China wan­der­lust poses hur­dle to De Beers di­a­mond sales

The Star Malaysia - StarBiz - - Features -

CHINA’S new­found pen­chant for lux­ury travel poses the lat­est threat to a turn­around for the US$80bil di­a­mond in­dus­try.

Chi­nese deluxe spend­ing on travel is the “fastest-grow­ing com­peti­tor” stand­ing in the way of di­a­mond sales in the world’s big­gest con­sumer mar­ket, said De Beers SA chief ex­ec­u­tive of­fi­cer Bruce Cleaver. To win those travel dol­lars, he said De Beers could even see it­self ty­ing up with the lux­ury travel mar­ket some­how.

“Lux­ury travel is cer­tainly a com­peti­tor to di­a­monds,” Cleaver said in an in­ter­view in Hong Kong Thurs­day. “If there’s a way to link lux­ury travel to an African des­ti­na­tion where the di­a­mond came from, we’d cer­tainly look into that too.”

The world’s big­gest di­a­mond pro­ducer is seek­ing to kick­start an in­dus­try that’s seen prices for pol­ished di­a­monds slump for the past six years. Its ma­jor Asian mar­kets in­clud­ing China and In­dia re­ported flat or de­clin­ing sales in 2016. The com­pany is also fac­ing hur­dles as a younger gen­er­a­tion of Chi­nese shop­pers in­creas­ingly spend more on high-end elec­tron­ics, travel and fine din­ing than on baubles.

“Chi­nese con­sumers, es­pe­cially the mil­len­ni­als, are will­ing to spend more to en­rich their life­styles through ser­vices and travel,” Bloomberg In­tel­li­gence retail an­a­lyst Cather­ine Lim said. “Jewel­ers can tap into the rise in Chi­nese tourism, both do­mes­ti­cally and over­seas, by sell­ing more through travel retail chan­nels such as tax-free as well as duty-paid points-of-sale.”

World­wide di­a­mond de­mand in 2016 was es­sen­tially flat, as a 4.4% gain in the US off­set slug­gish­ness in Asia, ac­cord­ing to a De Beers in­dus­try re­port pub­lished on Thurs­day. Sales in China and In­dia showed im­prove­ments in the first half of 2017, with sin­gle-digit growth from a year ear­lier, said Cleaver. The in­dus­try ex­pects gains for those coun­tries in the next five years as the global eco­nomic out­look im­proves, though Ja­pan won’t grow as fast as its Asian peers due to its aging pop­u­la­tion, he said.

De Beers is seek­ing to in­flu­ence buy­ing trends by spend­ing US$140mil this year to ad­ver­tise di­a­monds, the most since 2008.

It is fo­cus­ing on women in its main mar­kets -- par­tic­u­larly those be­tween the ages of 18 and 33 - who De Beers says are buy­ing di­a­monds for them­selves as their earn­ing power in­creases. Win­ning over those shop­pers won’t be easy, es­pe­cially in China, where di­a­mond sales de­clined 4.8% last year in dol­lar terms. Com­pe­ti­tion from travel is a big chal­lenge. China is the world’s largest source of out­bound trav­el­ers, ac­cord­ing to the World Tourism Or­ga­ni­za­tion. More than 135 mil­lion Chi­nese trav­elled in 2016, and their spend­ing rose 12% to US$261bil.

Even at home, rich shop­pers who want to make a fashion state­ment are fre­quently opt­ing for items such as Louis Vuit­ton bags and Gucci loafers.

De Beers also is com­pet­ing against com­pa­nies in­clud­ing Chow Tai Fook Jew­ellery Group Ltd that are of­fer­ing fashion jew­ellery at lower prices to lure Chi­nese shop­pers.

“The con­cept that a di­a­mond is for­ever doesn’t sound as fancy to cus­tomers as be­fore, es­pe­cially for young cus­tomers,” Hong Kong-based ICBC In­ter­na­tional Re­search Ltd an­a­lyst Yixin Luo said this week. “Brands may need to re­shape their images.”

De Beers says it isn’t daunted by the chal­lenges. “We are still pretty pos­i­tive,” said Cleaver. “It’s a ques­tion of adapt­ing your brands to the fu­ture, which I think we have all the tools to do.”

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.