China is today the largest platinum jewellery market, notes the Platinum Guild International (PGI) which recently released its PGI Insight: Rejuvenation of Platinum Jewellery in China.

Yet, in 2017, two decades after the introduction of platinum to the Chinese market, the platinum jewellery industry found itself in a “four-year demand decline”. 

While platinum off-take by Europe and Japan, is marked for use mainly by their respective automotive industries, “jewellery accounts for approximately 70% of China’s demand, with around 12 million pieces sold each year”, PGI states.

Traditionally, China has been a gold jewellery market. In the late 1990s and mid-2000s, young consumers began getting attracted to platinum jewellery “as an alternative metal to gold with a much higher value than silver”. 

The study observes: “A nation-wide consumer campaign by Platinum Guild International brought in shoppers who were looking for something fashionable that 24k gold jewellery could not offer.”

One important aspect highlighted by the Insight study is the different approaches to selling platinum: while in Mainland China local jewellers sold platinum jewellery by  weight – just as they did  24k gold jewellery – some  Hong Kong-based retailers “applied piece-based pricing”.

“These two methods reflect a very different product offering and margin structure,” PGI points out.  

The growth in early days gave those in the platinum jewellery business a fillip.  “Some plain platinum jewellery plants in China used to produce around 300,000 ounces of platinum jewellery per annum at their peak,” recalls the study.

And then, the Global Financial Crisis struck. In early 2008, the platinum price rose to over US$ 2,000 per ounce, before it collapsed to below US$ 900 per ounce in October of the same year. “Fortunately, the risk caused by price volatility was quickly offset by aggressive network expansion of some leading jewellers, which led to a strong recovery in factory orders and stock building,” PGI says.

By 2014, the study says, many leading retailers had already established their presence in Tier 1 and 2 cities, as well as some Tier 3 cities across China. “Between 2014 and 2016, Tier 1 and 2 cities experienced falling store traffic, and many jewellers reported a decline in sales,” the study notes. “Finished stock built at higher platinum prices before 2014 also placed pressure on new orders.”

One mitigating factor was that consumer demand for platinum jewellery has not declined in all categories. “Thanks to the marketing of platinum bridal jewellery, and its association with eternal love, platinum enhanced its position in the bridal category and its size grew 22% between 2014 and 2016,” PGI says.  This was boosted further by PGI introducing the concept of exchanging wedding bands between brides and grooms which resulted in substantial growth in platinum pair rings, especially in lower tier cities.

There have been some changes in consumer requirements as well.  “Outdated design and homogenous products have gradually lost their appeal,” the Study notes. “The lack of sufficient product differentiation and design is a key barrier for consumers to choose platinum jewellery in recent years, especially among younger groups. Consequently, the non-bridal category, which accounts for 70% of China’s platinum jewellery market, lost over 30% ounce volume in Tier 1-3 cities during the same period.”

On the retail front several pressure points impacted platinum jewellery demand as well margins. Also, retailers found it more lucrative to stock other kinds of items. 

“To achieve a high margin for platinum jewellery, one approach is to change the pricing to piece based,” observes PGI.

Yet, the organisation recognises that “without additional value creation, consumers may not be willing to pay a higher premium for a generic product”. 

The PGI stressed product differentiation, “with more emphasis on product design, branding, and marketing by individual retailers”. 

The organisation says, the revival of platinum jewellery consumption asks for a makeover in business model which needs to change “From product-centric to consumer centric”. And this must be translated on all fronts – design, pricing, marketing etc.

To achieve this successfully, the study says, “marketing based on consumer insight plays a more vital role not only in the success of the platinum jewellery retail businesses, but also in growing incremental demand as a whole”. 

The study also said that some retailers have re-positioned themselves in 2017. “Those who have acted fast have seen signs of recovery in the platinum jewellery market,” the Study points out. “Some retailers have significantly increased their margins by converting to piece-based pricing. In addition, retailers who sell platinum jewellery by weight, with improvements in product offerings, design and marketing, have also enjoyed increased margins. On the other hand, selling more platinum jewellery pieces requires a balance to keep the unit price affordable; therefore, some retailers have sold more pieces, with a decline in total ounces. This is not a negative outcome for the platinum jewellery industry, as it helps to accelerate stock turnover and capture the opportunity of a new market segment.”