Is the Macau Jewelry Retail Industry Ready for Local Manufacturing?

Amy Sam Wai Heng*MBA Student, USJ

The Government keeps promoting diversified and creative industries to support the Macau economy - can the Jewelry Retail Industry be the next? Since 2006, the luxury sector “watches and jewellery” has had the largest share of the total retail sales volume in Macau. The luxury retail sales value has increased from MOP 1.42 Billion in year 2006 to MOP 7.12 Billion in year 2010, yet very little of these sales are manufactured locally. The expansion of the luxury retail industry was brought about by the growth of tourism, and statistics show that visitors are spending more and more on shopping. In the fourth quarter of 2010, per-capita shopping spending of visitors amounted to MOP 947, up by 32% over the fourth quarter of 2009.
Unfortunately Macau is not taking advantage of this growth by introducing a unique jewelry manufacturing industry for this lucrative luxury market. There are political, economic, social, and technological advantages in Macau which can translate into opportunities for the jewelry industry.
According to Macau Government Tourist Office, one major policy from the Chinese Government that supports Macau’s tourism is the “Individual Visit Scheme” through which the Mainland Chinese from the selected cities are allowed to visit Hong Kong and Macau on an individual basis. The Scheme had brought a gradual increase in the number of Mainland visitors to Macau since July 2003. Among the Mainland visitors, 44% of them travelled to Macau using the Scheme. It has made a huge contribution to the growth of Macau’s tourism industry which in-turn promotes a gradual growth trend for the jewellery retail industry.
The future prospect of Macau’s luxury retail business will be highly dependent on the economic growth rate of China since over half of the total number of tourists in Macau is from Mainland China. Surveys have shown that there is a clear link between consumers’ luxury spending desire and economic conditions. According to the National Bureau of Statistics of China, China’s gross domestic product (GDP) remains at a stable growth rate of around 8% to 10% over the past ten years. Further, there is a gradually rising trend of the per capita annual income. In 2008, the per capita annual income of urban households has increased by 86% compared with 2003. This data supports the belief that Chinese people are having better living conditions and quality of life, with the consequent greater demand of luxury consumption.
Consumers’ optimism is a key social factor affecting the development of the luxury retail industry in Macau. Survey have shown that Chinese consumers, especially the middle class, possess strong confidence that they can maintain a stable income earning level, with 59% expecting an increase in future income. This consumers’ optimism can support consumer spending and increase the demand for luxury goods.
Technologically online luxury sales have been growing globally with a 20% increase in 2009. Luxury goods consumers are looking for brand experience across multiple channels. Therefore, luxury retailers can adopt the online channel to strengthen the brand’s prestigious heritage value. This can provide an extra shopping scope for the experienced consumers, and also provide an opportunity to reach the “newly rich” customers. The development of online technology may strengthen the marketing ability for luxury products and hence enlarge the customer base of luxury retailers.
All the above macro environmental trends are favorable opportunities for the overall luxury jeweler retail industry to start creating a unique manufacturing ‘brand’ in Macau.

©MDTimes/ University of Saint Joseph