Russia deserves much more attention from foreign manufacturers of jewellery. We did not plan to sell the products at exhibition at retail. But buyers interest has forced us to think of such a possibility in the future. All pre-scheduled appointments with customers took place, new trade representatives from different cities of the country appear, we are looking for ways of cooperation with them, actively negotiate. I have collected a lot of business cards, contacts which i have to work out after the show. Our main goal is to find partners to distribute products in Moscow, St. Petersburg, Ekaterinburg, Volgograd, Novosibirsk, Surgut, Novokuznetsk, Krasnodar and other cities.

How do you feel about the fact that the global jewellery industry is subject to fairly aggressive expansion by China? I think this is a serious problem that did not arise yesterday, and, unfortunately, applies to all

members of the jewellery market. More and more companies manufacture their products in China to get a very cheap, but, alas, a very low quality product. This has a direct impact on European markets, resulting in overproduction and, as a consequence â&#x20AC;&#x201D; to the crisis. Not to mention that, as a rule, production made in China â&#x20AC;&#x201D; is a copy of famous brands. But with all the dominance of Chinese goods jewellery luxury will always find a buyer. I am convinced that the French jewellery products that was popular in the world for hundreds of years will remain a favorite, demanded by buyers. Active growth of the Russian jewellery market allows us to suppose that in your country the problem of illegal copying will be resolved. I watch how the worst, dishonest, weak players are sifted from the Russian retail sector . As shop also is responsible for the products that it offers to the customer. Why would it knowingly sell defective goods? Russians have good taste, they are well versed in fashion jewellery.

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40 | Events | JUNWEX Magazine

JUNWEX New Russian It is noteworthy that “JUNWEX New Russian Style” posted the solid product-shipment results this year. The Russian Jewellery Trade Club registered 12% more wholesalers and retailers in attendance than in 2012. Thus, “JUNWEX Petersburg” (February), “JUNWEX New Russian Style” (May), “JUNWEX Moscow” (September) have formed a system that makes it possible to load-up on products at the exhibition and make the necessary inventory replenishments during the periods in between.

Events

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Style: Constant Growth

orthy of special mention is the exposition put on by MACEF, which for the first time this year was organised within the framework of “JUNWEX New Russian Style.” As noted by O. Mironova, General Director of RIA RusJewellerExpert, “this proximity is good for both projects.” “In particular, jewellers are gaining new growth opportunities: the presence of companies specialising in design helps in the positioning and sale of gold not merely as a metal, but as an integrally-precious part of the individual image and style marketed to customers.” With each passing year, the JUNWEX exhibitions are attracting an increasing number of interested companies from abroad. These include both those visiting Russia for the first time and those attending the expos for some time and keeping an eye on the local market. For them, the deciding factors are the authority of the organisers — Media-Holding RESTEC® JUNWEX — and the constant expansion of related projects that they see with their own eyes. Thus, this year’s “New Russian Style” featured a number of consultations on the formation of an international exposition at “JUNWEX Moscow 2012.” Among other things, the Embassy of the Republic of Sri Lanka expressed its intention to create

Expo by the numbers

24 800 m2 Number of exhibitors 559 Number of visitors 28 559 Number of trade visitors 6603

42 | Events | JUNWEX Magazine

Leading Russian producers of gold jewellery: • ADAMAS • DIAMANT • TOPAZ, Kostroma Jewellery Factory • Krasnoyarsk Non-Ferrous Metals Plant (Krastsvetmet) • ESTET Jewellery House • Region-Kostroma Jewellery Factory • ADAMANT Jewellery Factory • PLATINA Jewellery Factory • Bronnitsky Jewellery Factory • AQUAMARIN Jewellery Factory Leading Russian producers of silver jewellery: • Krasnoselsky Yuvelirprom • Krasnaya Presnya Jewellery Factory • Adamant Jewellery Factory • Severnaya Chern Jewellery Factory • Intersilverline Silver Factory • Diamant Jewellery Factory • Bronnitsky Jewellery Factory • Sidan Jewellery Factory • SP G.G. Gusev

