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Professional development opportunities for the Gold Market

The gold market is heading toward calm period following the “bottled-neck” control of Gold market by the Central Bank of Vietnam. The market is becoming more stable and the gold Jewellery trading of the reputable brands are still growing strongly with the new policy in quality control of gold-Jewellery from the decree No 22 effect in June / 2014

Gold bar trading is limited, gold jewellery trading is following a stable path.

The production of gold Jewellery in Vietnam was unorganized and un-controlled. However, with the newly applied policy 24/2012/ND – CP regardings the management of gold trading activities in May 25th 2012, the quality of the gold products are more tightly controlled. Many jewellery corporations with reputable brand image in the area of producing and trading such as PNJ, SJC will have more advantages.

According to Policy no. 24, the activities of gold bar and account of gold jewellery trading will be tightly regulated in legal perspectives.

In order to trade gold and crafted jewellery, besides the previous requirements such as gold content marking on products, notice of quality standard, buying, selling price and responsible for the quality in the market…, Point no. 5 of the Policy No 24 clearly enforced the incorporation of Jewellery trading entities.

The jewellery corporation have to be licensed by the Central Bank of Vietnam for meeting the production standards; have location, have adequate operating facilities and equipment for production of gold, Jewellery and crafts.

Policy No. 24 also tightly controls the gold bar trading activities. Corporation needs to have authorized capital from 100 billion VND; have operating experience in gold trading business from 2 or more years; have paid the amount of tax from 500 million VND for two latest consecutive years; have retail network in at least 3 Central provinces.

Credit Unions applied for gold trading license is required to have the authorized capital of 3.000 billion VND; have registration for gold trading; have retail network from at least 5 Central provinces. The Corporations and Credit Unions are not allowed to conduct the gold trading activities through their authorized retailers…

Despite the limitation on gold bar trading, the gold jewellery trading is following the right order with positively impact in the operation of reputable gold jewellery corporations, including PNJ. In reality, the profit from gold bar trading accounted only a small profit for PNJ Corporation.

In early 2015, PNJ was approved by the Government for its gold inspection services, referee on the dispute of gold content between customers and other gold Jewelries – Picture: Hoai Nam

PNJ core ability is jewellery production and trade. The corporation places its goal on revenue and profit from gold bar in the variable gold category (due to a high dependency on Government policy). Once the market is feasible, PNJ will take fully advantage and when the market is not feasible, PNJ will not be affected much in its strategy and profit goals.

For the operation of gold trading business, total revenue does not show the clear picture of the corporation due to the fluctuation of the gold bar trading price. Revenue generated is quite high while the net profit is relatively small.

Gold, silver jewellery services achieved the revenue and profit target for PNJ from last year, especially the PNJSilver brand with a fairly good growth rate (more than 30% / year). In the other hands, PNJ met all the gold bar trading requirements according to the Decree 24.

The Policy stopped the gold bar production of other Gold brand than SJC, but did not stop trading gold bar of other brands. Meanwhile, having the most networks of stores and branches in Vietnam gave PNJ much better advantages compared to other corporations.

While the main profit from the core wholesale and retail of gold Jewellery , the profit of gold bar trading is only approximately of 1% and only accounted for total net profit of 2% of PNJ. The demand for gold bar from customers is quite high and PNJ is still focusing on meeting the demands.

The gold bar product of PNJ was established from 1988, despite the fact that was unable to continually produce according to the new Policy, are still flowing on the market.

Besides, PNJ is one of a few gold jewellery corporations which were licensed by the Government to trade gold bar. This advantage helped to build up the brand image. On occasion such as “Fortune God” day at the beginning of Lunar New Year, PNJ’s stores even ran out of gold bar.

PNJ is still the favorite and trusted brands, and the continuation of gold bar trading does not affect PNJ’s core focus on gold jewellery.

PNJ strongest advantage is the retail network with presence in 43 provinces, cities in the country and the ability to supply for more than 3.000 gold stores.

PNJ jewellery factory which started operation in the end of 2012 in Go Vap, Ho Chi Minh City (with the production rate of 4 million products / year) created a very good advantage of producing and trading of jewellery.

The stability of this unit did not only create the opportunities for PNJ to increase its trading activities, maximize production for domestic market, but also lead towards export to foreign markets. The production capability of PNJ jewellery factory in 2014 has increased 35% compare to 2013, which created more than 2 million units to the market…

The demand for jewellery for the market population of more than 90 million with the gold-reserved tradition and beauty in precious gems is tremendous. Therefore, the core business operation in jewellery business is always the strong focus of PNJ.

In 2014, PNJ achieved the revenue in retail jewellery of 2.280 billion VND, increase 42%, accounted for 31% and 74% of total revenue and gross profit respectively. This is a stellar growth improvement, despite 8% decrease in the total gold demand in Vietnam in 2014, according to the World Gold Council reports.

Advantages for reputable brands

The economic challenge in recent years had a negative impact on consumer products demand. However, the purchasing demand for gold jewellery products only decrease at a lower rate of 12% in 2012 and lower in the following years.

The business sector of production and trading of Jewellery still have many potential to grow in Vietnam market.

First, the belief in old reservation as top savings priority is still popular among Asian countries.

Second, economy development results in increasing in consumer demand however more selective consumers and they only trusted on reputable products, brand.

On the other hands, Vietnamese jewellery owned per capita is still low compare to other Asian countries, therefore, the consumer purchasing power and demand for Jewellery still remains large.

Control of jewellery quality in compliance with the Policy 22/2013/TT-BKHCN is the supporting platform for reputable brands such as PNJ, SJC. Before the application of Policy 22, Jewellery products from PNJ have to go through a rigid quality control process

The quality control of jewellery according to Policy 22/2013/TT – BKHCN is the supporting platform for reputable brands such as PNJ, SJC.

Policy 22’s goal to standardize the Jewellery retail market has greatly supported corporations with structured business model such as PNJ and greatly support the consumers in receiving reputable, high quality products. Consumers were guaranteed the benefits and will be less worry about the “unclear” gold content and pricing.

According to Policy No. 22, company, jewelers which sell incorrect gold content, unable to publish the gold content and gold weight in each product will be heavily fined. Therefore, the condition has been improved from the effect of this Policy since 1/6/2014. Jewellery corporations which want to improve their brands and long term development will have to be honest on the gold content to consumers.

PNJ is the third corporation approved by the Government to operate the gold inspection service in the market, referee the dispute of gold content between consumers and other jewellery by the beginning of 2015.

New Policy is opening more opportunities for not only trusted Jewellery Corporation with a clear business structure but also the whole gold trading industry to improve our professionalism, and carter to the increasing demand on quality products from consumers.