In early June 2005, for the first time in history, Russian jewelry manufacturers came to the United States - to the world renowned JCK Las Vegas show - with a firm resolve to establish new business connections and to expand their operations to the American market. 

The Russian jewelry market's rapid growth and liberalization along with the existence of a complete infrastructure for jewelry business development make Russia attractive for prospective cooperation.

In spite of Russia's huge raw material base of precious stones and metals, the jewelry industry today accounts for only 0.01 % of the country's GDP. These statistics notwithstanding, the jewelry market's rapid growth and liberalization along with the existence of a complete infrastructure for jewelry business development make Russia attractive for future cooperation.

Russia is the 4th largest world gold producer and practically the monopolist in platinum and palladium extraction. Thirty-three state enterprises take the lead in precious metals quarry production. The most significant of these are the Gulidov Krasnoyarsk non-ferrous metals plant, Schelkovski plant, as well as the Yekaterinburg and the Moscow plants of non-ferrous metals. In terms of diamond reserves, Russia takes the first place in the world. The AK ALROSA company takes the second place in value terms of diamond quarry production. From more than twenty countries dealing in gem-cutting, Russia is in the fifth place.

According to the Assay Office, in Russia, there are over 5 500 jewelry companies of various forms of proprietorship that are licensed to produce and repair items made of precious stones and metals. All the jewelry producers in Russia can be divided into four categories on basis of the ligature mass of the jewelry they produce.

The first group includes about fifty large companies that produce over 50 kilograms of jewelry items per month. Presently, they are responsible for nearly 18 % of the total market volume. Before 1999, this number was 25.

The second group incorporates about 8-9 % of the total number of companies. These produce 10-50 kilograms of jewelry items a month.

The third category includes about 50 % of all companies. These enterprises have monthly production quantities of 1-10 kilograms. Although this industry segment is developing with stability, its overall influence on the market cannot be considered significant.

The fourth group is comprised of sole proprietors and artist jewelers that work with private orders. Their products are mostly exclusive and custom-made.

As for diamond production, over 150 companies are involved with the KRISTALL (Smolensk) and the Tuimaada Diamond plants, which are the largest producers of such jewelry and whose annual sales are measured in hundreds of millions of dollars. Diamond production in Yakvtia is also developing rapidly. Smolensk diamonds of the “Russian cutting” class are world renowned as respectable and expensive jewelry. Only 5 % of this jewelry  is destined for the local market – the rest is being exported.

Russian jewelry art is traditional and has a long history. Historically large-scale jewelry production centers formed in Yekaterinburg, St. Petersburg, Moscow, and Kostroma. These cities are still the headquarters for over 80 % of the jewelry sector companies. Prospective jewelers obtain professional education in colleges of St. Petersburg, Moscow, and Kostroma. The elite of jewelry designers have degrees from the St. Petersburg Mukhin University of Arts and the University of Design.

In 1999 – 2002, the annual industrial production growth has reached 25 %. In 2003, the figure was 30 %. In that period 39.13 million pieces of gold jewelry, 29.25 million pieces of silver jewelry, 65 000 pieces of platinum jewelry and 1 380 pieces of palladium jewelry were produced in Russia.

From year to year the average mass of the jewelry produced is lowering, revealing a common world tendency. In 2003, Russia used 96 tons of gold for jewelry production, |which is 15 tons more than former Soviet Union used for these purposes.

Economic growth explains high development rates of the Russian jewelry market. Russia as a whole learned to manage inflation. Constant growth of economy has been established. The government supports the liberalization of the jewelry market, giving it the opportunity to develop according to the laws of the economy. In 2001, the excise duty was lowered form 15 % to 5 %. In 2002, the licensing procedure was shortened. Monopolistic companies that belonged to the government were transformed into joint-stock companies. State control is exercised only for the companies working with precious metals and stones in the form of required approbation of all goods made for sale. The State Customs Commission is in charge of drafting all the customs rules for the importing and exporting of jewelry products.

The year 2004 signified the beginning of the stabilization process, when the rate of production growth was 27 %.  According to the experts’ data, total volume of jewelry sales on the Russian market now exceeds $ 1.5 billion.

The dynamics of the industry’s development are also evidenced by the 100 % production volume growth at almost a quarter of all Russian companies. A new era of private capital investments, both - domestic and foreign - into the jewelry industry has come to Russia. Some of the Russian companies have strong influence on the internal market and on the situation in the CIS countries. The oldest Russian companies: Russkiye Samotsvety (St. Petersburg), Krasnoselskiy, Kostromskoy and Krasnoyarskiy jewelry factories and Krasnaya Presnya still remain the biggest in the industry. The increase of domestic competition in 2002-2004 has lead to the structuring of the industry. Newly founded companies were trying to conquer the market and to develop in their own new directions. Continually expanding for the past five years, these companies have filled all existing spaces in the jewelry market. It is now expected that in the following 2-3 years the jewelry production growth will stabilize. Those companies that appeared after the jewelry system of the USSR broke down have already divided the market shares between themselves. Absolute leaders in production volumes and growth rate have also shown themselves. Russkiye Samotsvety, Krasnoselskiy YUVELIRPROM, KOUZ, Krastsvetmet and other traditional brands from the past are considered to be the leaders of the jewelry market. Some of the “second wave” companies, however, have surpassed the production volumes of the traditional leaders. The dynamics of the new companies’ development forecasts their future industry leadership. Such manufacturers as ERMI, the Treasure House (Yekaterinburg), Sharm and Trust Capital (Moscow), Gringor, Petrozoloto and Cast (St. Petersburg), Junaid and Platina, Master Brilliant (Kostroma) are recognized all over the world.

