Worldwide Jewelry MKT Demand Ken Research Feb 12 2010

Feb 12, 2010
Worldwide Jewelry Market Demand and Opportunities
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Table of Contents
1. Global gems and jewellery Structure and Demand ...................................................5
1.1 Industry Structure ................................................................................................ 5
1.2 Market Size/Demand ............................................................................................ 6
1.2.1 Global Jewellery Demand .................................................................................. 6
1.2.2 Demand for Diamond and Gold by Geography ........................................................... 7
1.2.3 Global Demand for Precious Metals ....................................................................... 9
2. Jewellery Market in the United States ............................................................... 10

2.1 Industry Structure .............................................................................................. 10
2.2 Classification of Jewellery .................................................................................... 11
2.3 U.S. Jewellery Market Size ................................................................................... 11
2.4 Diamond Jewellery Demand .................................................................................. 12
2.5 Performance in Year 2008 .................................................................................... 13
2.6 Industry Players in United States ............................................................................. 15
3. Canadian Gems and Jewellery Market .............................................................. 18

3.1 Market Size .................................................................................................... 18
4. European Union ....................................................................................... 20

4.1 EU Market Size ................................................................................................ 20
4.2 EU Costume, silver and palladium jewellery Demand ...................................................... 21
4.3 The Jewellery Demand in Romania........................................................................... 23
4.4 The Jewellery Market in Bulgaria ............................................................................ 25
4.5 The Jewellery Market in Germany............................................................................ 26
5. Recent Industry Trends and Opportunities ......................................................... 28

5.1 UK Gems and Jewellery Demand............................................................................. 28
5.2 Symbolic Jewellery has Targeted Spiritual Group ........................................................... 28
5.3 Declining Sales of Luxury Jewellery Retailers with Rising Raw Material Prices .......................... 29
5.4 Opportunities in Saudi Arabia Jewellery Market ............................................................ 31
5.5 Bright Prospects in Indian Jewellery Market ................................................................. 32
5.6 Impact of Economic Recession over Diamond supply/demand ............................................. 33
6. Driving Forces in Gems and Jewellery Sector ...................................................... 34

6.1 Increasing Urban Population with Contribution of Working Women ...................................... 34
6.2 Mens jewellery Demand ...................................................................................... 36
6.3 Jewellery a Symbol of Changing Lifestyle among working women ........................................ 36
6.4 US consumer spending and Personal Income ................................................................ 37
7. Gems and Jewellery Market Forecast................................................................ 39
8. Industry Players Profiling ............................................................................. 41

8.1 Tiffany & Co. .................................................................................................. 41
8.1.1 Business Map ............................................................................................. 41
8.1.2 Company Financials ...................................................................................... 42
8.1.2 Business Strategies ....................................................................................... 43
8.2 Signet Group Ltd. .............................................................................................. 45
8.2.1 Business Map ............................................................................................. 45
Company Financials ............................................................................................ 46
8.3 Zale Corporation ............................................................................................... 47
8.3.1 Business Map ............................................................................................. 47
8.4 Gitanjali Gems ................................................................................................. 48
8.4.1 Business Map ............................................................................................. 48
8.4.3 Business Strategies ....................................................................................... 49
1. Global gems and jewellery Structure and Demand

1.1 Industry Structure
The structure of the industry is global in nature, the source of the raw material are Africa,
Canada, Russia & Australia. Primarily India, China, Turkey & Italy are the countries which
are involved in jewellery manufacturing & diamond processing and the retail market are in
US, Europe, Far East, Middle East and Asia.
India is one of the leading countries in diamond cutting and polishing centre. It accounts for
57% of the global polished diamond market in terms of value, in terms of cartage 80% and
90% in terms of number of pieces processed.
Figure 1.1: Global Gems and Jewelry Industry Structure
Global gems and jewellery Structure
Africa, Canada, Russia and Australia
Sources of Raw Material
Jewelry Manufacturing and

Diamond Processing
Retail Markets
India, China, Turkey & Italy
US, Europe, Far East, Middle East and

Asia
1.2 Market Size/Demand

1.2.1 Global Jewellery Demand
Since 2000, the global gems & jewellery industry has grown at an average CAGR of 5.2%. In
2005 the size at retail prices was estimated at US$146 billion, in the same year industry
experts predicted the industry will grow at 4.6 % every year and would reach US$185 billion
by 2010 and by 2015 it would reach US$230 billion but the recent fall in gems & jewellery
demand has led the experts to lower their expectations.
US$ Billions
Figure 1.2: Global Jewellery Sales (2000-2008)
200
180
160
140
120
100
80
60
40
20
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: HSBC and industry estimates
Luxury goods sector is expected to grow faster than the gems & jewel sector. Industry experts
believe that the luxury apparel is expected to grow at around 10% 15% in the next seven
years. The largest producer of gold is South Africa followed by US and Australia. According
to Indian Brand Equity Foundation in the gems & jewellery sector 2006 report, these
countries account for 45% of the worlds total gold production.
According to World Gold council (WGC), the global market for gold reached to 3,115 tonnes
in 2008 by volume. In 2007 global jewellery sales were US$163.03 billion which rose to
US$177.87 billion in 2008, an increase of 1.7%. Rising number of marriages, working
women, shopping centres and interest in fashion are the factors which have led to the growth
in this sector.
In the last 10 years compared to 4.7% for the total jewellery market, US diamond jewellery
sales grew up by 6.1%. Until 2007 worldwide jewellery sales have risen substantially but
have slowed down after that. EU with 20% of the global sales in 2008 was the second largest
jewellery market.
1.2.2 Demand for Diamond and Gold by Geography

USA with US$50 billion leads the global market in jewellery consumption followed EU
(US$34.25 billion), China (US$17.93 billion), Middle East (US$17.49 billion), India
(US$13.96 billion) and Japan (US$12.8 billion). Almost 82% of the total jewellery
consumption comes from these markets. China, Middle East, India, Russia & Brazil are the
emerging markets.
Figure 1.3: Jewellery Demand by Geographic Regions by Value in 2008
60
50
Figures in US$ Billions
50
40
34.25
30
20
17.93
17.49
China
Middle East
13.96
12.8
India
Japan
10
0
USA
EU
Source: World Gold Council
In 2005, the world diamond production was approximately 171 million carats valued at
US$12.7 billion. Countries such as Australia, Russia, Canada, Botswana, Congo & South
Africa account for 90%-95% of the total. According to industry experts, estimated reserves
are valued at US$110 billion in 2007, while Russia has the largest diamond reserves in the
world.
Figure 1.4: Global Diamond Sales by Geography in 2007
8%
6%
7%
50%
13%
16%
Source: HSBC, IDEX online,JIRI
Americas
Japan
Europe & Russia
Asia Arabian
Asia Pacific
Other
Gold and diamond jewellery in 2008 accounted for 77% of the global jewellery sales value.
In terms of volume particularly in China, India and Brazil lower carats gold jewellery, silver
& costume jewellery formed the largest part.
Figure 1.5: Consumer Demand for Gold in 2007
22%
30%
10%
7%
9%
4%
India
Source: WGC estimates
Greater China
China
10%
USA
8%
Middle East
Saudi Arabia
Turkey
ROW
1.2.3 Global Demand for Precious Metals

The global demand for precious metals for manufacturing of jewellery has gone down by
more than 700 tonnes from 2004 to 2008. Higher prices, lighter pieces with stones, lower
carats, and shift towards silver & costume jewellery were the main reasons which led to the
decrease in the demand of gold. India being the most sensitive country for the gold price
developments in the world market also experienced the decrease in demand for gold.
Table 1.1: Global Demand for Precious Metals for the Production of Jewellery in tonnes
(2004&2008)
Volume
2004
Gold (World)
Volume
2008
difference ave annn.
Major Demand from
2,878
2,152
-7.10%
Middle East
528
435
-4.70%
India
526
294
-15.60%
USA
379
291
-6.40%
China
265
233
-3.20%
Turkey
129
116
-2.80%
EU
581
472
-5.10%
Italy
87
70
-5.30%
Germany
59
43
-7.60%
UK
55
42
-6.60%
Spain
39
32
-4.80%
France
21
18
-4.70%
4,961
4,479
-2.50%
Platinum
59
45
-6.60%
Palladium
12
21
15%
Silver
Thailand. China. Italy, USA,

Russia and India
China, USA, Switzerland, Italy,
UK and Germany
China and Japan
Source: GMFS, World Gold Council, Silver Institute
The demand for silver fell in Italy and Thailand because of its increase in prices and the
popularity of stainless steel & titanium jewellery. The demand for silver jewellery was more
in India, China and Russia. Demand for platinum declined because of high prices and also
because of rise in second hand platinum jewellery markets in China and Japan.
2. Jewellery Market in the United States

