Vladimir Potapov

As the tradition goes, the start of this fall in Moscow has been marked by the International Uvelir-2003 Jewelry and Watch Exhibition. This exhibition is an organic part of the world’s largest forums and has been on the business list of manufacturers, sellers and buyers of jewelry products.

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he history of the exhibition, which this year has been held for the 45th time, dates back to 1958. In the Soviet times those were purely formal events to set up and distribute State orders for manufacturing jewelry among producing enterprises as well as to arrange the wholesale trade. Since the beginning of the 1990s the nature of the exhibition drastically changed. It started to show unique works of art, exclusive and serial decorations, bijouterie, precious metal tableware, stone-cut items, jewelry-decorated watches, various accessories, products of folk art trades, antique articles as well as instruments, equipment, jewelry production materials, packaging, collection stones and many other things.
By inviting to participate in the exhibition the organizing firm RosUvelirExpo is seeking to arrange it in such a way so that jewelers and visitors could see the best samples of what has been done in the past year in jewelry production, design and technologies. In recent years precisely technologies, which, in the words of Alexander Rybakov, the president of RosUvelirExpo, guarantee the stable development of production, have been paid the ever growing attention.
The Uvelir-2003 exhibition has been attended by almost 80,000 people, 700 Russian and 200 jewelry firms and enterprises. Over 1,500 trading companies have taken part in it as well. This time jewelry items manufactured by the most famous producers have been exhibited in a new pavilion. Russia’ State museums have also presented their expositions there.

Items by ZAO Severnaya Tchern, city of Velikhy Ustug, Vologda region. Silver, blacking. Photo by Alexei Lokhov

During the exhibition not only excellent samples of the jewelry art have been shown. The productive exchanges of views at conferences, meetings and round-table discussion have been held. On the whole, their participants have given an optimistic assessment to the state and prospects of Russia’s jewelry market. And they have a good reason for it.
In September the gold price in world markets has exceeded its 7 year-long maximum. The manufacturing demand is contributing to this upsurge. Production of jewelry is taking place in many countries. For example, last year Turkish jewelers raised their production by 74 %, including the expansion to the Russian market.
Between 40,000 and 50,000 items are purchased in Russia annually, although its market is undoubtedly more capacious and has a marked trend toward growth. According to the data provided by the Russian Ministry of Economic Development and Trade, last year the volume of the jewelry market in the mass of commodity increased 9 %. It is interesting to note that the production of jewelry in Russia is growing even faster, by almost 30 % a year. In the opinion of the Ministry’s officials, the major incentive for such a spurt was the revocation of excise tax on jewelry, which for a long time experts considered economically absurd since it was, in fact, depressing the national industry and was contributing to the contraband of jewelry products from countries of the Middle East and, particularly, from Turkey.
Today, there about 2,600 jewelry enterprises operating in Russia. A number of small firms is quickly growing. As predicted by president of RosUvelirExpo Alexander Rybakov, who also heads the Guild of Russia’s jewelers, in 2003 jewelers will sell gold decorations for the total amount of $885M and the volume of their production will reach 45 to 47 tons. Thus, the Russian jewelry industry will further expand by almost one third.
The development of the jewelry industry is very important to Russia, all the more so since the country is a large producer of gold being fifth in the world. By the data of Alexander Zakharov, the deputy chairman of Russia’s Sberbank, last year the total volume of gold production amounted to 171 tons. In 2002 Russian banks bought out around 120 tons of gold. With an addition of reserves stocked up earlier 190 tons were exported. At the same time the domestic market, including the jewelry industry, accounts for 30 tons only. "We believe that this is an impermissibly low level of consumption", said Zakharov. He pointed out that in Turkey or Italy, where there is no gold production whatsoever, the annual volume of gold consumption exceeds 100 tons, thanks, mainly, to the existence of developed jewel industry. Alexander Zakharov drew attention to the fact that Russia’s population is buying coins minted of precious metals with ever growing desire. For example, in 2002 Russia’s Sberbank sold gold and silver coins for the amount of $10.5 million but in the first half of 2003 this amount already reached $11M. But the hoarding demand accounts for relatively small share of the gold consumption market with jewelers remaining indisputable leaders.
So far Russia is placed 36th in the world by volumes of using gold in the jewelry industry. And there are some specific reasons for it. Here is only one fact: if the price of a jewel item with no insets usually exceeds the cost of the metal itself by 20 % to 30 %, in Russia this difference reaches 200 % to 300 %. But even despite it, consumers are giving preference to Russian products believing that their quality is higher.
In contrast to Western countries, where buyers of items with brilliants are confident that this way they are making profitable investments, Russians prefer comparatively inexpensive decorations. At present, the highest demand in Russia is for items with tiny (up to 0.3 carat) brilliants costing from $250 to $300. Alexander Ivanyuk, the general director of the Moscow special alloy processing plant, notes that this year the volume of selling such decorations has gone up 2 to 2.5 times! At the same time Pavel Sidorenko, the marketing director from the company Adamas, believes that there is a niche in the Russian jewelry market that is still unoccupied. That is production of highly artistic items, including those made to order. The jewelry group Adamas is actively working in this direction.
Lately, platinum articles are becoming fashionable. This metal is stronger than gold or silver, it is hypoallergenic and goes well with brilliants. Jewelry items account for about 50 % of platinum sales. And Russia is placed second (next to the Republic of South Africa) in the world by supplies of platinum (20 % of the market).
Russians are vigorously expanding the range of jewelry products and improving the sales mechanism. In the opinion of Sergei Bogomolov, the deputy director of Uvelirnyaya Torgovlya Severo-Zapada JSC, it is necessary to use press ads much more aggressively, cancel or, at least, reduce restrictions on merchandise return. As an example, he referred to the experience of his firm, which announced its willingness to take back items that customers do not like. The volume of such returns did not exceed 1 % but instead the advertising effect of this action surpassed all expectations.
As specialists see it, in order to expand the jewelry trade it is necessary to use modern technologies more widely, including those based on automation. The main difficulty is that today every company chooses methods of bar coding independently. As a result, one item may have up to 4 or 5 bar codes. That is why Russian jewelers should develop a single industry standard and, thereby, simplify the stock-taking of products considerably.

