The demand for jewelry has organically decreased by 15-20% from the previous year, while in the most favorable periods (late 2023 – early 2024), jewelry sales in Ukraine have recovered to about 70% of the pre-war level, Igor Ilchishen, founder of Kimberli jewelry house, told Interfax-Ukraine.
“Last year was very difficult for the domestic jewelry business. Companies, like skillful gymnasts, balanced between opposing trends. On the one hand, there was the record growth in world prices for precious metals, including gold (by 30% on average) over the past decade, and on the other hand, the tendency to reduce effective demand in the country due to the war, economic difficulties and Ukrainians leaving for other countries,” he pointed out the factors that affected the market situation.
Ilchyshen recalled that an additional stressful factor for the jewelry market last year was the draft amendments to the tax code, which proposed to increase the military tax on the sale of jewelry to 30%.
“This initiative was very confusing for market players, because the new tax could bury the entire domestic jewelry industry. Almost every significant market player spoke out on this topic in the public domain, explaining the risks and disappointing prospects of such a decision. Fortunately, our arguments were taken into account,” he said.
Instead, the military rate was raised on general terms, which also affected the industry – the burden on employee salaries increased, which in turn affected profitability.
“Jewelry companies usually increase prices for jewelry only when the cost of raw materials rises. Therefore, the increase in the rate is not very noticeable to our customers, but it has affected the revenue side of the companies. However, compared to what we managed to avoid, this can be called a positive result,” Ilchyshen said.
As for consumer demands, classic designs remain in demand in the expensive segment of the jewelry market, in particular diamond jewelry. The demand for symbolic jewelry and ethnic motifs has also increased. Companies are responding to this demand by launching limited collections.
Unlike many other retail segments, online sales account for a very small share of jewelry companies’ sales, about 10% on average, and there are no prospects for increasing this share, the expert says. This is due to the specifics of the products. Jewelry cannot be attributed to spontaneous purchases: when choosing jewelry, especially in the expensive segment, you need emotional contact, the opportunity to try it on, and get detailed live advice, explains Ilchyshen. Among the sustainable marketing tools that work are holiday promotions, loyalty programs, and capsule themed collections that give a sense of exclusivity to jewelry owners.
“We are very sober about the prospects for 2025. Evaluating the processes taking place around us, the decline in demand will continue, and the financial burden will increase, we will have to adapt to new tax and market conditions,” Ilchyshen says.
In his opinion, it will be easier for large companies to keep the balance sheet due to the availability of resources for development, active marketing and expansion.
“We see this within the industry on the example of wholesale sales in 2024. While in 2023 many had positive expectations and believed in development opportunities, opening new outlets, in 2024 they were closed due to unprofitability. It is likely that these places will be taken by more successful players, accumulating even more resources,” he said.
At the same time, he pointed out that large chains also have their vulnerabilities, in particular due to the National Bank’s increased control over retail outlets operating as individual entrepreneurs.
“The growing tax burden will also force retailers to abandon such formats. This will increase the burden on accounting, and additional qualified specialists will be needed, which is also a problem in the market now,” the expert believes.
In his opinion, this year jewelry companies should decide how to continue to work with the new challenges posed by the system, while they should remain in the legal field and find new growth points.
According to the open data, Kimberly Jewelry House LLC was established in 2021, and in the first three quarters of 2024, the company received revenue of UAH 3 million 122.9 thousand, a net loss of UAH 121.9 thousand.
