April 24, 2007 / 11:00 AM / 12 years ago

QVC may cut back gold airtime as prices soar

By Humeyra Pamuk

LONDON, April 24 (Reuters) - Television shopping channel retailer QVC is mulling cutting back airtime allocated to gold jewellery because high prices have sapped its appeal.

“In QVC everything is based on airtime and airtime is dollars per minute,” David Markstein, director of merchandise at QVC, told Reuters in an interview late on Monday.

“We will look maybe to cut back gold airtime slightly to give airtime to other areas that are more productive,” he added.

“Less airtime obviously means selling less.”

QVC, owned by Liberty Media LCAPA.O, is one of the largest multimedia retailers in the world, with annual revenues exceeding $7 billion.

High and volatile world gold prices, which hit a 26-year peak of $730 an ounce last May, have dented consumer appetite for gold jewellery for over a year now.

Industry officials had forecast steadier prices this year would help price-sensitive jewellery demand to recover, but a rise of more than 14 percent since the start of the year has hit hopes.

“The expectation was that once these prices leveled out the customers would get used to the pricing but the volatile gold market has not allowed that,” Markstein said.

“But the jewellers cannot charge customers any more for gold than they already do. I think they are really at a point now where they just have to maintain the price that the customers will pay for it.”

Markstein said customers had shifted to cheaper alternatives like steel, or a combination of gold and silver.


“In such a market it becomes less of a price game than a product game,” said Markstein.

He said Turkey, one of the world’s top jewellery exporters, could have an advantage in such a market with its low production costs, but he listed one disadvantage.

“Turkey has casting, stamping, all the things Italy can do but without the creativity,” Markstein said.

“The customers have no loyalty towards Turkey, but they do have loyalty towards Italy...The intrinsic value they get from Italy is higher.”

Italy used to dominte the world’s gold jewellery manufacturing sector but has run into fierce competition from countries with lower production costs, like Turkey, India and China. But thanks to its well-established brand name and high quality, it has retained some degree of customer loyalty.

High and volatile world gold prices coupled with competition from lower cost producers like India and China reduced Turkey’s gold jewellery exports by 23 percent in 2006.

“China and India for us are in the game, but still very irrelevant compared to the Turkish market because they do not have the capacity to work in different manufacturing processes like Turkey does,” Markstein said.

((Editing by Tony Austin; humeyra. pamuk@reuters.com; Reuters Messaging: humeyra.pamuk.reuters.com@reuters.net; +44 20 7542 9736)) Keywords: GOLD JEWELLERY QVC

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