Firebird table decoration, symbol of Russian jewelers’ forums. Krasnoselsky UvelirProm JSC. Authored by Ludmila Studennikova. Filigree technique. Cupronickel with silver covering, corundum group stones. Photo provided by Almaz-Holding Group

Alexander Perevedentsev, the head of the Russian Assay Chamber, showed statistical data on operations of Russian enterprises in foreign markets. So, gold import shipments to Russia are done by 84 organizations, silver import shipments are carried out by 82 organizations but only 62 companies are engaged in shipping jewelry products abroad. Russia’s jewelry market is dominated by large producers: 60 % of products is manufactured at 20 enterprises. This prompted the Assay Chamber and the Guild of Jewelers to put forward a initiative to mark items directly at enterprises of large jewelry companies. Alexander Perevedentsev also made it known that soon the Assay Chamber might be entrusted with a responsibility to control gold production, although in all 303 years of its existence the Chamber never performed such a duty.
The forum’s participants did not ignore the future entry of Russia into WTO. It was noted that, if the existing economic conditions remained unchanged, the Russian jewelry production most likely would not withstand competition. As an example, they pointed out that Italian producers have an opportunity to use 1.5 % credits to reprocess gold during production. Russian enterprises, on the contrary, have to either buy out raw materials or to get credits with incommensurably high interest rates. In order to be successfully competitive with foreign producers there is a need to review financial schemes of the industry’s operation.
Foreign colleagues expressed the same opinion. Anna Rochia with the company Ardos (Italy) voiced her concern that the Russian jewelry industry would become noncompetitive with the country’s entry into WTO because of high prices for its products, although, judging by articles displayed at the exhibition, the jewelry items themselves were very good. She explained that there were just a few enterprises abroad, which could afford to produce jewelry items of such a quality. Anna Rochia advised to continue perfecting the legal base and to work at reducing costs so as to secure the industry’s advantages when entering the international market.