| Higher raw
material costs and a growing supplier base are
intensifying competition in China's costume jewelry
export industry.
The prices of petroleum-based materials have been
escalating since2004 because of the higher cost of
crude oil in the world market. There has also been a
marginal increase in the cost of metal. With
sustained and significant increases in material
costs, the majority of costume jewelry manufacturers
in China have had to raise prices at the start of
2005 to offset higher expenses.
In fact, the average export value per gram of
costume jewelry exported from China in the first 10
months of 2005 increased 24 percent.
But while the higher average export value per
gram is mostly attributed to a general increase in
prices, an up market shift among suppliers is also a
factor.
With costume jewelry exports increasing at a
healthy rate in each of the past two years, new
manufacturers have been quick to join the industry.
The number of suppliers is expected to grow further
as the low-entry barrier attracts more companies to
the line.
With the supplier base growing, many of the more
established companies are moving up-market to
distinguish themselves and become more competitive.
Their years of experience in the line, financial
stability, and technical and design expertise have
helped them make the shift from low-end to midrange
and even high-end production. Some companies now
specialize in sterling silver models, many of which
are plated in 18K gold.
Although raw material costs are not expected to
stabilize in coming months, most manufacturers will
not raise prices in 2006. This is particularly true
for companies that have already implemented price
increases in 2005 and those that have moved up
market.
Industry composition
China is the world's foremost producer of costume
jewelry, accounting for about half of global supply.
Exports have been increasing in the past few years
and continue to show strong growth: Sales in the
first 10 months of 2005 grew more than 50 percent to
US$650 million. It is estimated that 70 percent of
the country's exports in the line go to OEM and ODM
customers.
Currently, about 60 percent of all costume
jewelry export volume in China is low-end, 30
percent midrange and 10 percent high-end.
About 70 percent of China's 5,000 costume jewelry
makers have export capability and of these, only
around 1,000 can ship products directly. The rest
export via the country's more than 1,500 trading
companies.
A richer sales experience, better service quality
and more distribution channels are some of the
advantages of sourcing from a trading company.
Because of these factors, small makers and entrants
may find it difficult to compete with trading
companies that have been long-term major players in
the industry.
However, products from trading companies are
usually 5 percent more expensive than when they are
sourced directly from manufacturers.
About 65 percent of costume jewelry makers are
small companies and around 90 percent are privately
owned. Large manufacturers account for no more than
5 percent of all exporters, and only about 10
percent are foreign-owned or joint ventures. The
majority of makers can produce all types of costume
jewelry, although a few concentrate on one or two
product lines.
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