a national expo stand. The Organising Committee was also approached by major enterprises from Greece, India and the UAE wanting to showcase their exhibits in September. Organisers were deeply honored by the participation in the official opening ceremony for “JUNWEX New Russian Style” of a representative of leading exhibition operator UBM Asia — UBM Asia Director of European Affairs J. Essink, and L. Chow — development director of the jewellery group. Media-Holding RESTEC® JUNWEX already has a number of agreements with UBM concerning the organisation of buyers’ programs. At present, the operators’ joint plans call for further cooperation expansion in that direction within the scope of the Hong Kong Jewellery & Gem Fair. The exhibitions held under the Jewellery Russia Programme have always been a welcome occasion to improve the qualifications of company employees thanks to the events put on by the JUNWEX Learning Center. The exhibition also served as the backdrop for the traditional awarding of the best Russian jewellery producers with the honorary distinction: “2011 Industry Leader.” The official award ceremony was continued by “Jewellery Russia” Publishing House, which presented honorary certificates for long years of productive cooperation, high professionalism and active assistance in the formation of a civilized Russian jewellery market. Laureates included Gulidov Krasnoyarsk Non-Ferrous Metals Plant (Krastsvetmet), “Aquamarin,” “Sidan,” “Northern

Events

Capital Jewellers,” “Style Avenue,” “Samorodok,” “Kostroma Diamonds,” “Master Brilliant,” Jewellery Factory “Karat,” the Navell retail chain, “Region Yuvelir” Group, “Elana,” Trading House “Adamant,” the “Bronnitsky Jewellers” retail chain, Fidelis, the “Sergey Slotin” retail chain, “Yuvelia,” “Russkoe Zoloto-Art,” and the “Almaz” retail chain. Saint Petersburg Mint “Goznak” was presented with a special diploma for its highly-professional approach to the promotion of a trademark combining the best traditions of the reknowned enterprise with the bold trends of modern advertising.

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44 | Analytics | JUNWEX Magazine

Where Next for Retail Chains? R

ecently, prices for precious metals have been trending upwards, real estate and rents have risen in price, and interest rates on credits have gone up considerably. At the same time, consumer demand leaves a lot to be desired. Companies in the sector have been paying more attention to the sustainability of their retail chains than to expansion. A marked increase in costs has inevitably promoted a strategy of consolidating past achievements. Today it is becoming obvious that the rapid development of a retailer — an increase in retail space and territorial expansion of the retail chain — can either increase capitalisation or lead to a serious internal crisis, manifested primarily in delays in payments to suppliers.

Key regional evaluation criteria: 1. population in shop catchment area 2. percentage of potential buyers (this figure is calculated based on the retailer's format and their price positioning). It signifies what percentage of consumers from the total population can be expected to regularly visit the planned shop and make purchases there 3. penetration — the expected frequency of visits to the shop 4. the potential size of the market basket; 5. an evaluation of competition in the region chosen for expansion.

In these conditions, some chains are continuing to develop in the regions, others are holding out, freezing regional expansion, while others still have simply scrapped these projects without comment. Which position is the most correct? World market experience shows that under no circumstances should development be discontinued! But given the increase in the cost of credit, the active development of new territorial markets is currently quite expensive; so it is extremely important to decide which criteria to use to select regions for expansion, and how to develop a proper development strategy for these regions. To make initial forecasts and evaluate a region’s potential, it is important to know retail sales figures, the population level and its income. RusJewellerExpert has analysed the key regional evaluation criteria on the basis of data received from the Federal State Statistics Service, which was correlated with data from other official sources, and has ranked them from the point of view of their appeal to retailers in the sector. Jewellery sales volumes were calculated based not on quantity but on the rouble equivalent, as used by the Federal State Statistics Service in its record-keeping. In 2011, jewellery sales in the Russian Federation amounted to almost RUR 144 bln., up 16% from 2010. Unfortunately, it is not possible to create a more detailed picture of sales, broken down into various precious metals, as these statistics are not available. The situation in the Russian regions varies even within the borders of the same federal district: in some places sales fell, while in others they increased. The leader in the regional rating is the Central Federal District (33%), followed by the Ural Federal

Analytics

Despite the fact that in rouble Jewellery retail in regions terms, jewellery sales in 2011 6 were up year-on-year, the 11 actual volume of jewellery sales by weight fell 4.8%. District (12%) with the Siberian district in third place, followed closely by the Southern and the Volga districts. Altogether, sales in the Central Federal District increased 23.6% to RUR 48 bln. Sales in Ryazan region increased 84% from 2010, in Kaluga and Bryansk — 50%, Lipetsk — 34%, Smolensk — 30%, Ivanovo — 24.5%, Voronezh — 23%, and Kostroma practically 130%! Sales in Oryol and Tambov regions remained almost unchanged. For several years in a row, growth in sales in Belgorod region outpaced all others in the Central Federal District, but in 2011 sales unexpectedly fell 4%. Sales in other regions in this district increased 15–20% on average. As regards jewellery sales, 33% all sales in the Central Federal District are accounted for by Moscow, 13% — Belgorod and Moscow regions, 10% — Voronezh region, and 8% — Bryansk region. The remaining 25% is divided among other regions. The most insignificant sales volume was in Tambov region, which accounted for 0.03% of the total. Sales in the Northwest Federal District increased 16% to RUR 11.4 bln.

