By Christie Dang
Falling platinum prices and slower demand for platinum in auto-catalysts, as well as in the largest jewellery market of China, have exerted downward pressure on the profitability of the platinum mining industry in recent years. To encourage more funding to boost demand in jewellery, PGI CEO Huw Daniel has implemented various strategies across PGI’s markets, including relocating the organisation’s headquarters from London to Hong Kong. In an exclusive interview with JNA, Daniel shares his insights on the world’s platinum jewellery market as well as his priorities for 2018.
According to a report by SFA (Oxford) Ltd for the World Platinum Investment Council (WPIC), global demand for platinum jewellery is projected to rise by 3 percent in 2018 to reach 2.655 million ounces. This would be the first annual increase since 2014. Demand for platinum jewellery in China is expected to stabilise, and strong growth is likely to be seen in all other regions. Against this backdrop, Huw Daniel, CEO of the Platinum Guild International (PGI) is adopting a positive outlook on the global platinum jewellery market in 2018.
To establish closer proximity to the Asian market and gain better insight into market opportunities across the region, PGI moved its global headquarters from London to Hong Kong in July 2015. “The move allows for more frequent touchpoints between headquarters and the major markets, which help improve mutual understanding, faster knowledge transfer and collaboration. It also enables a swifter response to fast-changing consumer tastes, as well as to our industry partners’ needs,” explained Daniel.
PGI’s support from the South African mining community has increased from three major mining companies to six in 2018, despite the financial challenges arising from record-low platinum prices, he said.
“Jewellery provides a compelling ROI of US$57 per ounce, and the South African mining industry remains committed to jewellery development. Currently, jewellery is second only to automobile in demand for platinum, and is highly responsive to market stimulation,” Daniel said.
According to Daniel, PGI’s strategic approach is to add value to the jewellery industry by identifying and fulfilling opportunities for sustainable ounce and revenue growth. “For the jewellery industry, this means incremental opportunities to target new customers at higher margins, whereas for consumers, new platinum jewellery products and buying occasions will be encouraged in different markets,” he said.
PGI’s focus in 2018
Enhance promotions for both wedding and post-wedding markets
Strengthen 60+ market and exports of platinum chain-based jewellery to the US
Promote Platinum Days of Love, Platinum Evara and men’s jewellery
Establish the “platinum crown” as the safest setting for a gemstone, and facilitate jewellery imports
Although total platinum demand was still down in 2017, the rate of decline has slowed and many of PGI’s partners have returned to growth. According to Daniel, the decline in platinum jewellery demand was driven by generic plain metal jewellery that is increasingly out of sync with a more sophisticated Chinese mainland consumer. Areas within the business that show strong growth and future potential include the bridal market, both plain and gem-set pair rings and sets. Demand for men’s bridal jewellery has grown as PGI marketing closed the gap between female and male acquisition. Strongest market growth came from tier-two and tier-three cities, registering 106 percent and 86 percent growth respectively.
The acquisition rate of gem-set jewellery increased by 13 percentage points to 35 percent of annual sales of platinum jewellery. This gives platinum a larger proportionate share of gem-set items compared to the total jewellery market, where gem-set accounts for only 19 percent of annual sales. The launch of branded collections by retailers attracted significant growth rates up to 100 percent, signifying the tremendous potential for higher-value and more sophisticated products among consumers in China. As a result of stronger demand for more design-driven and branded collections, retailers are rethinking their pricing strategies, transitioning to piece-priced collections which boost margins. This enables the development of better design and marketing campaigns, driving a virtuous circle of growth through innovative marketing.
The uptake of PGI’s celebrity-driven marketing packages, the appointment of a popular local star, Yang Yang, as the spokesperson for platinum in China, and the launch of an iconic dandelion collection, boosted sales volumes among participating retailers.
To further encourage manufacturers in China to produce more platinum jewellery, PGI has organised seminars in the country’s key manufacturing centre, Shenzhen, addressing technical issues such as applications of platinum alloys to further improve the efficiency of production.