2.1 Industry Structure
In United States, generally jewellery is sold through speciality retailers (Tiffany, Sterling),
general retailers (Target, Walmart), apparel & accessories retailers (Sears Roebuck, JC
Penny), through online stores and departmental stores. General retailers and other categories
have lost their market share to online sales which has gathered attention recently.
The jewellery & silverware market comprises of gold, silver, diamonds and other precious
metals. Diamond is the most lucrative segment in the US market followed by gold jewellery
with gold bracelets and earrings being the prominent product categories in demand. Online
sales have also added to the profitability in this market. Increase in raw material cost has
adversely hit the manufacturers as prices of silver plummeted and price of bullion and
commodities have risen. Changing trends and brand significance has benefited retailers who
have introduced branded jewellery and enhanced the popularity of silver and gold jewellery
throughout the market.
Speciality retailers hold a very strong position in the jewellery market. The market share of
speciality retailers has been around 48% since 1997. In 2007, 30,000 speciality stores
generated revenue of US$30 billion. Speciality stores account for 48% of the market share in
terms of value although they operate only 22% of the stores.
Zale, Sterling Jewellers, Tiffany are the major companies. The industry is highly fragmented
with less than half of the revenue is generated by the top 50 jewellery chains. Consumer
Income is one of the main factors on which the jewellery sales dependent upon. Since sales
are not directly related to price small jewellers can effectively compete with large chains,
rather it depends upon merchandising and effective marketing. Wal-Mart is the largest
jewellery retailer in US. Apart from the specialised jewellery retailers it is sold by department
stores and mass merchants.
2.2 Classification of Jewellery

Jewellery is classified as bridal merchandise, fashion jewellery, silver flatware, watches &
other giftware. Bridal merchandise constitutes of 35% of the market which includes
engagement, bridal & anniversary rings. Fashion jewellery includes bracelets, rings, earrings,
pins, gold chains etc. Largest share of total jewellery sales comes from diamond jewellery &
loose diamonds which accounts for approximately 46% followed by gold jewellery 11%,
coloured gemstone jewellery (rubies, sapphires, emeralds) 9% & watches 4%.
Jewellery sales are highly seasonal in nature. Majority of the profits & around 40% of the
revenue is earned in the fourth quarter. Around 25% of the jewellery sales are in the month of
December. Merchandise Inventories constitute more than 50% of the annual sales. Inventory
controls needs to be checked to prevent fraudulent practices. Countries which offer their own
credit card generally for them accounts receivables are very high. Most of the jewellers
indulge in credit sales. Credit is an important consideration since credit availability is
necessary to sell expensive product. 50% of the jewellers sales are on credit cards, whereas
cash sale constitute very large portion of credit sales. A practice which has resulted in
negative results is when local jewellers extend credit on large purchases to well known
customers. Big chains typically offer a private credit card by not taking any risk themselves
rather through a third party. Small retailers avoid risk by taking only third party credit cards.
Government does not regulate retailers and jewellers except that they must adhere to standard
fair trade & credit laws. Jewellers are provided guidelines by the FTC to accurately advertise
and describe gemstones, especially when they have been treated for change color.
2.3 U.S. Jewellery Market Size

Total US jewellery sales is largest in the world and accounts for 28% of the world jewellery
market; including watches and fashion jewellery the figure accounted for US$65 billion in
2008. In the last 25 years the sector had registered a CAGR of 5.9%. However, in 2007 it
grew by 4.0%, primarily reflecting the slower growth of discretionary disposable income.
The US retail jewellery industry is highly fragmented. The US retail jewellery market
includes formats such as department stores, discount outlets, television home shopping,
internet retailers and general merchandise, apparel and accessory stores. Wal-Mart Stores, Inc
is the largest jewellery retailer in the US, with an estimated 4.6% market share. Signet is the
second largest and has steadily grown its market share to 4.2% in CY 2006, from 3.3% in CY
2001.
Specialty retailers accounted for 47.7% of the total jewellery market in 2006 compared to
48.3% in 2001. The specialty jewellery sector grew 6.7% in 2006.
Figure 2.1: Jewellery Outlets by Store Count and Value in 2008

60%
48%
50%
37%
40%
30%
22%
25%
23%
18%
20%
20%
7%
10%
0%
Specialty
Apparel & Acc. Retailers
General Mechandise
% Sahre out of 130,000 Stores
Others
% Share in US$64 bn
Source: US Dept of commerce
Online jewelry sales in the U.S. market in 2007 were roughly US$4.8 billion, or 7.4 percent
of total jewelry sales, according to preliminary data from the U.S. Department of Commerce.
In the prior year (2006), revised data suggests that online jewelry sales were US$4.0 billion,
or 6.4 percent of all jewelry sold in the U.S. Prior to this major revision in data, the
Commerce Department had reported that just US$2.5 billion, or 3.9 percent of jewelry sales
were made online in 2006.
2.4 Diamond Jewellery Demand

Diamond jewellery accounts for 55% of total jewellery sales in the US market.
Approximately 50% of worldwide diamond jewellery sales are made in the US, according to
the International Diamond Exchange. During the last ten years, the industry growth in
diamond jewellery sales has been 6.4% per annum.
Diamond jewellery accounted for 72% of Signets US divisions sales in FY 2007, compared
to 67% in FY 2002. In the last 10 years diamond jewellery sales have increased by 6.1%
compared to 4.7% for the total jewellery market. At US$32 billion, US accounts for almost
half of the diamond jewellery market worldwide, 15 times the Indian jewellery market.
Figure 2.2: US Jewellery Market Sales Mix in 2007
8%
12%
50%
12%
18%
Diamonds
Precious Metals
Other Gems Pearls
Watches
Others
Source: IDEX online
According to IDEX online in 2009, the net imports of polished diamonds in US showed a
decline by 40% in value and by quarter in volume in July 2009 compared to the same in
previous year. A decline of nearly 75% in the value of rough diamond imports to US was
observed in July 2009 year over year. South Africa & Canada continue to be the top suppliers
of rough diamonds to US. In 2009, US have exported more diamond goods than it has
imported depicting weak domestic demand for diamond jewellery.
2.5 Performance in Year 2008

According to BEA, total US jewellery retail sales, including watches and fashion jewellery,
reached to US$65.8 billion in calendar 2008. The US jewellery market has grown at a
compound annual growth rate of 5.9% over the last 25 years. In calendar 2008, the US
jewellery market grew by a provisional 0.4%, significantly below the 25 year average,
reflecting the challenging economic environment. There was a marked contrast between total
jewellery market growth and the performance of the specialty jewellery sector, which fell by
4.7%. Over the first three quarters of the year the two sectors performed broadly in line.
However, provisional figures show the specialty sector under-performed significantly during
the fourth quarter. As a result, the specialty sector saw a provisional decline in market share
to 44.6% in calendar 2008 from 47.7% in calendar 2007.
Jewellery, watch & clock demand in US (at manufacturers level) witnessed an increase from
2003 to 2008 reaching US$16.45 billion. During the same period the retail sales of jewellery,
watches & clocks grew by 4.5% per year and reached US$65.8 billion.
In 2001 the demand fell sharply following a strong growth in late 1990s because of the
softening of the US economy but the conditions improved in 2002 and so did the demand of
jewellery and related products which continued till 2006. Many factors such as economic
recession of 2007, global financial crisis and the credit crunch, collapse of the housing
market, rising food and energy cost impacted the jewellery, watch & clock demand which
experienced a modest decline in 2007 and sharp decline in 2008. All these factors affected the
sale of jewellery, watch & clock negatively since the consumers curbed their spending.
Figure 2.3: Jewelry Watch and Clock Demand in US at Manufacturers Level (19982008)
US$ Billions
20
15
10
5
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
Source: A&M mindpower and Industry estimates
Fine Jewellery: Includes jewellery made from precious or semi precious gemstones or from
precious metals. The demand for fine jewellery fell from 0.3% per annum from 2003 and
reached US$9.8 billion in 2008.
Costume Jewellery & Novelties: includes jewellery made from artificial pearls, gemstones,
plastic, base metals and other non precious materials. It also includes accessories such as
cigarette cases & compacts. Demand for costume jewellery & associated novelties reached
US$1.7 billon a climb of 5.7% per year which was the fastest for any product segment during
the period 2003 2008.
Industry experts believes that the long term outlook for jewellery sales is encouraging given
the expected growth in disposable income and the increasing number of women in the work
force.
2.6 Industry Players in United States

The jewellery retail industry is subject to intense competition among industry players to
develop and build their brand recognition. Signets competitors include large jewellery
retailers such as Wal-Mart and J.C. Penney, in addition to international, national and regional
jewellery chains. The major competitors of Signet that we have considered in our report are
Zale Corporation (Zale), Blue Nile Inc. (Blue Nile) Tiffany & Co. (Tiffany) and Compagnie
Financiere Richemont S.A. (Richemont).
It should come as no surprise that Wal-Mart is the largest jeweller in the US market due to its
sheer reach. Close on its heels are two specialty jewellers, Sterling and Zale. In fourth place
is QVC, an online sales portal.
Table 2.1: Top US Jewellery Retailers
Retailer Name
Wal Mart
Sterling
Zale
QVC
Tiffany
JC Penny
Sears RoebuskFinlay
Helzberg
Fred Meyer
Jewellery Television
Costco
Macy's East
Target
Neimen Marcus
Shop NBC
HSN
Friedman's
Ross-Simons
Tourneau
Cartier
Whitehall
Source: National Jewellers and IDEX Online
Type
Discount
Specialty Jeweller
Specialty Jeweller
Non Store
Specialty Jeweller
Mass Merchant
Mass Merchant
Specialty Jeweller
Specialty Jeweller
Specialty Jeweller
Non Store
Wholesale Club
Dept Store
Discount
Non Store
Non Store
Specialty Jeweller
Multi Channel
Specialty Jeweller
Specialty Jeweller
Specialty Jeweller
Figure 2.4: US Jewellery Chains Sales Growth in terms of Value