National rating of regions: 1. Moscow (11%) and Moscow region (4%) 2. Krasnodar territory (7%) 3. Tumen region (6%) 4. Sverdlovsk region (4%) Total sales in Moscow and Moscow region account for 15% of the national total, which is more than the entire Ural Federal District.

33%

Central Federal District North-West Federal District South Federal District North Caucasian Federal District Volga Federal District Ural Federal District Siberian Federal District

11 8 8

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Far Eastern Federal District

This growth is primarily attributed to a 36.5% increase in sales in Kaliningrad region (this region accounts for 10% of total jewellery sales in the district) and 31% in Novgorod and Arkhangelsk oblasts. Sales in St Petersburg, as well as Pskov and Vologda regions remain constant (in particular, St Petersburg accounts for 40% of the total for the Northwest Federal District, but only 3% the national market). Komi Republic accounts for 20% sales of the district. The situation in the Southern Federal District is quite depressing — with a 27% drop in sales to RUR 15.875 bln. The worst situation was in Krasnodar territory: the volume of the local jewellery market fell by 38%. There was a similar picture in Adygea and Volgograd region, with a drop of 19%. Unlike their neighbours, jewellers in Rostov and Astrakhan regions saw growth in sales of almost 30%. Sales in Kalmykia remained unchanged. Krasnodar territory has always been the sales leader in the district: In 2010, its share of the local market was 76%, but the current figure is a little more modest — 66%. Nevertheless, it is still second in the national sales rating (7% of the total volume of jewellery sold in the country) after Moscow and Moscow region. Their interest piqued by the atypical situation in Krasnodar territory, RusJuwellerExpert carried out

46 | Analytics | JUNWEX Magazine

a survey among representatives of the local retail trade. It is significant that the respondents' opinions were frequently very different. In particular, we spoke to three owners of companies whose shops are located in one small town, Slavyansk-onKuban. One emphasized a marked fall in demand for jewellery, the second noted a considerable increase in consumer activity (especially in summer), and the third refrained from commenting the sales, saying: “People have no money at all!” However, all of them admitted that the number of jeweller's shops in the city had increased steadily, and the main items in demand are still inexpensive lightweight articles and hollow chains. The survey demonstrated the need to “sink or swim”. Retailers that strive to work efficiently, regularly change window displays, carry out various original promotions and spend enough on advertising etc., are happy with sales. And it is well know that where there is no pain, there is no gain. Sales in the North Caucasian Federal District increased 16% to RUR 11.232 bln. However, these figures were only reached due to a 2.5-fold jump in sales in Ingushetia. In Alania and Kabardino-Balkariya the figures were a little higher than previously; and in Chechnya the market fell 2.8%. N.Guseynova (Dealer-Jeweller, Makhachkala): The number of articles sold fell, but revenue remained the same, as gold prices increased constantly. I can confidently state that our sales are steady all through the year and there are no significant surges or falls in demand. This is primarily connected with tradition — local people love gold: our weddings, engagements, birthdays are all celebrated with precious gifts. The best gift to an oriental woman is gold. When a baby is born, its mother should be presented with a piece of golden jewellery, and if the baby is a girl, it should also get some. Our national custom is that a girl can be engaged for rather a long time — two or three years. And in this period, she is to be presented with golden jewellery. Of course, our jewellery prices differ significantly from those in Moscow, and so does our standard of living. However, even people on relatively small salaries give quite expensive precious gifts.