Japan is the world’s most mature platinum market which PGI entered in 1975. Platinum jewellery accounts for over half of total jewellery sales by value and over 20 percent by unit sales, and Japan has the highest per capita consumption of platinum jewellery. However, demographic trends have depressed total jewellery sales in recent years. To capitalise on Japan’s leading position in the world’s platinum industry, PGI started a new project to facilitate the export of chain-based jewellery to US-based retailers.
“Our Japan and US teams have been working on this for over a year. We have curated a 20+ piece collection of chain-based jewellery, primarily necklaces and earrings. We are market-testing branded collections with selected retailers and the collection will be showcased at the upcoming Centurion Jewellery Show in Scottsdale, Arizona in February,” Daniel said.
“The response we’ve had from both trade and consumers has been incredible, because there is simply nothing like this product in the US today,” he added.
Another focus is to encourage jewellers to produce and promote more lower-price assortments in platinum for the younger-generation Japanese consumer, in order to expand the country’s platinum market beyond the already strong segment of mature customers aged 60 and above.
"Jewellery provides a compelling ROI of US$57 per ounce, and PGI’s sponsors from the South African mining industry are more committed than ever to jewellery development. Currently, jewellery is second only to automobiles in demand for platinum. "
– Huw Daniel, CEO, PGI
After a challenging 2016, when the market suffered major disruptions from floods, government legislation and strikes, platinum demand in India has rebounded. Platinum was the best-performing jewellery category in 2017, growing 25 percent after an 11 percent increase in 2016. An increasing number of jewellery manufacturers experience the advantage of promoting platinum jewellery as it delivers higher margins as well as more development opportunities among young consumers, who demand more modern and design-oriented jewellery.
According to Daniel, "Platinum Days of Love," which features love bands exchanged before or after the wedding day, and "Platinum Evara" that focuses on contemporary wedding jewellery exchanged as a blessing, are PGI’s continued focus this year.
In India, where arranged marriages are a cultural norm, most jewellery items exchanged during the wedding represent the transfer of wealth between families, and have little emotional resonance for the couple. However, Platinum Days of Love and Platinum Love Bands are now strongly associated with the discovery of love between the couple, especially as love matches within arranged marriages become the norm among urban consumers. PGI’s new campaign focuses on how the bride and bridegroom-to-be discover their love for each other as they go about organising their wedding day, capturing this special moment with the exchange of their very own Platinum Love Bands. Platinum is now more strongly associated with love than any other precious metal, or even diamonds, in the fast-growing Indian jewellery market.
For platinum to play a significant role in the Indian jewellery industry it needed a place in the wedding market, traditionally dominated by gold. PGI’s Platinum Evara introduces a new tradition of blessings between the mother of the bride and the bride and bridegroom. The jewellery is affordably price-pointed and contemporary in design, making it both desirable and wearable long after the wedding celebrations have finished. Given the growing importance of the millennial generation and the better margins platinum delivers to the industry in India, Daniel is confident of a positive future for platinum in the country.
The US market is in its fifth year of consecutive growth, thanks to the lower platinum price making the desirable metal more available across retailers. In the world’s largest diamond market, diamonds and platinum make a natural fit. Citing a PGI research, Daniel said, “Only 38 percent of consumers know that platinum is a more secure setting for diamonds, and less than 30 percent know that they could have a platinum head on their ring, regardless of what metal the ring is made of. Once they were made aware of this, a whopping 73 percent said they are willing to pay more for their peace of mind.”
In light of this business opportunity, PGI’s “Diamond Crown” marketing initiative encourages retailers to upsell customers to a platinum crown for their diamond ring. By doing so, the retailer could make an average of US$350 more per sale.
“If we could convert the head of every diamond ring to platinum, that would deliver an incremental 150,000 ounces of platinum, equal to almost half of the size of the US platinum market, so it’s a significant business opportunity,” Daniel noted.
“The dilemma of retailers these days is having fewer consumers in their stores. This programme allows retailers to maximise the business value of every purchase, making it a significant profit driver,” he added.