15.00%
12.20% 12.60%
10.00%
Growth Rate
6.20%
5.00%
1.00%
0.00%
Tiffany
Signet
Zale
-5.00%
-5.70%
-7.10%
-10.00%
Q208
Q108
Source: Company reports
Tiffany holds a 5.5% share of the US$28 billion U.S. specialty jewelery market, holding
third-place behind Signet and Zale's. However, Walmart, which is the largest seller of
jewelery in the U.S.
A difficult macroeconomic environment presents an attractive long-term share opportunity
for Tiffany. Over the past two years, the jewellery industry has undergone a significant
contraction with four of the eight main jewellery retailers filing for bankruptcy. According to
the Jewelers Board of Trade, more than 1,400 jewellery companies discontinued operations
during 2008 and 1H09. The jewellery capacity in 2009 has decreased by approximately 510%, a clear opportunity for Tiffany to gain market share. A significant amount of this
capacity came from local jewellery stores. This is in part driven by the capital intensity of the
businesses, and in many cases, meaningful inventory recovery values.
Table 2.2: Consolidations of Jewellery Retailers in US
2007
No. of stores
2008
Open
Close
Net
Projected 2009
Open
Close
Net
Open
Close
Net
Finlay ( Balley Banks

& Biddle)-Bankrupt
Zales
2,080
44
68
-24
31
105
-74
115
-109
2,080
44
68
-24
31
105
-74
115
-109
Signet US
1,401
108
17
91
77
75
15
60
-45
Whitehall-Bankrupt
18
17
373
Friedman's - Bankrupt
377
76
373
377
6
Tiffany & Co (U.S.)
Iridesse-Liquidates
16
16
-16
Claire's north America
2,029
118
109
Ultra Stores-Bankrupt
162
5,764
162
104
92
123
1064
Fortunoff-Bankrupt
Total
12
-12
23
-23
941
24
210
-186
Note: Data as of April 2009

Source: Costar market estimates
Signets US division has an 8.8% market share of the specialty sector in the US and its largest
direct competitor is Zale Corporation, which has a specialty market share of 7.4%.
Competition is also encountered from a limited number of large regional retail jewellery
chains (only six other specialty jewellery retailers have more than US$300 million sales,
according to National Jeweler), and independent retail jewellery stores (including smaller
regional chains with sales of less than US$300 million) which accounted more than 70% of
the specialty market.
Table 2.3: Specialty Jewellery Market Shares (1999, 2001, 2005, 2006)
1999
2001
2005
2006
Signet US
5.2
6.8
8.2
8.8
Zale Corp US
6.5
8.4
7.8
7.4
Chains Ranked 3-7
9.5
10.5
10.1
NA
78.8
74.3
73.9
NA
Other Specialty Jewelers

Source: US Census Bureau
3. Canadian Gems and Jewellery Market

3.1 Market Size
In a global prospect, the United States and Canada stands on top in terms of trading amounted
more than US$1.6 billion per day and US$596 billion at the year end of 2008. Jewellery
market is also strong in both the regions; Canada imports its jewellery from United States. In
2008, despite the heavy fluctuations of Canadian dollar there was an increase of 11% in 2008
as compared to 2007 in jewellery imports from the United States.
The jewellery industry in Canada has reached to US$1.7 billion in 2008 and domestic export
increased from US$524 million in 2007 to US$1,087 million in 2008 from United States to
Canada. This growth in 2008, however, was low in 2009 due to the slowdown of economic
activity around the world and especially in North America. The jewellery industry, which is
mostly compromised of SMEs (Small-and- Medium-Sized enterprises), suffered because of
instability in consumer markets and the inability to keep small operations going because of a
lack of demand. With a large spike in the price of gold and other precious metals over the
summer, consumers cut down their spending and suppliers thus were left with large
inventories.
Apart from United States there were other countries like China, India, Israel and Italy acted
as major exporters of jewellery and silverware in the Canadian market, led to a strong
growth. This shift may have occurred due to exchange rate fluctuations in the Canadian
dollar, which in the latter half of 2008 declined against the U.S. dollar. Ultimately, this may
have led Canadian importers to seek out new markets in which the Canadian dollar had more
clout against the domestic currency.
The strong growth was coming from costume jewellery segment due to inexpensive
alternative to fine jewellery. It also follows the changing trend and preferences according to
demographic needs. Costume jewellery continues to change with the current seasons trends
with materials such as base metals, leather, feathers, glass beads, gems and pearls.
The Canadian diamond market has emerged as a highly sought after global diamond supplier.
Existing diamond mines in Russia and Australia are reaching their production limits, while
northern regions of Canada are still in the early mining stages. In 2007, Canada was ranked
3rd in the world for diamond output and 3rd in the world for value.
Table 3.1: Jewellery Industry (NAICS 33991) Total Canadian Exports (2006-2008)
2006
2007
2008
United States (US))
519,902
524,847
1,087,990
Germany
9,050.20
55,943.78
116,315
United Arab Emirates
1,973.92
14,426.57
40,872
Mexico
210.79
21,767
35,338
Japan
4,564.35
3,808.58
31,462
Note: Thousands of US$

Source: Statistics Canada, 18 Aug, 2009
The total jewellery import in Canada reached to US$1.78 billion of which US$601 million came from
the United States, US$248 million from China; followed by India with US$212 million.
Table 3.2: Jewellery Industry (NAICS 33991) Canadian Imports
2006
2007
2008
United States
458,318
507,483
568,217
China
176,645
207,694
234,887
India
167,771
181,022
200,612
Israel
98,689
120,143
138,389
Italy (Including Vatican

city state)
70,918
81,814
78,767
Total (All Countries)
1,345,027
1,524,389
1,681,138
Note: Figures in Thousands of US$

Source: Statistics Canada, 18 Aug, 2009
4. European Union
4.1 EU Market Size
Representing one fifth of the global market value EU is the second largest market for
jewellery after USA. EU consumption in 2008 was US$34.26 billion with an average per
capita expenditure of US$69.38 of which US$9.41 was costume jewellery. There are
differences observed in the spending of individuals in different parts of EU countries. Italian
(US$125.09) or Greek people (US$125.09) spent more on precious jewellery, while in
Eastern countries they spent an average of US$15.29 on jewellery every year. In 2008,
Eastern EU countries represented 4% of the EU jewellery market value.
Markets like Italy (21.7%), France (17.3%), UK (16.3%) and Germany (13.3%) constitute
nearly 70% of the market value. In 2008, approximately 200 million pieces were sold and
most of the pieces constituted of costume and silver jewellery specially earrings and
neckwear. France, UK, Spain, Germany, Netherlands and Eastern EU countries are the
largest markets by volume.
EU jewellery sales increased from US$29.21 to US$29.89 million between 2004 2006.
Easily affordable (economical) jewellery was being imported from India and China thus
Costume jewellery enjoyed substantial growth. Teens and pre-teens preferred (body
jewellery, metal, titanium or silver jewellery with beads or crystals), whereas men and
women preferred diamonds, pearls and accessible jewellery with coloured gemstones.
Since 2007, due to the global recession and enormous price rise of precious metals jewellery
sales have declined considerably. The preference of consumers changed and they stared
preferring silver and costume jewellery to precious jewellery like gold, platinum and
diamond jewellery. Some preferred cutting down their expenditure on jewellery and started
looking for personal pieces that can be used for longer duration. Initially individuals used to
see intrinsic value of the jewellery but now individuals started giving importance to other
factors such as good design & affordable price. The sale for precious jewellery in EU fell to
US$29.64 billion in 2008, while for costume jewellery it rose to US$4.62 billion for the same
year.
Figure 4.1: Consumption of Jewellery in EU (2004-2008)

35000
29645.49
30000
26186.34
25769.88
US$ Millions
25000
20000
15000
10000
4621.68
3710.22
3474.19
5000
0
2004
2006
Precious
2008
Costume
Source: Euromonitor, National Trade Associations, Research Agencies, Trade Estimates (2009)
There were many reasons such as recession in 2007 and high prices of precious metals which
affected the sale of gold, platinum & diamond jewellery in the EU markets in 2007 2008.
Although if we still take into account the entire period ranging from 2003 2008 still there
were registered average increase in precious jewellery sales. This was largely seen in the
Scandinavian countries such as Netherland, Poland, Ireland and Greece etc.
4.2 EU Costume, silver and palladium jewellery Demand