Together with traditional Russian factories that have managed to rebuild their operations according to the new market conditions and along with the absolute industry leaders (Almaz-Holding, Edem, Adamas) that have at their disposal modern technologies and good management, young “second wave” companies will determine the direction the Russian jewelry market.

Rapid growth of the Russian market elicited much interest from foreign companies. The foreign goods share has increased from 25% to 35%. In 2004, the import of silver goods exceeded internal production. For instance, the “VIP 2000” company (St. Petersburg) has imported about 7 tons of silver goods in 2004, which almost equals to the Russian silver leader Krasnoselskiy YUVELIRPROM production. It is worth mentioning that legally transported jewelry form the Asian region – even after passing all customs procedures and paying the duties – is still more competitive compared to domestic products. In this situation many companies are switching to a new cooperation scheme with foreign partners. Through customs processing regimes, raw materials for jewelry goods (metal, stones) are transported into Asian countries for the production of jewelry that afterwards returns to Russia. This method of production allows for significant cuts to the labor cost. Compared to Russia, the workforce in Turkey, for example, is much cheaper. Besides, the manufacturer gets high design and quality level product that allows him to improve the level of sales and supply the jewelry market with modern models that have a number of advantages over the products of local competitors.

The biggest advantage in the competition foreign companies see in both: high quality of the final product and the recognition of the manufacturer brand on the Russian market. Quite often, Russian companies fail to have clear marketing policy strategy and, as a rule, lose in the competition. Those advantages are especially notable in the jewelry trade organization. There are over 22 000 companies involved in jewelry trade in Russia. Four big jewelry centers together with big manufacturers historically formed in Kostroma, Krasnoye Selo and their surroundings; St. Petersburg; Yekaterinburg and Chelyabinsk; Moscow and the Moscow Region. In the past several years, the jewelry trade systems have started to develop in Rostov, Orel, Saratov, Yakutia and Far East.

There is no strict definition on retailers and wholesales in the Russian jewelry market. Smaller than 5 % can be considered a wholesales. The major part of Russia’s jewelry trade companies work by the retailing-wholesale scheme. A jewelry store makes a wholesale acquisition or gets a product for retail from a manufacturer and sells it to a customer.

Due to some peculiarities in the legislation and the banking system, Russian jewelry trade lacks appropriate customer service. Even such trade chains as Center Yuvelir (Moscow) and Jewelry Trade of the North-West are not able to embrace market changes quickly. In reality, only few companies have clear development strategy – modern ideas on trade halls decoration and advertising campaigns of the trade chain. Obviously, when a foreign jewelry company enters the Russian market, it keeps to its own development strategies and does not rely on the already existing local ones. The local manufacturer also fails in the way of presenting its products. In this area, it is essential to have brand packaging and trained personnel.

Big jewelry manufacturers are establishing their own trade chains now. Among them are Adamas and Almaz-Holding. Almaz-Holding has a chain of more than 150 jewelry stores all over Russia. The cycle “production-trade-production” allows the company to offer competitive prices. At the same time, information obtained from the stores allows to discover new demand tendencies and to make corrections to the existing products. The Adamas trade chain (about 30 stores) is working the same way.

In the big cities of Russia, such as Moscow and St. Petersburg, a chain of demonstration halls is being established for presentation of top-level jewelry. Luxury stores are not enough to meet customers’ demands. Among those stores are: Tiffany, Chopard, Bulgari, Cartier, Korloff, Almazny Dvor. It is expected that the chains of luxury jewelry stores will have further expansion, enjoying more and more foreign investments.

During the last decade the marketing system in Russia is going through the development phase.

Out of all the multitude of jewelry exhibitions held in Russia, only RESTEC Exhibitions Company and R.O.S. Jewellerexpo offer significant shows, where the entire potential of the Russian jewelry industry is presented along with some of the biggest manufacturers and trading chains, leading professional, associations, and unions. Until the year 2002, there were only 2 main jewelry exhibitions in Russia: JEWELLER (Moscow) and JUNWEX (St. Petersburg). Given the outcome of a recent exhibition the “New Russian style” that took place in 2001 and considering all the integration processes and the market changes that could arise after Russia’s entering the WTO, the situation may change in favor of new exhibition.

Today the “New Russian style / International Jewellery Moscow” exhibition together with a transnational Reed Exhibitions company have presented to the Russian market 149 famous jewelry companies from Italy, France, Belgium, Israel, the U.S., Great Britain, and Germany. With such a rapid rate of growth, the exhibition is now considered to be a national event.

The initiators of the new marketing system were RusJewellerExpert Consulting Agency and the RESTEC Exhibitions Company. They proposed to establish a Russian Jewelry Trade club, to provide an all-year-round exhibition program to stimulate consumer demand according to seasonal demand, to launch new marketing structures, and to present new jewelry brands.

The program includes a jewelry wholesale fair JEWELLEW/Best Russian Jewels/ (7-11 September 2005, Moscow, Gostiny dvor), the JUNWEX jewelry exhibition (1-5 February; 2006, St. Petersburg) and the international jewelry exhibition New Russian style/International Jewelry Moscow (17-20 May, 2006, Moscow, Gostiny dvor), organized in cooperation with the Reed Exhibitions. The support of the RusJewellerExpert Consulting Agency, the Russian Jewelry Trade club and local jeweler societies, together with the organizers’ huge experience in the jewelry market put this exhibition at the highest level.

Further development of Russia’s jewelry market now depends on the ability of Russian businessmen to attract investments - both domestic and foreign. Of course, it is quite easy to understand that cooperation with Russian companies with their management base and knowledge of economic and national peculiarities is essential to reduce losses while entering the new market.

The new Russian strategy of cutting the raw material base sales and industrial growth stimulation create lucrative investments conditions and a promising field for cooperation and partnership.