The price of gold continues to soar, and the price of pure gold jewelry in mainland China is also rising. However, some jewelers are feeling bewildered – the industry is fiercely competitive, and many bosses are finding it particularly challenging. Experienced jewelers collectively expressed that as the price of gold rises, more capital is needed, yet the profit margin in the gold jewelry industry continues to decrease. Some merchants have stated that physical jewelry stores are facing a life-or-death test.
On April 22, the price of gold continued its rapid rise, with COMEX gold futures breaking through $3,477 per ounce in early trading.
According to reports from Dai Xiang News, the prices of domestically produced gold jewelry brands in China have also risen, with many prices exceeding 1,060 yuan per gram. Just a week ago, on April 16, the retail prices of gold jewelry from brands like Zhou Sheng Sheng and Lao Miao Gold crossed the thousand yuan per gram mark for the first time.
However, while gold prices are surging, the jewelry industry is not experiencing the same prosperity, leading to a situation where it’s like ‘one side is the sea while the other is fire.’
On April 17, in a jewelry city in Guancheng District, Zhengzhou, Henan Province, there were far more store attendants than customers. Customers would barely leave one counter before being approached by another attendant from a different counter.
A jewelry industry employee said, “The higher the gold price, the tougher our business becomes.” “Consumers nowadays prefer to buy gold bars rather than gold jewelry. Additionally, the impact of e-commerce and live streaming has significantly squeezed the profit margins of physical stores.”
Lao Wang has been working in a jewelry city for over ten years, managing several counters. This year, he is planning to reduce the number of counters he rents to just one, saying, “It’s tough. This industry requires a lot of capital. You need millions to stock a variety of products, and with the rising gold prices, even more capital is needed. But now, we are barely making ends meet, and if we don’t do well, we end up losing money!”
In many jewelry cities in Guancheng District, the prices of gold jewelry are based on the daily gold price plus a handmade fee. Due to the intense competition, jewelers are offering discounts on the handmade fee, with some newly opened jewelry cities even launching promotions like “consume and win a car.”
Some jewelers complain, “We just sold our stock yesterday, and before we know it, the gold price has risen again, forcing us to purchase at a higher price. Are we making a profit or facing losses?”
Li Zhiguo, the CEO of Unique International Jewelry Trading Center, stated that many bosses are currently experiencing a shared feeling, “After working in this industry for many years, I have never felt as perplexed as I do now!”
“The profit from gold has been continuously decreasing, with wholesale profit margins below 1% and retail profit margins below 10%. However, the comprehensive costs of the entire industry are now above 10%. Currently, gold has become a product that generates traffic but lacks substantial profit margins,” Li Zhiguo said. He added that the industry must have some high-profit products to sustain itself.
Ma Zhong, Chairman of Central Plains Jewelry City, said, “This year, many bosses will find it particularly challenging.”
Ma Zhong reminisced that in 2005, he established a jewelry exhibition hall of over a thousand square meters, which ranked among the top in the country. Nowadays, due to the intense competition in the industry, exhibition halls of one to two thousand square meters are very common. Other local large supermarkets have also diverted customers. Dennis David’s jewelry stores increased from four or five to 30. When Huiji Wanda opened in 2015, they had only three jewelry stores, but now they have 15.
“Gold hoarding,” “gold rush,” “breaking gold price”… From last year to this year, “gold price” has frequently become a trending keyword. Greetings have turned into asking, “Have you bought? Buy it, it’s expensive! Don’t buy, it might get even pricier!”
However, behind the gold rush, the jewelry industry is undergoing a profound “reshuffle.”
An industry insider mentioned, “Many people will not be able to keep up, not only individuals and brands but even jewelry cities will undergo a process of natural selection.”
A regional manager of a certain jewelry brand in Zhengzhou stated that currently, there is an imbalance between the supply and demand of gold bar investors in banks and gold stores, while traditional jewelry brands are facing a wave of store closures, with some jewelry cities even experiencing an “increase in vacant stores.”
With the increasing popularity of gold, in just one year, the commercial space for jewelry in Zhengzhou has exceeded 100,000 square meters, intensifying market competition. In the business district of Guancheng, a jewelry city sells gold jewelry based on the daily price of gold, adding a dozen yuan per gram, while the adjacent store sells based on market prices…
An industry observer pointed out, “Today’s jewelry cities are like department stores from a decade ago, lacking core competitiveness.” “In addition to severe internal competition in marketing and the dominance of price wars, some businesses are even promoting ‘zero labor fees,’ significantly compressing profit margins.”
Moreover, a crisis of trust is also spreading. Complaints in the jewelry industry increased by 40% in 2024, primarily involving issues such as “gold-plated silver” and “false advertising.”
Merchant Mr. Li stated that physical jewelry stores are facing a life-or-death test. On one hand, there is high rental pressure, with core business district store rents accounting for 25%-30% of revenue, causing significant pressure on some merchants. Meanwhile, the accumulation of inventory has led to an average turnover period of 180 days. It has become challenging to rotate funds, resulting in a tight cash flow and increased capital costs. Coupled with a severe loss of professional sales staff, the industry is facing the awkward situation of having “no one to sell.”