Eastern European countries such as Finland, Ireland, Austria, Sweden, Greece, and Spain
observed an increase in the costume jewellery sales. Fashion conscious consumers now prefer
designer jewellery and have been more conscious on price and less on material content.
Costume or silver jewellery acts an alternative for precious jewellery. In platinum wedding
rings or in white gold, jewellers and designers discovered a cheaper precious metal called
Palladium which was increasingly used.
Precious, Gold and Silver Jewellery
In 2008, precious jewellery accounted for 86% of all the jewellery sold in EU. The value of
precious jewellery sales from 2004 2008 decreased from US$25.73 to 29.69 billion,
average decrease of 0.7%. Consumers prefer platinum because of its unique elements such as
its purity, durability & its white colour. The German, UK and Scandinavian platinum ring
markets showed positive growth till 2006. The main reason for the success of platinum is its
acceptance in the younger age group. The significance of platinum is maintained as new
designs creating special extraordinary pieces of jewellery are present in the market. However
the sale of platinum jewellery has suffered because of the EU recession in 2007 2008 and
also because of the high prices of platinum. Palladium, a cheaper metal with similar
characteristics is increasingly used as an alternative.
63% of the total EU market in 2008 by value comprised of gold jewellery and gold jewellery
with gems. In USA 14 carat is more popular while in EU 18, 14 and 9 carat. The demand for
gold jewellery mostly comes from Italy, UK, Spain and Greece. In UK 9 carat gold is more
common and also in some of the Eastern EU states, where most people now prefer 14 carat.
Gold is much more expensive than silver even though the prices of silver have increased.
Silver has benefitted from the high price of gold due to recession. Silver comes second as
compared to gold in case of number of pieces sold in Italy, UK, Germany, Spain,
Netherlands, Scandinavian countries and in eastern EU countries. The consumption of silver
jewellery increased in almost all EU countries in terms of volume also in terms of value EU
silver jewellery retail sales were approximately US$6.32 billion in 2008.
4.3 The Jewellery Demand in Romania

In 2008, the Romanian jewellery market in terms of retail sales was valued at US$169.05
million. In 2008, the per capita spending among the Romanian people at US$7.94 was the
lowest in EU with an average of US$69.38. It was also the lowest among the Eastern EU
Member States. In 2008, precious jewellery sales accounted for more than 80% of the total
jewellery sales. These sales were confined to a very small group of affluent people. Cheap
costume jewellery sales accounts for the vast majority of the sales. Romania is one of the
smaller jewellery markets in EU, despite its large geographical size and population. In terms
of jewellery market size Romania comes below Czech Republic but it is above Cyprus and
Luxembourg.
US$ Millions
Figure 4.2: Romania Jewelry Consumption (2004-2008)

180
160
140
120
100
80
60
40
20
0
169.05
147.96
108.14
114.54
124.34
2004
2005
2006
2007
2008
Source: Hong Kong Trade Centre, Romania Business Review
The most popular one among the gold jewellery is 14 carat. The import duty till 2007 was
very high leading up to 50% of the selling price, excluding the wedding rings. When
Romania aligned its import tariffs with EU, tariff reductions on wide range of consumer
goods were offered especially for Gold Jewellery. Industry experts believe in 2007, around
75% of the precious jewellery market comprised of black market.
Figure 4.3: Romania Jewelry Consumption by Segments (2004-2008)
US$ Millions
150
100
50
119.19
87.01
21.131
92.13
22.41
135.24
100.48
23.864
28.77
33.81
0
2004
2005
2006
Precious
2007
Costume
2008
Source: Hong Kong Trade Centre, Romania Business Review
Among the Romanians, costume and silver jewellery (with semi precious stones such as
opals, turquoise, topaz or imitations of amethyst & rubies) was very famous with the
bohemian style of 1960 and 1970. Also in 2007, costume jewellery of leather, shells, wood,
glass beads, crystals or rhinestones was very popular. Street markets are still a very important
place where a lot of jewellery is purchased. The Romanian market is under an influence of
change where choices of individuals are undergoing transformation. Affluent people and
Young women have developed a liking for modern shopping which has made jewellery
prices from international retail outlets more expensive.
In the coming years the jewellery market is expected to grow, but price inflation and higher
import prices will slow down the demand. Many Romanians are aware of about the
international trends but they cannot afford to follow them
As the Romanian economy would integrate with EU, it is expected that the jewellery
consumption would increase in the coming years. Middle class in Romania is growing; also
the disposable incomes are rising which would lead to individuals demanding jewellery of a
good design. Diamond jewellery is more popular in the higher price segment. Many of the
foreign brands such as Cartier, Louis Vuitton and Secret Garden have opened their retail
outlets in Romania. In 2008, Romania had around 358 small to medium sized companies,
which generated a turnover of US$27.93 million employing around 2,857 people. The
demand for costume jewellery production has increased by 7.5% and for precious jewellery
by 5.7% since 2004. Along with this the demand in the domestic market has also increased
and more outsourced production for Italian manufacturers.
Figure 4.4: Jewelry Production in Romania (2004-2008)
US$ Millions
25
20
22.05
17.584
14.916
15
10
5
3.729
3.768
5.88
0
2004
2006
Precious
Source: Trade Estimates (2009)
2008
Costume
4.4 The Jewellery Market in Bulgaria

In terms of retail sales the jewellery market in Bulgaria was valued at US$74.97 million in
2008. The country has the smallest jewellery market in EU being below Slovakia, but above
Slovenia and Malta. Compared to an average of US$69.38 spent as per capita in 2008,
Bulgarians spent US$9.7 per capita, which was the lowest in EU.
Figure 4.5: Bulgaria, Jewelry Consumption by Value (2004-2008)
74.97
80
65.76
70
US$ Millions
60
50
51.045
55.264
45.991
40
30
20
10
0
2004
2005
2006
2007
2008
Source: Bia-Bg, Trade Estimates (2009)
The consumers spending on jewellery has received a boost after Bulgaria had joined the EU
which bought an increase foreign investment and privatisation. Import duty which was as
high as 50% of the selling price was charged on the precious jewellery. A large tariff
reduction was offered on wide range of consumer goods specially jewellery when Bulgaria
aligned with EU.
The Bulgarian industry is small and fragmented. By value the majority is of precious
jewellery i.e. jewellery articles of precious metals (gold and silver) with or without stones. In
2007 by volume 21,770 pieces of costume jewellery i.e. imitation jewellery of other material
was produced in 2007. The domestic demand for jewellery is not met by the Bulgarian
manufacturers that increasingly become more diverse.
US$ Millions
Figure 4.6: Bulgaria Jewelry Production by Value (2004-2008)
18
16
14
12
10
8
6
4
2
0
16.17
11.30
9.20
2004
2006
2008
Source: Bulgarian Industrial Association
The jewellery made in Bulgaria is dominated by the small manufacturers. Some of these
small manufacturers are mixed retailers selling a variety of accessories or some specialise in
precious or costume jewellery. With the advent of large international operators entering the
market this has started to change.
From an exporters point of view exporting from a developing country, it would be beneficial
to identify the importers or wholesalers which specialise in precious or in costume jewellery,
many of which would be having their own retail outlets. In the jewellery sector one would not
find many sale agents operating in Bulgaria.
4.5 The Jewellery Market in Germany

In terms of retail sales, in 2008 the jewellery market in Germany is worth US$4,561 million
which is equivalent to 26 million pieces. Germany has the fourth largest EU market for
jewellery. Germany comes between UK and Spain in terms of value; however figures for
precious jewellery are more than twice as much as those of Spain.
Between 20042008, German jewellery sale decreased by an average annual rate of -0.9%, a
figure below the EU average increase of -0.3%. The consumer regained confidence in 2007 &
the precious jewellery sales increased, which experienced a fall in 2006. However in 2008,
the market for jewellery suffered from economic recession, higher metal prices, increased
VAT rate and a fall in the number of marriages.
The demand for jewellery weakened as many people regarded it as a non essential item in
difficult economic times.
Figure 4.7: Jewelry Consumption by Segments in Value (2004-2008)

5000
US$ Millions
4000
3839.58
3706.63
4163.04
3996.29
3644.91
3000
2000
1000
277.19
301.44
297.56
380.86
398.37
0
2004
2005
2006
Precious
2007
2008
Costume
Source: BVJ - BV Schmuck + Uhren, BBE Retail Experts, Euromonitor (2009)
From 2004 2008, there was a decline in the precious jewellery sales from 93% to 91% from
the total jewellery, showing a higher interest in costume jewellery. Precious jewellery sales
were driven by gold jewellery with diamonds, coloured stones & pearls.
Figure 4.8: German Jewellery Consumption by Product in %, 2008
10%
12%
12%
66%
Gold, Platinum etc.
Silver
Costume
Others
Source: BVJ - BV Schmuck + Uhren, BBE Retail Experts (2009)
According to BVJ (German Jewellery & Watches Association) because of economic

recession the jewellery market is expected to decrease in value by -1% in 2009. An average
annual growth rate of 1% for silver jewellery is expected until 2013.
In comparison to the other leading EU markets, the German market is less concentrated.
From the exporters point, exporting from developing countries there are wide range of
distribution channels, along with some strong and dominant retail groups. The specialised
retail traders carry out the distribution of jewellery in Germany accounting for three quarters
of the German market in 2008.
5. Recent Industry Trends and Opportunities

5.1 UK Gems and Jewellery Demand
The UK market includes specialty retail jewelers and non-specialty jewellery retailers, such
as mail order catalogs, catalog showrooms, department stores, supermarkets and internet
based retailers. The retail jewellery market is very fragmented and competitive, with a
substantial number of independent specialty jewellery retailers. There are approximately
7,500 specialty retail jewellery stores in the UK, which is a similar figure to the previous
year.
The UK jewellery market is vast and accounts for a big share of the global gems and
jewellery market, grew at a compound rate of 5.3% per annum from 1997 to 2004. In 2005 it
showed a variable trend and posed a decline of 2.2%; further grew by 14.0% and 4.2% in
2006, 2007. Per capita spend on jewellery in the UK remains at approximately half of the
level of the US.
The growth of the UK jewellery market can also be estimated from the volume of
hallmarking of jewellery items containing gold carried out by the Assay Offices in the UK.
Hallmarking volumes grew at a compound rate of 2.2% from 1997 to 2004. In the last four
years the volume has been variable and declined by 17.7% in 2005, by 14.2% in 2006, by
4.8% in 2007 and by 34.2% in 2008.
5.2 Symbolic Jewellery has Targeted Spiritual Group