The maximum share of sales (66%) in this district is accounted for by Dagestan, with 16% from Stavropol territory. Sales in the Volga Federal District increased 18.6% to RUR 15.877 bln. In this district the highest year-on-year growth was in Udmurtiya (a gain of 40%), Penza region (33%) and Yaroslavl region (31%). The lowest growth was in Nizhniy Novgorod region (21%), Orenburg (25.5%) and Tatarstan (21%). Sales in the Republic of Mordovia remained unchanged. Sales fell only in Chuvashiya — by 19%. The sales leader in the Volga Federal District is Tatarstan (17%), followed by Perm territory (13%), with Nizhniy Novgorod region (12%) in third place. The Republic of Bashkortostan was in third place in 2010. Among the federal districts, the most rapid growth was in the Ural Federal District, where sales have doubled (RUR 17.162 bln.). In many respects, this increase was due to the work of the Ural office of the Russian Jewellery Trade Club and the JUNWEX Ekaterinburg exhibition, held with its support, which considerably improved the efficiency of deliveries of collections to retail outlets in the region. Very good results were achieved by retailers in Khanty-Mansi (a four-fold increase in sales) and Yamalo-Nenets Autonomous Districts (an almost three-fold gain), as well as in Tyumen region (3.7-fold). In Sverdlovsk region, jewellery sales in roubles increased 40%, and in Chelyabinsk region — 30%. In this district, only Kurgan region saw a decline — with jewellery sales down 38%. The leaders in the Ural Federal District are Tyumen region (38% of the local market), Khanty-Mansi district (26%) and Sverdlovsk region (24%). Sverdlovsk region used to be the leader in the district, accounting for half of total sales in the entire Urals; however, today it accounts for 4% of national sales, having been overtaken by Tyumen region, whose share increased to 6%. Sales in the Siberian Federal District increased 11.2% to RUR 16.37 bln. The largest growth was in Tuva (34% growth), Omsk region and Krasnoyarsk territory (31% each). Sales dropped only in Novosibirsk region (19%): in 2010 this region was

Analytics

the leader of the district, accounting for 32% of the market; today its share is 23%. The present leader is Irkutsk region, where the share of sales in the district went up from 24% to 26%. In third and fourth place are Omsk region (15%) and Krasnoyarsk territory (14%), respectively. Sales in the Far East Federal District increased 14.5% to RUR 7.87 bln. This is the only district where absolutely all provinces demonstrated positive sales growth dynamics (only Sakhalin region remained unchanged). Market distribution in the federal district has also remained practically the same: Sakha Republic (Yakutia) 43%, Khabarovsk territory 23%, Primorye 14%, and Sakhalin region — 11%. Sales grew 35% in Magadan region and 43% in Amur region, but their share of total sales in the district is small; therefore, they have not affected the overall result. Moreover, the website of the Federal State Statistics Service of the Russian Federation published a rating of regions according to the following criteria: the size of individual incomes; migratory appeal of the area; the survival rate for children under one year; safety; development of service markets; and the availability of jobs. As a result, the top ten included: • Moscow; • St Petersburg; • Moscow region; • Belgorod region; • Khanty-Mansi Autonomous District — Yugra; • Krasnodar territory; • Tumen region; • Republic of Tatarstan; • Yamalo-Nenets Autonomous District; • Lipetsk region. We can see that growth in jewellery sales is not directly dependent on the standard of living. In Belgorod region, in which is high up on the list, sales fell; in St Petersburg, ranking second, the sales remained the same, and in Krasnodar territory, which is also among the leaders, sales fell drastically. The only exceptions are Khanty-Mansi and Yamal-Nenets Autonomous Districts, where the high standard of living corresponds to high jewellery sales. So, the RusJewellerExpert statistical analysis has made it possible to receive a comprehensive

| 47

picture of the situation in different areas. Based on the standard of living in different regions of the Russian Federation, jewellery sales volumes in each of them, and the development dynamics in particular territories, retail operators can make a precise evaluation of the potential of a particular market and select the right development strategy for the company. As regards the future, RusJewellerExpert experts expect retail trade development to move from large cities to smaller ones, as well as from well-developed central regions to peripheral ones in the near future. In many areas, there are practically no retail chains, due to problems with logistics and the absence of suitable real estate, but local consumers already expect up-to-date retail trade.

I.Minakov (Independent Trader I.M Minakov., Kazan): In comparison with the previous period, sales remained steady; with active demand for cubic zirconium jewellery, the average purchase amounting to RUR 5,000-10,000. I have not observed the opening of new jeweller's shops as there are quite a lot of them in the city and the market is oversaturated; buyers feel lost when the choice is so large, and the standard of living has not gone up. Our buyer is a representative of the middle class. Sales peak on holidays and in summer. The prolonged winter and the resulting bad mood do not stimulate buyers to go to jeweller's shops to buy some jewellery. But I am sure that success in sales depends mainly on the person standing behind the counter. Y. Semyonova, 'Golden Fleece' jeweller's showroom (Nyagan, Khanty-Mansi Autonomous District): Our shop is relatively new, it was opened about three years ago; therefore it is difficult for me to assess the situation yet. In my opinion, sales have improved by about 20%. However, we will see a usual outflow of buyers in summer as people go on holidays. Nevertheless, the increase in the standard of living cannot but be felt. Now the city is undergoing large-scale state-funded construction, with the building of large shopping centres and malls. As regards current market trends, I would mention the purchase of jewellery on credit: as a rule, these purchases are made by people of advanced age, even pensioners.

