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St. Petersburg jewelers catch the wind of change

The pandemic has not only hugely changed our lives, but also forced the economy to operate in a completely new reality. We decided to interview St. Petersburg jewelers, from the CEO of Russia's largest jewelry factory to the owner of a small private company, to find out how their businesses have survived the quarantine period, and what plans they have for the future.

A little spoiler: despite the heterogeneity of opinions, jewelers are unanimous in one thing: the crisis's consequences will impact the business only in fall. Whatever they will be, the industry needs to change.

Sergey Dokuchaev, CEO of the Russkiye Samotsvety Imperial Jewelry Factory:

- In June, RBC-Petersburg conducted a study. According to it, the efficiency of entrepreneurs in St. Petersburg decreased by 40% due to restrictions imposed during the coronavirus pandemic.

These estimates may differ for different business sectors, and it is difficult to assess the real losses of specific enterprises. But it is indisputable that the country's business and economy have suffered real damage.

The company Russkiye Samotsvety, in accordance with the Russian Federation Presidential Decree and the resolutions of the St. Petersburg Government, suspended its work in April.

The company ceased the production, the chain of our branded stores was closed, and shipping to our partners was stopped.

Under these conditions, in accordance with the recommendations of Rospotrebnadzor, standards for the safety of the company's operations were developed. Some employees from commercial department, accounting, and other vital departments, started working remotely.

We understood that in the conditions of imposed restrictions, when an enterprise loses flexibility and management mechanisms such as pricing and the management of accounts receivable, and the business relations with partners are on pause, it is necessary to use new ways to communicate.

Therefore, we introduced new forms of remote interaction – video meetings, communication via modern messengers, and online consulting.

We rapidly reacted to the current situation and kept in touch with our regional partners so that we could assess the scale of losses and discuss possible ways out of the crisis.

In accordance with the Russian Federation Presidential Decree, the jewelry industry was not included in the list of industries most affected by the coronavirus epidemic, so we had to make all the decisions in the existing conditions at the local level relying only on ourselves.

A number of anti-crisis measures were developed for strict budgeting and rationing of all expenses, developing relations with partners, stimulating sales, and preparing proposals for a possible discount system and benefits for working with debtors.

During this crisis, we faced a new challenge. Demand for our products has reduced. The main reason for this is a decrease in the purchasing power of the population.

But even in these conditions, we tried not to lose touch with our customers and partners, offering them to make purchases on pre-orders and through online orders.

It was possible thanks to the online platform which partially compensated for losses from closing retail outlets.

Gradually, the situation is changing for the better, because since June 9 those brand stores which have a separate entrance could be opened, and the sales have began to show positive dynamics.

We understand that a certain category of products such as wedding rings, diamond jewelry, or silverware, has formed a deferred demand, and they will remain in demand. But in the current conditions we struggle to keep the mass-market customers.

Therefore, our technology services are currently focused on developing measures to reduce the cost of production by modernizing technological processes, possibly reducing the weight of the most popular mass-market products, and developing new models in the mass-demand segment.

All our work is aimed at diversifying the sales channels and finding new areas for marketing.

To help us with this, we invite professional jewelers and creative specialists in custom design.

Oleg Podgursky, President of the Silver Club, St. Petersburg, Owner and CEO of the STRANNIK Studio:

- I dare to express an opinion contrary to the common point of view. It's not the crisis we should blame for the current problems but the jewellers. The crisis has only exposed the issues that many chose to ignore.

The fact is that the industry bringing almost 250 billion rubles annually to the Russian budget remains invisible for the public. Ask any person to name at least three Russian jewelry manufacturers, and you will not get an answer. This is because most companies don't do anything to get closer to their customers – the gap between them is huge. It is no wonder that the industry is not included the list of the most affected by the epidemic. It is difficult to help companies if you do not know in what way they contribute the society. The jewelry industry has long ceased to expand. Now we need to deal with issues of improving quality and building new marketing strategies. Today all jewelry stores look exactly the same – in every window you will see the sparkling wave of jewelry, and the assortment is quite similar. But we can and should create thematic collections, come up with informational and emotional descriptions of products.