These days use of jewellery is not only limited to marriages or fashion, it has reached to a
different group of people believes in spiritualism. A large group of population is trying to
find solution to their problems through astrology, as the economic uncertainty has added
another fear into their minds. This deeper meaning could be eastern religions, astrology,
tribalism or foreign cultures with each having its symbolic jewellery. This is reflected in the
ongoing significance of body piercing and in the strong impact of different ethic African and
Asian designs in recent jewellery fashion. Stones, symbols or charms that dangle on a chain
or on a pendant are typically used in symbolic jewellery. Next to typical local patterns,
crosses, stars, flowers, moon and other celestial motifs are frequent in jewellery designs.
The demand for symbolic jewellery is strongly coming from Asian countries and few
European regions. In India, tourists are also participating in the growing demand of Symbolic
jewellery market.
5.3 Declining Sales of Luxury Jewellery Retailers with Rising Raw Material
Prices
In the second quarter of 2009, the Luxury jewellery retailers continued to struggle with
negative performance of Luxury Jewely market demand. This business remains under
pressure and rough diamond prices are beginning to rise. Raw material prices are continue to
rise which has affected overall demand of jewellery, though the higher income group
population trying to maintain a balance.
y/y Growth in Sales
Figure 5.1: Luxury Jewelry Retailers Sales Trend (4Q08, 1Q09 and 2Q09)
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
-45%
4Q08
-7%
1Q09
2Q09
-3%
-13%
-20%
-14%
-16%
-15%
-21%
-18%
-22%
-22%
-27%
-30%
-40%
HW Retail
LVMH-Watches & Jewelry
Bulgari-Jewelry
Richemont-Jewelry
TIF
Note: Richemont reporting includes 2H09 and 1H10

Raw material price grew in recent months, which will place some pressure on 2011 gross
margin. The jewellery, platinum and karat gold unadjusted PPI gained momentum in
October, increasing 6.1% year-over-year, up from the September increase of 4.6% year-overyear, +2.3% year-over-years in August 2009 and -0.5% year-over-year in July 2009. The
increase was primarily driven by a 4.6% year-over-year increase in gold prices in October.
The jewellery PPI has decelerated from the high single-digit and low double-digit increases
seen in 1H08. Despite the moderate growth, the October jewellery, platinum and karat gold
unadjusted PPI of 173.9 is 11.1% above October 2007. Recent increases in precious metal
prices drove up the PPI.
Figure 5.2: Jewellery PPI Trends (Jan08-Oct09)
14%
12%
12%
11%
10%
10%
9%
10%
8% 8%
7%
8%
6%
5% 5%
6%
5%
3% 3%
4%
2%
2% 2%
1%
2%
2%
1%
0%
0%
-1%
-2%
Note: Jewelry, Platinum and Karat gold unadjusted PPI

Source: Bureau of Labor Statistics and KeyBanc Capital Markets Inc.
Gold is not only used in consumer products, it is also used to hedge against the dollar and
inflation. Since January 2008, gold prices have continued to trend higher and are up
approximately 39% from December 2007. Industry experts believe a modest gross margin
expansion in late 2009 from the January 2009 pullback in gold prices.
1000
900
800
700
600
500
400
300
200
100
0
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Gold $/Ounces
Figure 5.3: Gold Prices
Source: Thomson & KeyBanc Capital Markets Inc.
5.4 Opportunities in Saudi Arabia Jewellery Market

Saudi Arabia is a strong market for Jewellery with added influence of culture. Historically,
jewellery has played a very significant role in the local Saudi culture, as they take it as a
benchmark of determining a persons status and wealth. Today, jewellery maintains both its
appeal in the form of gifts, and its reputation as an important commodity. Saudi Arabia ranks
number three in terms of global demand for gold, trailing only the United States and India.
Saudi Arabia's total market for gold has ranked third in the world after the USA and India. In
recent years, a strong demand has been seen for gold in the Saudi market, with over Saudi
Riyals 13 billion (equivalent to US$3.5 billion) being spent on the yellow metal in the last
two weeks of November 2008. This trend is reflecting opportunities in this sector as demand
expected to rise higher as more investors turn to gold as a safe haven in the midst of the
global financial crisis.
Since soaring to an all-time high of US$1,033.39 per ounce in March 2008, gold has
plummeted 15.97%. Many Saudi investors see this as the right time for making investments
in gold as its price is more reasonable. Saudi Arabias retail jewellery sector is looking up,
and demand for jewellery has been increasing. Demand for gold reached a record high in the
third quarter of 2008 as investors sought refuge from the financial crisis and volatile stock
markets, according to the World Gold Council (WGC).The WGC said demand for gold
reached an all-time quarterly record of US$32 billion between July 2008 and September 2008
as investors around the world sought refuge from the global financial meltdown. This was
45% higher than the previous record in the second quarter of 2008.
The gold and jewellery markets in Saudi Arabia, as well as the Arabian Gulf countries are
considered to be some of the most rapidly growing markets in the world due to the huge
purchasing power and unprecedented volume of trade in gold and jewellery in the region, and
particularly in the Kingdom of Saudi Arabia. Out of a total US$7.2 billion of annual trade in
gold and other jewellery, 80% are imports, and 20% made locally, making the Saudi market
one of the hottest locations for such an industry.
With government decision to reduce the customs tariff on the imports of gold and jewellery
from 12% to 15%, there was a rise in the volume of trade in gold and jewellery in Saudi
Arabia.
5.5 Bright Prospects in Indian Jewellery Market

Indian Gems and Jewellery is highly fragmented with only 4% accounting for organised
sector (2005). Family businesses dominate with 96% share. There are 15,000 players in the
jewellery processing industry and 6,000 players in the diamond processing industry.
Indian market is a mix of different cultures where sometimes jewellery plays an important
role such as marriages and siding population supports the industry further. Over a period of
six years (2000-2006) Indian gems and jewellery market registered a CAGR of 10.3% and
reached to US$13.5 billion turnover in 2006. Overall it is counted on Worlds fastest growing
market in terms of jewellery consumption.
Gold jewellery forms around 83% of the Indian jewellery market. Since 2003, demand for
gold in India has grown at a CAGR of 12.4%. As per the World Gold Councils FY07 report,
India consumed 800 tonnes of gold in 2007, accounting for 22% of global gold consumption.
Three quarters (600 tonnes) of this was used in manufacturing jewellery.
Also, India is the world's leading diamond cutting and polishing centre, accounting for 57%
share of the global polished diamond market in terms of value, 80% share in terms of
caratage and 90% share in terms of pieces.
Figure 5.4: Retail Sales of Jewelry in India (2000-2006, 2010E and 2015E)
Sales in US$ Billions
30
27.5
25
18.1
20
15
10
11.75
7.42
7.24
6.6
7.3
2000
2001
2002
2003
13.6
8.9
5
0
2004
2005
2006
2010E
2015E
Source: A&M Mindpower and industry estimates
The growth in Indian jewellery market has been driven by many factors directly or indirectly
of which changing life style, E-retailing, rising number of population between 23-45 years
age group and purchasing power of middle income and high income groups contributed the
most.
In 2010, retail sales for jewellery is expected to reach US$18.3 billion alone in India and
further expected to reach US$28.3 billion by 2015. Despite the economic slowdown, this
sector is expected to continue to shine in coming years. Rising raw material prices slowed the
growth leaving loss in revenue in their revenue but future of this sector is secure.
5.6 Impact of Economic Recession over Diamond supply/demand

Almost all industry participants believe that there is a looming shortfall of diamond supply
against demand. This is apparent because the number of kimberlites discovered has fallen
behind the number required for the discovery of economically viable deposits in order to
cover the ongoing depletion of reserves. Over time it has been estimated that increasing
diamond supply may only amount to about 1%/year whereas diamond demand looks set to
increase at 2%/year. It is this squeeze that is expected to push prices higher.
In more recent months the diamond market has been subject to extreme influence from the
credit crunch which has put strain on the banking relationships in the diamond cutting
centres. In particular, the diamantaires often finance their working stocks through short-term
debt and this area of finance has all but dried up. As a consequence, the diamantaires were
forced to liquidate their stocks and this generated a short-term oversupply of material into the
market.
In order to bring the supply/demand situation back into balance De Beers and Debswana as
the worlds largest producers on a combined basis closed a large proportion of their
production capacity at the start of 2009. This has recently started to have some positive effect
on diamond prices and Debswana has also recently started to remobilise its operations. Alrosa
also aided the situation by producing but not selling diamonds. Interestingly, while the retail
market remains weak, it is clear that some jewellers are attempting to hold price points,
which bodes well for the future of the market. Indeed, with an improving economic backdrop
and easing of liquidity in the cutting centres we anticipate that 2010 and beyond will see the
recovery in diamond prices continue.
6. Driving Forces in Gems and Jewellery Sector

