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Leading analyst Paul Zimnisky predicts that China will overtake the USA in diamond jewellery consumption by the end of this decade.
Throughout the pandemic China has shown to be the most resilient consumer market in the world for diamond jewellery. Most jewellery stores in Greater China, which is typically considered to encompass Mainland China, Hong Kong, Macau, and Taiwan, reopened in April 2020 after being closed for part of January and most of February.
While the rest of the world closed in late-March 2020, and remained so for many months thereafter, the Chinese market led the global recovery, acting as a beacon for the diamond industry – especially for downstream participants with a global presence. As early as April, Tiffany & Co., the largest jeweller in the world, said monthly sales in Mainland China were up 30% year-over-year, followed by a staggering 90% increase in May. This momentum continued through the year-end.
Richemont, the world’s second largest luxury conglomerate and parent of high jewellers Cartier and Van Cleef & Arpels, said company-wide sales in China were up a massive 80% year-over-year in calendar Q4, 2020; other luxury and jewellery companies with a presence in the region, including prominently positioned LVMH, noted similarly impressive results out of China through year-end.
Going into the pandemic, Greater China represented an estimated less than 20% of global consumer diamond jewellery demand, according to Paul Zimnisky data, however, post-pandemic, the market could now be as large as an estimated 25-30%.
Mainland China has been the primary performance driver of the Greater China region, in part due to a notable increase in the number of Chinese consumers buying jewellery within Mainland China, versus Hong Kong or Macau – or other popular shopping destinations for luxury-consuming Chinese, like major metro markets in the Americas, Western Europe and Japan (which historically have not only offered Chinese consumers lower prices on luxury goods but also “experiential benefit”).
The global lockdowns and travel restrictions due to the pandemic essentially halted Chinese tourism, which accelerated a multi-year trend of more Mainland Chinese consumers shopping domestically. This followed a series of steps first taken by the Chinese government in early 2016 to encourage more luxury spending within its own borders, including lowering import tariffs for foreign brands and an easing of duty-free shopping restrictions.
While this changing geographic shopping pattern of Chinese consumers is certainly boosting relative sales figures of jewellers in the Mainland market, fundamental Chinese wealth creation and a budding Chinese middle and upper-middle class with a penchant for luxe is underlying the demand.
Many global luxury brands with a presence in China regularly tout figures from consultancies such as McKinsey expressing their enthusiasm for the potential growth of the market, such as: more than 50% of China’s current “wealthy consumers” were not wealthy as recently as 5 years ago; or 80% of China’s “wealthy citizens” are under 45 years old.
Longer-term, at current growth rates China is on pace to overtake the US as the diamond industry’s largest consumer market by as early as the end of this decade. The US currently accounts for about half of global diamond jewellery demand.
On an analyst call in early-March 2021, Anglo American, the parent company of De Beers, said it is forecasting $100 billion in “potential cumulative incremental demand for diamond jewellery between 2019 and 2030 from Chinese consumers living in China.” For context, it is estimated that total pre-pandemic global diamond jewellery demand was about $78 billion on an annual basis, according to Paul Zimnisky data.
Paul Zimnisky, CFA is an independent diamond industry analyst and consultant based in the New York metro area. For regular in-depth analysis of the diamond industry, please consider subscribing to his State of the Diamond Market, a leading monthly industry report; an index of previous issues can be found here. Also, listen to the Paul Zimnisky Diamond Analytics Podcast on iTunes or Spotify for wide-ranging and interesting discussions with prominent guests from around the industry. Paul is a graduate of the University of Maryland’s Robert H. Smith School of Business with a B.S. in finance and he is a CFA charterholder. He can be reached at firstname.lastname@example.org and followed on Twitter @paulzimnisky.