48 | Analytics | JUNWEX Magazine

Production

Reacts to Demand A

Rating of regions by volume of jewellery output: Kostroma region (47%). Moscow (15.3%) and Moscow region (6.15%). Krasnodar territory (6.8%). Vladimir region (5.7%). St Petersburg (4.4%). Sakha Republic (2.8%). Ivanovo region (2.7%). Sverdlovsk region (1.23%). Republic of Dagestan (1.13%).

ccording to the Federal State Statistics Service, the Central Federal District leads in jewellery production in Russia. Kostroma region accounts for more than a half (60%) of jewellery products manufactured in the Central Federal District. This situation is traditional: Kostroma goldsmiths were second to none since before the Revolution. Today the province accounts for 47% all jewellery manufactured in Russia.

Stoneless jewellery

In 2011, stoneless jewellery, accounting for 41% of output, was the most popular group among Russian jewellery companies. Whatâ&#x20AC;&#x2122;s more, production of this jewellery is increasing from year to year.

Breakdown of production by region 4

1 1 1 5

2 5

Central Federal District South Federal District Volga Federal District

Siberian Federal District North-West Federal District North Caucasian Federal District

75% 2010

78% 2011

Ural Federal District Far Eastern Federal District

Analytics

Breakdown of jewellery production in Central Federal District 6

7 4

1 1

58%

60%

Belgorod region Bryansk region Vladimir region Voronezh region Ivanovo region Kaluga region Kostroma region Kursk region Lipetsk region Moscow region Orlov region Ryazan region Smolensk region Tambov region

Breakdown of jewellery production in Russia 2,7 2,8

1,2

3,94 1,11,1

4,4 5,7

6,15

6,8

Kostroma

Dagestan

Moscow

Rostov region

Krasnoyarsk region

Smolensk region

Moscow region

Chelyabinsk region

Vladimir region

Udmurtiya

Saint-Petersburg

Kaliningrad region

Sakha Republic

Tatarstan

Ivanovo region

others

Sverdlovsk region 15,3

Diamond jewellery

Most of the diamond jewellery manufactured in the country comes from the Central Federal District (72%). In 2011, production of this jewellery increased 16%. The increase was mostly due to companies in Kostroma region: diamond collections account

for an increasingly large share of their range from year to year, with a 36% increase in 2011. With other companies in the Central Federal District, the situation with diamond jewellery has taken a sharp downturn: Vladimir region has seen a drop in production of almost 90%, Ivanovo region â&#x20AC;&#x201D; 80%, and production in Moscow and

| 49

50 | Analytics | JUNWEX Magazine

Breakdown of jewellery production by product groups 5 19

with brilliants

% 41%

with insets without insets wedding rings gold and silver chains

Moscow region has practically halved. The Southern and Ural Federal Districts have also seen a 30% decline. A positive dynamic was noted among jewellers in Yakutia, who increased diamond jewellery production 40%, as well as their counterparts in Nizhniy Novgorod region (up 30%), Yaroslavl region (26%) and St Petersburg (20%).

Wedding rings

In 2011, domestic production of wedding rings fell 7% year-on-year. This decline was for objective reasons, and was caused by overproduction of these goods in previous years. As a result, a number of companies had to halt wedding ring production.

Chain jewellery

• Rating of regions by production of diamond jewellery: • Kostroma region (59%). • Moscow (12%). • St Petersburg (9.6%). • Republic of Dagestan (6.6%). • Sakha Republic (6%). • Chelyabinsk region (2%). Production of diamond jewellery in other regions is insignificant and does not influence the national market.

In 2011, production of gold and silver chains fell 22%. The main manufacturing capacities of this market segment are concentrated in the Central Federal District (76.5%), particularly Vladimir and Moscow regions, and the Siberian Federal District (18.9%) — particularly companies in Krasnoyarsk territory. However, both these districts experienced a 26% and 7% slump in production respectively. An opposite trend was noted in the Northwestern Federal District, where there was 50% production growth, particularly in St Petersburg.

