The gemstone and jewellery sector survived a tough 2019. In 2020, potentially market-moving issues such as the US elections, and the lingering effects of the US-China trade war and the social unrest in Hong Kong are expected to put the jewellery trade’s resilience to the test.
Recessions spare no one in the business world. The real question is how companies build their resilience amid economic downturns. The secret, according to a McKinsey & Company report, is moving ahead and making tough decisions fast.
Published last year in an article titled “Improving your company’s business resilience,” the study examined how companies flourish amid difficulties, particularly during the 2008 global financial crisis. The analysis focused on a group of approximately 1,100 publicly traded companies, across a wide range of industries and geographies, with revenues exceeding US$1 billion.
“We found some noteworthy characteristics in how ‘resilients’ weathered the storms: How they prepared for them, how they acted during tougher periods and how they came out of them,” noted McKinsey.
While the world is far from another financial meltdown, the year 2019 proved boldly challenging for many industries.
The jewellery and gemstone sector, for instance, bore the brunt of uncertainties caused by the US-China trade dispute and anti-government protests in Hong Kong. Hong Kong government data showed a 42.9 percent drop in jewellery sales in October as violent social incidents disrupted consumption sentiment and tourist arrivals.
China also saw a 4.5 percent descent in October jewellery sales, representing four straight months of declining demand.
Other sector-specific challenges likewise abound – lacklustre rough diamond sales and oversupply of polished goods; and monetary regulations in China that hinder seamless trading of coloured gemstones.
There are, however, silver linings: Rough demand started to pick up towards end-2019, the strengthening of the US market and low interest rates. On top of this, most gem and jewellery industry players have been preparing contingency measures amid macroeconomic uncertainties.
“Sometimes, knowing the danger helps mitigate risks. When you are cautious, you have time to adjust and prepare for challenges. This fuels business resilience,” remarked Lawrence Ma, president of the Diamond Federation of Hong Kong, China Ltd (DFHK).
The full story will appear on JNA's Jan/Feb 2020 issue.