The demand for jewelry has organically decreased by 15-20% compared to last year's figures. However, during the most favorable periods (late 2023 - early 2024), jewelry sales in Ukraine have recovered to about 70% of pre-war levels, reported Igor Ilchishen, founder of the Kimberli jewelry house, to the Interfax-Ukraine agency.
"The past year has been very challenging for the domestic jewelry business. Companies, like skilled acrobats, have balanced between opposing trends. On one hand, there was a record increase in global prices for precious metals, including gold (averaging 30%) over the last decade, and on the other, a decline in purchasing power demand in the country due to the war, economic difficulties, and Ukrainians moving abroad," he pointed out, highlighting the factors that influenced the market situation.
Ilchishen reminded that an additional stress factor for the jewelry market last year was the proposed amendments to the Tax Code, which suggested increasing the military tax on jewelry sales to 30%.
"This initiative greatly alarmed market players, as the new tax could potentially devastate the entire domestic jewelry industry. Almost every significant market player publicly voiced their concerns regarding the risks and bleak prospects of such a decision. Fortunately, our arguments were heard," he noted.
At the same time, the military tax rate was raised under general conditions, which also impacted the industry – the burden on employee salaries increased, in turn affecting profitability.
"Jewelry companies typically raise prices on jewelry only when raw material costs increase. Therefore, the hike in tax rates is not very noticeable to our customers, but it has affected the revenue side of companies. However, compared to what we managed to avoid, this can be considered a positive outcome," Ilchishen stated.
Regarding consumer demands, in the high-end segment of the jewelry market, particularly diamond pieces, classic designs remain in high demand. There has also been a rise in interest for symbolic jewelry and ethnic motifs. Companies are responding by launching corresponding limited collections.
Among sales channels, online sales account for a very small share of jewelry companies’ sales, averaging around 10% in the market, and currently, there are no prospects for increasing this share, the expert notes. This is explained by the nature of the products. Jewelry cannot be classified as impulse purchases: when choosing jewelry, especially in the high-end segment, emotional contact, the ability to try on, and receive detailed consultations in person are necessary, Ilchishen explains. Among the ongoing marketing tools are holiday promotions, loyalty programs, and thematic capsule collections that provide a sense of exclusivity to jewelry owners.
"We view the prospects for 2025 very realistically. Assessing the processes occurring around us, the decline in demand will continue, while financial burdens will increase, necessitating adaptation to new tax and market conditions," Ilchishen says.
In his opinion, larger companies will find it easier to maintain balance due to their resources for development, active marketing, and expansion.
"We see this within the industry through wholesale sales for 2024. While in 2023 many had positive expectations and believed in growth opportunities, opening new retail locations, in 2024, these were closed due to unprofitability. It is likely that these spaces will be occupied by more successful players, accumulating even more resources," he noted.
At the same time, he pointed out that large chains also have their vulnerabilities, particularly due to increased control by the National Bank over retail outlets operating as individual entrepreneurs.
"The rise in tax burden will also force retail to abandon such formats. This will increase the burden on accounting, and additional qualified specialists will be needed, which is currently a problem in the market," the expert believes.
In his opinion, this year jewelry companies must address how to cope with new challenges posed by the system while remaining within the legal framework and finding new growth opportunities.