Inset jewellery

In this segment of jewellery production, the situation has remained unchanged from the last year. The overwhelming majority (77.6%) of this jewellery is manufactured in the Central Federal District (Kostroma and Ivanovo regions), with the North Caucasus (Republic of Dagestan) accounting for 11%.

Jewellery Market

| 51

Market Environment The Russian jewellery market is the most developed part of the jewellery market in the post-Soviet space and dominant from the point of view of the development of the jewellery business in this part of Europe.

he infrastructure of the Russian jewellery market is a well-developed market system, with a minimum of administrative intervention of the state bodies and with the maximum of the market mechanisms. Most of the participants of the jewellery market (not less than 99%) is a private, family and public (OAO, ZAO, OOO) enterprises. And number of such enterprises registered in Russia is about 25 thousand! The leading jewellery manufacturers can be attributed 10-15 enterprises,

in the aggregate, producing no more than 12–14% of the total Russian production of jewellery. The fall in purchasing power in the Russian Federation, caused by the crisis passed a minimum in 2009-2010. Today in monetary terms the volume of sales is fully restored, which positively characterizes the Russian market in comparison with the majority of the countries of Europe and the United States. And this is despite the significant growth of prices for gold and silver.

Data on the number and mass of pieces hallmarked and stamped for 2000–2012 ARTICLES OF GOLD Year

Total:

Quantity Mln pieces 2000 9,74 2001 13,15 2002 17,63 2003 22,09 2004 26,94 2005 32,31 2006 37,32 2007 48,51 2008 46,68 2009 27,93 2010 33,96 2011 33,77 2012* 35,24 *11 months of 2012

mass tons 24,60 33,66 42,70 55,72 68,48 88,18 96,82 130,32 126,92 68,23 78,13 77,00 76,66

including foreign products of art Quantity mass Mln tons pieces 0,26 0,70 0,08 0,20 0,11 0,59 0,19 0,95 0,40 1,66 0,83 3,99 1,57 6,20 2,85 11,74 2,78 10,39 1,08 3,81 1,73 4,81 2,06 2,06 1,56 4,34

ARTICLES OF SILVER Total: Quantity Mln pieces 7,56 9,30 12,19 16,51 21,43 23,17 24,98 32,79 41,97 49,20 56,24 49,91 46,29

mass tons 35,44 47,89 60,37 87,60 121,83 150,48 155,3 223,24 268,83 224,98 240,43 193,17 180,47

including foreign products of art Quantity mass Mln tons pieces 0,73 3,40 0,85 4,38 1,66 10,09 2,86 17,80 4,32 28,03 5,42 37,20 6,09 43,91 8,12 63,70 10,65 79,90 7,85 52,03 11,39 69,00 11,06 58,41 10,97 54,27

ARTICLES OF PLATINUM

ARTICLES OF PALLADIUM

Total:

Quantity thousand pieces 22,94 16,48 19,56 29,40 17,80 22,95 24,04 23,41 29,39 12,30 11,30 13,36

mass kg 104,2 84,03 109,3 160,74 96,42 135,49 157,41 163,03 211,1 83,39 83,77 105,76

Quantity thousand pieces 0,10 0,33 0,90 4,37 8,88 5,99 6,74 6,25 6,78 24,33 23,33 13,06

mass kg 0,30 1,13 6,11 22,97 38,82 26,85 30,30 31,44 48,15 75,25 94,00 47,48

52 | Jewellery Market | JUNWEX Magazine

The base of the growth of purchasing power is the mass reindustrialization civil industries (construction, metallurgy, automotive industry, shipbuilding, aircraft construction, car-building, consumer goods, powerful injection of money into the Military-industrial complex and agriculture, updating and development of energy infrastructure, capacity of small and medium business. Well-developed jewellery market infrastructure, huge precious materials resources make Russia one of the most prospective countries in the world jewellery market. Russia holds the first place in the world in explored diamond resources and ALROSA JSC holds the first place in diamond production. Russia holds the fifth position among the 20 countries of the world producing brilliants. Russia holds the world fourth place in gold mining and is in fact a monopolist in resources of palladium-platinum group metals. The highest developed centers of jewellery production are Moscow, St.Petersburg, Ekaterinburg and Kostroma where the leading jewellery plants are concentrated and primary professional training of specialists is realized, large staff resources are accumulated. Meanwhile Russia jewellery

industry makes up only 0.01% of GDP and the state does not understand its priorities. The forthcoming Russia’s entry into the WTO shall open the largest distribution market for foreign companies. The growing demand for adornments, gifts and watches in the Russian market caused by the economic development of the country and growth of public wealth, establishment of the ‘middle class’ provides new prospects for sales increase. The prospects of Russia today especially brightly expressed the presence of a number of Russian buyers at all of the world's jewellery and watches exhibitions.

