SAN FRANCISCO(BullionStreet): China’s jewelery store industry grew at an annualized rate of 27.3% to $79.4 billion in the five years to 2012, says IBISWorld.

In it's latest report IBISWorld said China has become the largest consumer of gemstone, jade and platinum jewelry in the world, and the second-largest consumer of gold and diamond jewelry.

As household incomes rose and living standards improved, jewelry purchases have increased rapidly in China. China has become the largest consumer of gemstone, jade and platinum jewelry in the world, and the second-largest consumer of gold jewelry (after India) and diamond jewelry (after the United States).

Jewelry retailing is highly fragmented in China, with the five largest jewelry retailers jointly accounting for less than 25.0% of industry revenue in 2012.

Low industry concentration is mainly due to fragmented domestic markets and relatively low industry entry barriers. In addition, most jewelry retailers choose to specialize in one or two jewelry categories, such as gold jewelry, diamond jewelry, platinum jewelry, or gemstone jewelry, says IBISWorld.

This restrains their market shares in the industry as a whole. The Jewelry Store industry in China is characterized by leading retailers in local markets, such as Laofengxiang and Yuyuan in Shanghai, Caibai in Beijing, and Huiyunlou in Shenyang.

However, despite their prominence in local markets, their shares in the nationwide market are much lower. Even for large-scale jewelry retailers such as Chow Tai Fook, which has about 1,000 jewelry outlets across China, its coverage mainly focuses on large cities and is much lower in second and third-tier cities and rural areas.

The large market size in those areas provides opportunities for a large number of small and medium-sized jewelry retailers, says IBISWorld.

Since per capita jewelry consumption in China is well below that in developed economies and the world average, the future growth potential of the industry is substantial.

IBISWorld anticipates that more jewelry retailers will adopt franchise-store expansion strategies and move into second-tier and third-tier cities to exploit those markets.