Local jewellers lament cost, margin pressures

Singapore

LOCAL jewellers are feeling the pinch of higher precious metal prices, which is likely to put further pressure on margins that have already been hit by cautious consumer spending and reduced footfall at stores.

The Covid-19 pandemic restrictions on event sizes have forced many to scale back or postpone celebrations. Ho Nai Chuen, president of the Singapore Jewellers Association (SJA), estimates that this has caused jewellery sales to decline by 20 per cent. Border restrictions, meanwhile, have reduced the pool of customers.

The near-term outlook continues to be unpromising. Retailers typically rake in higher profits during festive seasons such as Christmas and Chinese New Year. But this year they are only hoping for "slight increases in sales", said Mr Ho.

Given the weak demand situation, jewellery retailers have to work hard to avoid passing higher costs on to customers.

Locally listed Aspial Corporation, which owns jewellery brands Lee Hwa, Goldheart and Niessing, is "streamlining operations to achieve higher productivity".

Kean Ng, senior director for the jewellery business at Aspial-Lee Hwa Jewellery, said manufacturing costs for gold and diamond jewellery pieces have increased by five to 10 per cent year on year. This has in turn "slightly pressured" the group's profit margins.

Pawnbroker Maxi-Cash, which sells pre-owned jewellery at its stores, said the company's cost of goods is now higher due to higher gold prices. Manufacturing and transport costs have also increased, it added. The company has been attempting to "entice more traffic and sales" by offering promotional prices on certain gold items.

Smaller retailers are facing even tougher times.

Vinod More, managing director of private jewellery design house The Jewel Box, said the firm's margins have shrunk by some 30 to 50 per cent as its cost of production has increased by 10 to 20 per cent. Margins, he noted, are likely to be kept under pressure in the quarters ahead.

Homegrown custom jewellery business Michael Trio told The Business Times that its production cost has increased by some 20 per cent from January. The company said it is trying to make adjustments to its production and supply chain systems to cope, while also drumming up demand by improving its digital presence and engagement.

There remain, however, some pockets of demand for jewellery retailers to tap.

Aspial's Mr Ng said customers are more discerning, which has created an opportunity for the company to market some of its unique designs.

Pamela Seow, assistant general manager of Poh Heng Jewellery, said there has been a shift towards "spending for self" since the end of the "circuit breaker". The temporary halt in travel has also been positive for gold demand. "Expenditure in travel, a competitor for jewellery sales, has been reduced greatly," added Ms Seow.

Some customers are also buying the company's "higher priced items" for gifting at weddings and baby showers, as they are unable to physically attend these ceremonies.

"Gold purchases during this time are not just about investment value. They also convey the sentimental value that is priceless," she said.