6.1 Increasing Urban Population with Contribution of Working Women
Over the past 30 years, the urban population has increased at a rate that by the end of 2008,
more than half of the world population is living in cities. The reason for the increase in
urbanization, especially in emerging economies of Asia and Africa is due to the geographical,
cultural and economic factors. Urban areas provide better access to education and health
facilities, wider employment opportunities and higher incomes.
Figure 6.1: Global Urban Population by Geography (%): (2004-2008)
90
80
Population (%)
70
60
50
40
30
20
10
0
North
America
Europe
Oceania
2004
Asia
2006
Latin
America/
C aribbean
Africa
World
2008
Source: United Nations Population Division
As seen in the above graph, over the past four years, urbanization has increased in the
countries of Asia (including the Middle East), Latin America/ Caribbean and Africa. Despite,
larger market share being held by the US and Europe, these above mentioned regions are the
future growing markets for the Gems and Jewelry industry.
The size of the female population also has an effect on the market because women are the
leading consumers of jewellery and possess almost 90 percent of all jewellery purchased in a
given year (including self-purchased and gifted jewellery). Furthermore, the number of
marriages that occur annually is also a good indicator of jewellery demand, as engagement
rings, wedding bands and other bridal jewellery account for a large portion of the fine
jewellery market. Also, the 25- to 54-year old demographic are top spenders on jewellery and
watches.
These socioeconomic trends, however, are most visible in urban areas, where most women
work in companies and therefore their time schedule is busier. Increasing urbanization and
the resultant increase in income have allowed consumers to buy better quality and more
sophisticated food products, and nowhere has this been more in evidence than in the baby
food market.
There have been considerable improvements in recent years in female labor market, with
many women progressing from precarious jobs to wage and salaried employment. Induced by
greater urbanization and access to education, these women now have greater employment
potential, income-earning capacity and decision-making authority within the household. In
2006, 46% of the worlds working women were in wage and salaried employment compared
with 41.1% ten years earlier. New opportunities have arisen, especially in tradable sectors
and in home-based businesses linked to global production networks.
Figure 6.2: Contribution of Women to Employment Growth: 1991 - 2007 (%)
North Africa
27
Middle East
31
Asia Pacific
35
Central & Eastern Europe and Former Soviet

Republics
39
Sub- Saharan Africa
41
Latin America & the Caribbean
52.5
Advanced Economies
62
0
10
20
30
40
50
60
70
Source: IILS estimates; ILO, 2008a.
Since, there are more working women today than a generation ago, a preference for platinum
jewelry has been on the rise. Consequently, they have more money to spend on their luxuries.
Apart from income, working women are more socialized and this leads to fashion jewelry
demand.
6.2 Mens jewellery Demand

In the past few years mens jewellery has taken a safer place in the industry, especially
among younger men in Spain, Italy, France, UK, Greece, Germany, the Netherlands,
Belgium, Scandinavian countries and in some Eastern EU markets. Mens have become more
conscious for their looks and dressing and the trend of perfectionism supported the jewellery
demand in this group of population. The modern man wants to create his own look, just as
women have done for ages. Young men were influenced by the popular surfing, beach and
urban fashion trends or by celebrities.
Popular items among men are silver, gold or beaded neck chains, pendants, bracelets, rings,
earrings and belt buckles. Alongside stainless steel, silver is the material most being preferred
by men. The shapes are usually clear and silver is often contrasted with black or with red
gold.
In 2007/2008, black was a favoured colour in mens jewellery collections being apparent in
jewellery pieces with black enamel, leather, carbon fibre and black diamonds. Other hot items
were tag pendants, rubber bracelets, chunky crosses and bold rectangular link chains of
stainless steel or silver. Urban chic style jewellery featured neckwear and wrist wear with
beads, diamonds and black and white enamel.
6.3 Jewellery a Symbol of Changing Lifestyle among working women

Now days with growing education rate and rising awareness female segment of the
population has become independent, not only in developed countries but this trend has been
seen in developing countries too. Womens are no longer dependent upon their partners for
their needs and they can easily manage their expenses according to the changing trend.
Working women are the most important segment for jewellery and represented around 65%
of EU jewellery value sales in 2008. As a result of more foreign investments in Eastern EU
states, the number of working women has grown steadily there. Despite the economic
recession, the ratio of working women in the EU27 countries still rose from 55.5% to 59.1%
of all EU women, between 2004 and 2008. Increases were observed in all EU countries,
particularly in Bulgaria, Germany, Spain, the Netherlands, Austria, Poland and the Baltic
States.
The Scandinavian countries and the Netherlands have high ratios of (part time) working
women, while Malta, Italy and Greece had the lowest ratios. Women aged between 25 and 54
years were strongly represented, but the biggest growth was observed in the older age group
(55 64 years), particularly in Austria, Germany, Slovakia, Finland, Spain, Italy and Ireland.
Older working women have become fashion aware over a longer period of time. The more
working women means higher levels of disposable income and the growing importance of
womens appearance at work and in their social life. There is a clear trend in most countries
among younger working women to reward themselves for working hard. They buy something
extra that can be a well-designed jewellery piece adding an extra touch of elegance and
personality to their outfit. The more classic icons of femininity (flowers, butterflies, charms,
high heels, romantic inspiration) are played with by women of all ages. Especially in the UK,
France and southern EU countries, women tend to express their girl power more than
before, but without losing touch with the soft and sensual.
This way working women contributes in the growth of the sector, pushing the demand for
designer and elegant jewellery and developing regions like China and India.
6.4 Rising consumer spending and Personal Income

Globalization has redefined the forces that drive inflation, interest rates, wages, profits,
employment, currencies, and economic growth. Since 2003, there has been a spurt of global
growth, with decrease in unemployment rates and increase in real wages across the emerging
economies. Low- and middle-income economies share of global output also increased from
34% to 41%, growing faster on average than high income economies. Few large countries
such as China, India, and Russia are driving these averages. Prudent fiscal and monetary
policies of the governments, decreased interest rates, increased investments and outsourcing
services have all aided the growth in consumer income from 2001 to 2007.
Figure 6.3: World Gross National Income per capita (PPP): (2001 - 2007)
Per Capita Income (US$)
40,000
30,000
20,000
10,000
0
2001
Low income
Upper middle income
Europe & Central Asia
South Asia
Source: The World Bank
Note: PPP: Purchasing Power Parity
2003
Middle income
Low & middle income
Latin America & Caribbean
Sub-Saharan Africa
2007
Lower middle income
East Asia & Pacific
Middle East & North Africa
High income
The strong economic growth of the past few years propelled income level across the world,
allowing consumers to spend more on food and have greater discretion in spending. In
general, with rising income, consumers devote less time and effort to food preparation and
reallocate spending away from raw food products to foods that are easy to prepare, require
little preparation, and are convenient to eat. This particular behaviour also enabled the
consumers to spend increasingly on baby food products.
In addition to rising income, demand for luxury jewelry in developing countries of Eastern
Europe, Asia, Middle East and Africa also helped drive the growth of the industry in the
above mentioned regions.
Total US consumer spending, an indicator for jewellery sales, fell a slight 0.5 percent,
primarily from nondurable goods expenditures, in August 2009 compared to the same month
in 2008.
US personal income, which drives how much consumers might spend on jewellery, fell 2.6
percent in August 2009 compared to the same month in 2008.
7. Gems and Jewellery Market Forecast

In recent years economic recession left an impact over the shining jewellery market with
rising unemployment rate. In European Union, future prospects are uncertain for jewellery
market as in most of the countries consumers are cutting down expenditures on jewellery.
Also there are chances for second hand jewellery to pick a share in the market. Consumer
confidence might return in 2010, but market growth will still be weak. Much will also depend
on the price development of gold and platinum.
Since jewellery is an essential part of an outfit in most EU countries, further increases are
expected for accessible silver and costume jewellery. A grading up to a higher quality of
accessible jewellery is expected, which will be in terms of designs focussed on style in large
EU market and Scandinavian markets. Also computer aided designs will continue to grab the
attention of people follow fashion statements with raising demand for precious metal and
coloured stones.
Figure 7.1: Global Jewelry Sales Forecast (2008-2009, 2010 & 2015)
225
250
US$ Billions
200
178
180.2
185
2008
2009E
2010E
150
100
50
0
Source: A&M Mindpower and Industry estimates
2015E
In 2008 and 2009, the U.S. jewellery retail industry has gone through a radical restructuring,
as at least 5-10% of the industry has declared bankruptcy and/or closed but 2010 will bring
some positive changes in the market demand with an upward shift in disposable income. US
personal consumption expenditures for jewellery and watches are forecast to grow at an
annual compounded rate of 4 percent between 2009 and 2014.
Figure 7.2: US Consumer Spending Growth on Jewelry (2009-2014E)
7%
6%
6%
5%
5%
5%
2013E
2014E
4%
4%
3%
3%
2%
1%
1%
0%
2009
2010E
2011E
2012E
Source: US Census bureau
Jewellery, Watches and clocks demand is expected to build again from jolt in 2008 to
increase of 2.7% y/y reaching US$17.8 billion in 2013. The impact of economic downturn
can be seen over the next few years with turning consumers interest to choose less expensive
jewellery pieces. It is expected that by 2013 the US economy will be able to recover
completely and after that once again demand for expensive jewellery rise up. In addition,
gains will be fueled by consumers desire to accessorize their outfits with coordinating
jewellery or a stylish watch.
Source: A&M Mindpower estimates
2013E
18.5
18
17.5
17
16.5
16
15.5
2008
US$ Millions
Figure 7.3: Jewelry Demand Forecasted at Manufacturers Level (2008 & 2013E)
8. Industry Players Profiling