At one of my seminars, I conducted a funny but revealing experiment. I divided a group into 3 teams, each of which was asked to estimate the cost of the jewelry piece in the photo. The results of the survey were staggering: it was the same product in all three photos, but the groups estimated it quite differently. The price offered by the first team was 100 times less than the price offered by the third team! Do you know why? To the first team, the product was described as a mass market piece, to the second, it was the product of a famous European jewelry house, and to the third team, it was an auction lot from the jewelry collection of some royalty.

As you can see, there are many reserves for increasing sales. The crisis only became a catalyst that triggered the inevitable mechanisms of change. Only those who are ready to change will survive the "epidemic" of stagnation that has hit our industry. The members of the Silver Club took this path long before the crisis. It is not that the time of forced production downtime and store closures affected us less negatively than the rest, but I believe that the anti-crisis strategies we have come up with will help us get out of stagnation faster.

Alexander Gorynya, Chairman of the Council of the Association of Jewelers of the North-West Russia, co-owner of the Gringor jewelry company, CEO of the Kongo company, St. Petersburg:

- According to the results of 3 months of self-isolation, the industry showed a drop in sales by more than 75%. By the strictness of quarantine measures, St. Petersburg is particularly different from other Russian cities. For example, in the Russia Far East, in Kaliningrad and other regions, jewelry stores opened much earlier. But our governor decided to ban non-food trade, and the ban on the sale of jewelry was in effect even when small retail outlets were allowed to open. The Union of Jewelers requested to exclude jewelry retail from the ban lists, but the St. Petersburg's government ignored their request. It is worth mentioning, though, that there are no queues in jewelry stores, and it is possible to organize safe retail.

As for production, it just stopped. The government support measures may help some companies to stay afloat, but the risks for the whole jewelry industry are still too high.

Some industries have switched to working remotely with no effort, but the production of goods cannot be done remotely by definition, and it is impossible to launch enterprises before retail starts working. Online retail does not really help here. Only so-called "catchweight" products can be successfully sold online, such as inexpensive jewelry made of silver, chains, and jewelry mass market goods. Fine jewelry with precious stones made manually, on the other hand, is very hard to sell through the Internet. A buyer will certainly want to see, touch and try on an expensive purchase.

The crisis, like any time of change, will bring not only losses, but also major changes. If we remember that there is always something positive in any situation, then, perhaps, we can thank the crisis for weeding-out the market. Recently, there has been clearly an overproduction of jewelry, and the today's market is provided with goods for 3 more years, and according to pessimistic forecasts, for 7 more years. So the crisis caused by the epidemic will play an equalizing role to a certain extent. Weak players will leave the market, and production volumes will find balance with the level of consumption.

The good example is our small company Gringor. We did not have to fire anyone, we kept the whole team because it is important to keep specialists, although the downtime still negatively affects the psychological climate in the company.

I believe that the major consequences of the current crisis will begin to fully manifest themselves only in fall, but the situation is so unstable that it is rather irresponsible to make any predictions. One thing I can say for sure: we've survived more than one crisis throughout 21 years of our company's existence. We will undoubtedly survive this one, we're used to it.

Oleg Ivanov, CEO of Oleg Ivanov Jewelry House, owner of the jewelry brand PIETRA

- We have a small team of only 7 people, so we had to spend a little less than a month on self-isolation before we were given permission to resume work. So it turned into something like an unscheduled vacation. Actually, I am even glad that there is so much free time to spend with my family and children. We also managed to educate ourselves and find insipration for the new jewelry collections. Fortunately, there have been so many interesting resources in the field of design, architecture, and applied arts during the pandemic. Now I have a lot of interesting plans waiting to be turned to life.

At the moment we are working on private orders and preparing products for the showcase, which we plan to present at the next exhibitions. We did not notice any extraordinary decline in sales as the end of spring and summer is always a period of down time. I believe we will see what the real state of affairs is only in September when business and exhibition will resume their work. Then we can sum up the crisis and make plans for the future.

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