Competitive environment of exhibition services in the jewellery sector

• The peculiarity of the Russian market is concentration of exhibitions in large cities — Moscow, St.Petersburg. Approximately 80% of all exhibitions are held in these cities. • Competition type — tough. • Before 2004 Jeweller (Moscow, organizer — RosUvelirExpo) and Junwex (St.Petersburg, RESTEC) were the largest exhibitions in the Russian jewellery market.

Steps done to optimize business in conditions of crisis 52,60%

Increased production of silver jewellery Increased shipments of products to the regions Increased staﬀ salaries Launched a new line for production of lightweight products Created new jobs Reduced the production volume of jewellery with precious stones (diamonds, sapphires, emeralds etc) Reduced the part of employees Reduced the salaries of employees

37,00% 22,20% 31,90% 28,90% 11,90% 8,10% 0,70%

Jewellery Market

• Since 2005 JUNWEX Exhibition programme organized by RESTEC JUNWEX media-holding holds the leading position in the exhibition services for the jewellery market. The ratio of its equipped exhibition area made up 1 to 10 in 2011 (5,500 / 52,000 sq.m accordingly). The exhibition included in the Jewellery Russia programme — Junwex — St.Petersburg (February), New Russian Style (May), Junwex Moscow (September) bear the most large-scale character and are the most demanded in the Russian jewellery market. The main venues for the Jewellery Russia Programme are All-Russian Exhibition Center — in Moscow, and Lenexpo Gavan in St.Petersburg. These exhibition grounds are the most modern venues in Russia provided with the highest service level corresponding to the international level with the appropriate transport infrastructure. There are no halls in Russia able to compete with those used for the Jewellery Russia Programme exhibitions by the basic range of parameters, including administrative support of Moscow and St.Petersburg heads. By the results of 2012 total area of RESTEC jewellery exhibitions made up over 50,000 sq.m netto (stand space). The exhibitions of the Jewellery Russia Programme organized by RESTEC JUNWEX media holding with the support of the Russian Jewellery Trade Club acquired the status of the leaders and totally deprived the former competitors of significant positions.

Retail market of Russian jewellery products

34 mln. golden jewellery items, approximately 50 mln. silver and 1,3 mln. diamond items were sold in Russia in 2011. Total volume of sales is estimated at 10 bln. dollars a year. Comparing to 2010, production of diamond jewellery items increased by 13,8% in 2011, according to the data of RusJewellerExpert and Russian Federal State Statistics Service. The demand for lightweight and hollow golden and silver jewellery items in all products categories is growing steadily. Meanwhile, the customer becomes more sophisticated while choosing between such products.

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Number of jewellery retail stores of five leading companies 585 Jewellery Retail Chain

347 337

201 240 240

Yaxhma Zoloto 172

Almaz-Holding Adamas 130 MUZ

282

200 218

170 165

2009

169 170

2011

2010 199

Federal retail in the Ural, Siberian and Far Eastern Federal District % from the total quantity of jewellery shops

120

Far Eastern Federal District Siberian Federal District Volga Federal District Northwestern Federal District Urals Federal District Southern Federal District Central Federal District Moscow St.Petersburg Local Jewellery Retail Federal Jewellery Retail Chains

54 | Jewellery Market | JUNWEX Magazine

Volume of retail sales of jewellery products in Russian regions Central Federal District

Northwestern Federal District

11% 33%

12%

11%

North Caucasian Federal District Volga Federal District 8%

Southern Federal District

11%

Urals Federal District Siberian Federal District Far Eastern Federal District

Jewellery manufacturers’ breakdown by federal districts (2010) 2% 2% 1% 2% 5%

Central Federal District

Northwestern Federal District

Southern Federal District

North Caucasian Federal District Volga Federal District Urals Federal District 75%