8.1 Tiffany & Co.
8.1.1 Business Map
Tiffany & Co. is one of the leading players in the international jewellery and accessory
market with broad range of products offering like jewellery, crystal, china and flatware. It
came into existence in 1837 and completed its IPO in 1987. The Company currently operates
88 stores in the Americas (76 in the United States), 99 stores in Asia-Pacific and 24 stores in
Europe. Tiffany primarily caters to upper income consumers, but offers a range of products
that capture a more diverse customer base.
The Companys reportable segments are as follows:
Americas includes sales in TIFFANY & CO. stores in the United States, Canada and
Latin/South America.
Asia-Pacific includes sales in TIFFANY & CO. stores in that region, as well as sales
of TIFFANY & CO. products in certain markets through business-to-business,
Internet and wholesale operations.
Europe includes sales in TIFFANY & CO. stores in that region, as well as sales of
TIFFANY & CO. products in certain markets through business-to-business, Internet
and wholesale operations.
Other consists of all non-reportable segments. Other consists primarily of wholesale
sales of diamonds obtained through bulk purchases. In addition, other includes
worldwide sales made by businesses operated under trademarks or trade names other
than TIFFANY & CO., such as IRIDESSE, as well as earnings received from thirdparty licensing agreements.
Industry Codes
ANZSIC 2006 Codes:
4253
Watch and Jewellery Retailing
2299
Other Fabricated Metal Product Manufacturing Not Elsewhere Classified
4259
Other Personal Accessory Retailing
3732
Jewellery and Watch Wholesaling
2591
Jewellery and Silverware Manufacturing
NACE 2002 Codes:

5147
Wholesale of other household goods
5243
Retail sale of footwear and leather goods
3622
Manufacture of jewellery and related articles not elsewhere classified
2861
Manufacture of cutlery
5248
Other retail sale in specialised stores
NAICS 2002 Codes:

339911
Jewellery (except Costume) Manufacturing
423940
Jewellery, Watch, Precious Stone, and Precious Metal Merchant Wholesalers
332211
Cutlery and Flatware (except Precious) Manufacturing
448320
Luggage and Leather Goods Stores
44831
Jewellery Stores
8.1.2 Company Financials

For the year ended Jan 31, 09, companys net sales decreased 3% to US$2.86 billion affected
by the global economic downturn, especially during the fourth quarter. Gross margin (gross
profit as a percentage of net sales) improved 1.1 percentage points in 2008 and declined 1.1
percentage points in 2007. SG&A expenses decreased US$32.39 million, or 3%, in 2008 and
increased US$194.24 million, or 19%, in 2007.
Total sales in the Americas decreased US$173.23 million, or 10%, in 2008 due to a decline in
the number of units sold as compared to increase of 12% reaching US$183 million in 2007.
This decrease included a 16%, or US$220.99 million, decline in U.S. comparable store sales,
partly offset by US$58.06 million of sales in U.S. non-comparable stores.
Total sales in Asia-Pacific increased by 8% represented US$68.22 million in 2008 due to an
increase in the average sales amount per unit as compared to 14% growth or US$105.75
million in 2007. This increase included comparable store sales growth of 4%, or US$28.48
million, and non-comparable store sales of US$33.17 million.
Total sales in Europe increased US$41.05 million, or 17%, in 2008 due to an increase in the
number of units sold. This increase included non-comparable store sales of US$34.91
million. In 2007, total sales in Europe increased US$58.181 million, or 31%, due to an
increase in the number of units sold.
Other sales declined US$14.82 million, or 18%, in 2008 and increased US$31.97 million, or
64%, in 2007. The decrease in sales in 2008 was attributed to lower wholesale sales of
diamonds that were deemed not suitable for the Companys needs, while the converse
occurred in 2007. Wholesale diamond sales were US$54.08 million in 2008, US$70.41
million in 2007 and US$39.85 million in 2006.
Table 8.1: Tiffany & Co. Revenue by Geography in US$ millions (2005-2009)
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
1,586.65
1,759.90
1,560.96
1,427.76
1,311.30
Asia/Pacific
922.03
853.83
748.03
Europe
284.61
243.68
185.47
66.72
81.62
508.52
394.22
401.4
498.52
491.32
490.82
492.1
2,860.01
2,938.81
2,560.71
2,312.81
United States
Other Areas
Japan
Consolidated Total
2,204.81
Note: Figures in US$ Millions

Source: Company Reports
8.1.2 Business Strategies

Changing Store Prototype with Tightening Assortment and Reducing Inventory Level
Tiffany has shrunk its store prototype, which is driving higher returns and arguably a higher
unit growth opportunity. Over the past few years, Tiffany has shifted toward a smaller store
base. Prior to 1993, the Company utilized approximately 45% of the total floor space for
retail selling. Stores opened between 1993 and 2001 utilized approximately 60-70% of the
total floor space for retail selling and ranged from 4,000-7,000 gross sq. ft. Since 2001, new
stores are approximately 5,000 sq. ft. and about 60-70% of the total floor space is devoted to
retail selling. By decreasing the square footage devoted to inventory space and adjusting the
per store merchandise assortment, Tiffany was able to decrease the total size of its stores. In
the United States, new stores typically range from 4,000-8,000 sq. ft. Stores opened since
2001 range from 5,000-6,000 gross sq. ft., displaying jewellery, timepieces and a limited
selection of china and crystal. The average U.S. store is approximately 42% smaller than the
average store size in 1993.
Tiffany tightened assortment and reduced inventory levels. Tiffany stores primarily carry
jewellery and timepieces, while a select number of stores carry china and crystal giftware
items. The Company reduced the number of stores carrying china and crystal giftware and, in
the stores carrying this product, limited the product assortment. The reduction in china and
crystal giftware products reduced the necessary amount of inventory needed, which enabled a
smaller store size.
Figure 8.1: Average Store Sizes (1994-2008)
Gross Square Feet
12,000
10,000
8,000
6,000
4,000
2,000
0
Advertising A Way to Differentiate Tiffanys Products

Tiffany competes based on product differentiation, focusing on quality and style, and
therefore devotes a substantial portion of its advertising to preserving its high quality brand
image and assuring brand recognition. Tiffany takes both a long and short-term view on
advertisements, using advertising dollars to preserve its brand image as a luxury jeweler and
to drive product demand. The worldwide advertising costs include dollars spent on media,
production, catalogs, promotional events and other related items.
Tiffany uses its brand reputation as a main competitive factor, it also uses a portion of the
advertising spend on public relations promotional activity through charity sponsorships,
grants and merchandise donations. The Company also now advertises opening price points as
part of its print advertising campaign, demonstrating that the brand has wide price reach.
8.2 Signet Group Ltd.

8.2.1 Business Map
Signet is a retailer of jewellery, watches, gifts and fashion accessories, operating jewellery
shops in the UK and the US. The company is registered and headquartered in England, with
its primary listing on the London Stock Exchange. The company derives a substantial
quantum of its revenues from the US market and is the largest in the US specialty jewellery
sector. As part of its revenue expansion plans, Signet plans to aggressively increase the
number of stores in the US.
Signets US division is the largest specialty retail jeweler in the US with approximately 8.8%
share of the specialty jewellery market. It also became the largest specialty retail jeweler in
North America during FY 2007.
Diamond jewellery contributes to a substantial portion of Signets revenues in the US, while
gold and silver jewellery were the major revenue contributors in the UK. In FY 2007, sales of
diamonds, gold and silver jewellery was primarily to cater to the bridal category, which
accounted for approximately 45% of the merchandise sold during that year, and its
participation in the sales mix has been growing over the years.
Industry Codes
ANZSIC 2006 Codes:
6240
Financial Asset Investing
NACE 2002 Codes:
7415 - Management activities of holding companies
NAICS 2002 Codes:
551112 - Offices of Other Holding Companies
US SIC 1987:
671
-
Holding Offices
UK SIC 2003:
7415 - Management activities of holding companies
Company Financials
In fiscal 2009, total Group sales decreased to US$3,344.3 compared to US$3,665.3 million in
2008. In 2009 sales was down by 8.8% on a reported basis and 5.7% at constant exchange
rates. This reflected lower sales in both the US and UK divisions. In fiscal 2009, gross
margin was US$1,080.1 million (fiscal 2008: US$1,250.7 million), down by 13.6%. This
reflected deleverage of the expense base. Selling, general and administrative expenses were
US$969.2 million (fiscal 2008: US$1,000.8 million), down by 3.2%. This decrease reflected
expense savings and the impact of the change in the pound sterling to US dollar exchange
rate on selling, general and administrative expenses in the UK division and Group function.
US Division
In a very challenging retail environment, US same store sales were down 9.7% and total sales
were US$2,536.1 million from US$2,705 million in 2008. Sales performance was primarily
driven by the difficult economic conditions with same store sales falling by 6.0% in the first
three quarters. Following the sharp deterioration in consumer sentiment in mid September,
and a further decline in early December, same store sales in the fourth quarter were 16.1%
lower than the comparable quarter in fiscal 2008.
UK Division
In fiscal 2009, same store sales decreased by 3.3% (H.Samuel down by 2.6% and Ernest
Jones down by 4.0%). Total sales decreased by 3.8% at constant exchange rates and were
US$808.2 million as reported (fiscal 2008: US$959.6 million). In the first nine months of
fiscal 2009, same store sales increased by 0.8% (H.Samuel up by 1.1% and Ernest Jones up
by 0.5%).
Figure 8.2: Signet Group Revenue by Segments (2007-2009)
3,000.00
2,652.10
2,705.70
2,536.10
US$ Millions
2,500.00
2,000.00
1,500.00
1,000.00
959.6
907.1
808.2
500.00
0.00
2007
2008
US Trading
2009
UK Trading
8.3 Zale Corporation

8.3.1 Business Map
Zale Corporation came into existence in 1924; it is a specialty retailer of fine jewellery that
operates a number of different chains, such as Zales Jewelers, Zales Fine Jewellery Outlet,
Gordon's Jewelers, Bailey Banks & Biddle Fine Jewelers, Peoples Jewelers, Mappins
Jewelers and Piercing Pagoda. The company operates more than 2,300 locations throughout
the United States, Canada and Puerto Rico. Zale Corporation is publicly traded on the New
York Stock Exchange under the symbol ZLC and is headquartered in Irving, Texas.
Its Fine Jewellery segment is comprised of five brands, predominantly focused on the valueoriented consumer as our core customer target. Each brand specializes in fine jewellery and
watches, with merchandise and marketing emphasis focused on diamond products.
The All Other segment includes insurance and reinsurance operations.
Industry Codes
ANZSIC 2006 Codes:
4251
Clothing Retailing
4253
Watch and Jewellery Retailing
NACE 2002 Codes:

5242
Retail sale of clothing
5248
Other retail sale in specialised stores
NAICS 2002 Codes:
448150
Clothing Accessories Stores
44831
Jewellery Stores
US SIC 1987:
5632 Women's Accessory and Specialty Stores
5944 Jewellery Stores
UK SIC 2003:
52423 Retail sale of other women's clothing
52484 Retail sale of jewellery, clocks and watches

Zale Corporations comparable store sales declined by 6.8 percent during the first quarter of
fiscal 2010 while Gross margin increased by 10 basis points to 48.6 percent compared to the
same period in the prior year. In November 2009, comparable store sales declined by 18.6
percent compared to the same period in the prior year. Historically, the month of November
has represented approximately 25 percent of total revenues for the second quarter of our
fiscal year.
Table 8.2: Zale Corporation Revenues by Segments (2005-2009)
Fine Jewelry
Jul-09
Jul-08
Jul-07
Jul-06
Jul-05
1,535.68
1,876.28
1,876.68
1,864.28
1,768.48
232.81
249.51
262.61
276.61
280.91
11.3
12.4
13.6
13.1
12.9
1,779.71
2,138.01
2,153
2,154.01
2,062.21
Kiosk
All Other
Consolidated Total
Note: Figures in US$ Millions

8.4 Gitanjali Gems

8.4.1 Business Map
Gitanjali Gems is the largest diamond and jewellery company in India and one of the leading
player in the global market; established in 1986. The company operates three business lines
(i) Diamond Processing and Jewellery Manufacture and Retail, (ii) Lifestyle, and (iii)
Infrastructure. The companys main focus areas for the immediate term are Diamonds &
Jewellery and Infrastructure. Its value chain includes sourcing of rough diamonds
processing wholesale & jewellery manufacture jewellery branding retailing in India and
the US.

Jewellery contributed just 15% of total sales in FY06, its contribution has increased to 44% in
FY08 and we expect this will increase further to 60% by FY12e.
EBIT and EBIT margins
Jewellery segment
Jewellery segment margins were 10.5% in FY06; they deteriorated to 7.6% in FY07 and
6.9% in FY08 due to:
Foray into Indian branded jewellery business, where margins are lower than for
exports since this segment is still in investment mode
Acquisition of US chains, Rogers and Samuels, which were loss-making
Diamond segment
Margins in the diamond segment are low, in the range of 3-4%. This is a commodity business
with low differentiation and we assume margins are flat going forward.
Segment EBIT to grow at a CAGR of 8% in the three years FY08-FY11E, in line with sales
growth
Table 8.3: Gitanjali: Income Statement Snapshot (2007-2011E)
FY07
FY08
FY09E
FY10E
FY11E
Diamond Sales
23,833
27,523
30,010
32,210
34,372
y-o-y growth
15.3%
14.4%
10.1%
7.3%
6.7%
Jewellery Sales
11,156
21,621
27,605
34,640
43,011
y-o-y growth
201.5%
93.8%
27.7%
25.5%
24.2%
Total Sales
34,674
48,280
57,039
66,182
76,609
y-o-y growth
44.3%
39.2%
18.1%
16.0%
15.8%
Diamond EBIT
708
920
1,020
1,095
1,169
EBIT margin
3.0%
3.4%
3.4%
3.4%
3.4%
Jewellery
EBIT
844
1,484
2,225
2,903
3,643
EBIT margin
7.6%
6.9%
8.1%
8.4%
8.5%
Total EBIT
1,649
2,398
3,245
3,998
4,811
EBIT margin
4.8%
5.0%
5.7%
6.0%
6.3%
INR Million
8.4.3 Business Strategies

Geographic Expansion
Apart from balancing its presence across the value chain, Gitanjali is in the process of
spreading its geographic presence. In addition to supplying polished diamonds across the
globe and selling jewellery in India, Gitanjali fabricates jewellery for several jewellers based
in the US, Middle East, Europe and South East Asia. Moreover, it has established retail
presence in the US with the acquisition of jewellery chains, Samuels and Rogers; it has plans
to establish retail operations in China, too.
Focus on Jewellery Manufacturing and Sales
The company is consciously moving away from diamond processing to jewellery
manufacture and sales, with the contribution of the diamond segment to fall from 85% in
FY06 to 56% in FY08 and 44% in FY11e per our estimates. This would result in EBIT
margin improvement from 4.3% in FY06 to 5.0% in FY08 and 6.3% in FY11e.
Gitanjali has become an integrated player straddling the entire value chain, including
sourcing, diamond processing, jewellery fabrication and jewellery retailing. We believe that
this structure gives Gitanjali benefits of scale and cost savings, enabling it to become the
industry leader of the future.
Planning to Develop Special Economic Zones
Gitanjali plans to develop six SEZs (gems and jewellery as well as multi-purpose). We focus
on Hyderabad SEZ, which has been approved by the government. The Hyderabad SEZ is
spread over 170 acres, of which 50% will be the processing zone mainly devoted to gems and
jewellery units and the remainder can be used for any purpose such as IT, residential,
commercial or hotels. Gitanjali will have its own processing unit there, occupying 3,65,000
sq ft; it is currently partially in operation. The land is located 2 kms from the new airport at
Hyderabad. The company plans to tie up with a real estate developer to develop the SEZ.

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Worldwide Jewelry Market Demand and Opportunities

2. Jewellery Market in the United States ............................................................... 10

3. Canadian Gems and Jewellery Market .............................................................. 18

4. European Union ....................................................................................... 20

5. Recent Industry Trends and Opportunities ......................................................... 28

6. Driving Forces in Gems and Jewellery Sector ...................................................... 34

7. Gems and Jewellery Market Forecast................................................................ 39

8. Industry Players Profiling ............................................................................. 41

1. Global gems and jewellery Structure and Demand

Global gems and jewellery Structure

Africa, Canada, Russia and Australia

Sources of Raw Material

Jewelry Manufacturing and

India, China, Turkey & Italy

US, Europe, Far East, Middle East and

1.2 Market Size/Demand

Figure 1.2: Global Jewellery Sales (2000-2008)

Source: HSBC and industry estimates

1.2.2 Demand for Diamond and Gold by Geography

Figures in US$ Billions

Source: World Gold Council

Source: HSBC, IDEX online,JIRI

Source: WGC estimates

1.2.3 Global Demand for Precious Metals

difference ave annn.

Major Demand from

Thailand. China. Italy, USA,

Source: GMFS, World Gold Council, Silver Institute

2. Jewellery Market in the United States

2.2 Classification of Jewellery

2.3 U.S. Jewellery Market Size

Figure 2.1: Jewellery Outlets by Store Count and Value in 2008

Apparel & Acc. Retailers

% Sahre out of 130,000 Stores

Source: US Dept of commerce

2.4 Diamond Jewellery Demand

Figure 2.2: US Jewellery Market Sales Mix in 2007

Other Gems Pearls

Source: IDEX online

2.5 Performance in Year 2008

Source: A&M mindpower and Industry estimates

2.6 Industry Players in United States

Figure 2.4: US Jewellery Chains Sales Growth in terms of Value

Source: Company reports

Finlay ( Balley Banks

Tiffany & Co (U.S.)

Claire's north America

Note: Data as of April 2009

Chains Ranked 3-7

Other Specialty Jewelers

3. Canadian Gems and Jewellery Market

United States (US))

United Arab Emirates

Note: Thousands of US$

Italy (Including Vatican

Total (All Countries)

Note: Figures in Thousands of US$

Figure 4.1: Consumption of Jewellery in EU (2004-2008)

4.2 EU Costume, silver and palladium jewellery Demand

4.3 The Jewellery Demand in Romania

Figure 4.2: Romania Jewelry Consumption (2004-2008)

Source: Hong Kong Trade Centre, Romania Business Review