Siberian Federal District Far Eastern Federal District

Russian jewellers learned a number of lessons from the decline in consumer demand in 2009– 2010 and from current conditions of globalised economy. Firstly, large companies gave up their ambitious plans to enter foreign markets overloaded with diverse jewellery products at dumping prices. Export

consignments are relatively small and carried out in testing regime. Secondly, jewellers have quickly reacted to the slump in world prices of gold, silver and precious stones. Trying to adjust to the prices typical of jewellery stores, they started to use less gold and more diamonds as well as even more silver and semiprecious stones to produce jewellery items. Thirdly, the crisis blasted the sphere of jewellery design which has previously been primitive and backward. Together with their own experience, Russian jewellers creatively approached and used ideas and solutions of others (luckily, the Internet provides the widest opportunities in this direction). Fourthly, “jewellery pipeline” containing five components (design — production — wholesale — retail — secondary market) become flexible and strong allowing manufacturers to adjust quickly to the seasonal changes in customer’s demand. Finally, jewellers significantly raised advertising and PR activities in competition with other products within the niche from 1000 to 10 000 roubles (mobile phones, gadgets, fashionable perfume, luxurious linen), thus, ensuring additional advantage and making themselves more preferable in customers' eyes. According to the survey “Retail jewellery chains” conducted by RosBusinessConsulting, in 2011 the volume of retail jewellery market of Russia raised by 19% in monetary terms. Adamas, Almaz-Holding, Moscow Jewellery Plant, 585 Jewellery Retail Chain Co and Yashma Zoloto form the list of five leading companies in jewellery retail by the number of stores. Large retail jewellery chains of federal level are still strengthening their positions at the most prospective markets from of the Volga, Central and Southern Federal Districts. Abundance of local operators at the Russian trade market, entry of manufacturing enterprises to the market with their own retail goods and reinforcement of price competition are the factors deterring the development of federal retail in the Ural, Siberian and Far Eastern Federal Districts. Following the results of the year 2011, according to the data of Russian Federal State Statistics

Jewellery Market

Service, the growth in the volume of retail sales of jewellery products in the Russian regions amounted to a little more than 16% in comparison to the year 2010. The largest contribution to the total income from jewellery trade was made by: the Central Federal District (over 30%), the Ural Federal District (approximately 12%), the Siberian Federal District (over 11%), the Volga Federal District (11%) and the Southern Federal District (11%). It should be stated that the indices of the official statistics do not include individual enterprises and small companies, the number of which is quite large in all regions of the Russian Federation. The shop of federal domestic jewellery chain still remains to be the most popular place of buying jewellery items: as a rule, 55,6% of customers buy jewellery there. The incorporated chain of Russian Jewellery Trade Club holds the strongest positions in the regions. This indicates that customers trust jewellery chains more due to certain services quality standard, the range and discounts provided.

State of Russian jewellery industry

Only two of all trade manufacturing enterprises — Moscow Special Alloys Processing Plant and workshops under the Administration of the Russian President — are state-owned. Therefore, there is nothing to hide in the fact that the forthcoming entry of Russia into the WTO makes heads of jewellery plants worry. They would like to obtain certain fringes from the authority for a long term transitional period. Presently this problem is being actively discussed. The final decision is expected to be taken in summer of this year. In fact, Russian jewellers have already come down from generalities to detailed business planning under new conditions. Leading manufacturers of gold jewellery: • Adamas • Diamant • Krastsvetmet • Topaz • Bronnickiy Jewellery Factory • Platina • Estet Jewellery House

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Jewellery manufacturers’ breakdown by federal districts (2011) Central Federal District

4% 1% 1% 2% 1% 5%

Northwestern Federal District Southern Federal District

North Caucasian Federal District Volga Federal District Urals Federal District 78%

Siberian Federal District Far Eastern Federal District

• Krasnoselskij Jeweller • Adamant • Kameya Leading manufacturers of silver jewellery: • Krasnoselskiy Jewellerprom» • Krasnaya Presnya • Intersilverline • Sidan • Severnaya Chern • Russkiye Samotsvety • Adamant • Bronnickiy Jewellery Factory Major tendencies of the Russian market 1. The Russian market has saved its strengths for a bound forward. This potential will be realized during 2013–2018. 2. Foreign players are expected to generate significant activity at the Russian market, particularly in the sphere of retail (this activity is caused by the decrease in customer demand in European Union, the USA and Japan). 3. Having weakened during the crisis of 20082011, pseudo-oligarchy will contribute to more favorable competitive environment. 4. Fight of law enforcement agencies against corruption, even if it turns out to be temporary measures, will help Russian business environment notably recover and attract many foreign investors.

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