China’s biggest jeweler eyes mass market – The world’s most valuable jewelry retailer Chow Tai Fook

Chow Tai Fook Jewellery Group’s range of fashionable, and affordable, pieces which the company hopes will win over the millions of Chinese who live outside major cities but who are reaping the benefits of a rapidly growing economy and who remain enamored by the gleam of gold.

The world’s most valuable jewelry retailer Chow Tai Fook, which counts Cartier and Tiffany & Co as competitors,is on a quest to conquer the hearts of China’s future big spenders.

“We are quite similar to the fast fashion way of business in that our products are only available for a limited period of time,” Kent Wong, managing director of Chow Tai Fook, told. “The stock-keeping units will have to respond promptly to the fast-changing tastes of customers,especially young customers, who can share information about trends very quickly on their smartphones,” he added.

China, the world’s second largest economy, is on track to overtake India as the world’s biggest consumer of gold this year as falling prices encourage purchases for both personal use and investment.

Combine that penchant for gold with a population that is rapidly urbanizing, and becoming more affluent and trend-conscious in the process, and building customer loyalty as well as keeping up
with fashion becomes key to the prospects of jewelry retailers. About 100 million people are likely to move into cities over the next 17 years, according to ratings agency Moody’s. China is already the second largest market for Zara-brand owner Inditex , the world’s biggest fashion retailer.

“Just like fast fashion, fast jewelery is the right stuff to target at the youth and the products can also sell at a better margin when they are limited edition,” said Renee Tai, a Hong-Kong based
analyst at brokerage UOB-Kay Hian.

Chow Tai Fook’s fashion jewelry, which costs between HK$200 and HK$2,000 ($26 and $260), is a far cry from the luxury offerings that have traditionally accounted for over 80 percent of sales,
and which on average cost about 10 times as much. But the shift to expand mass-market retail is already paying off. Chow Tai Fook saw its net profit rise by a forecast-beating 92.3 percent in the six months ended September, with same-store sales growing 33.2 percent. Chow Tai Fook, which has a market value of nearly $16 billion, is not alone in targeting the masses.

Smaller rival Luk Fook Holdings International, with a market value of $2.4 billion, is looking at opening stores in busy railway stations to expand its reach in China and raise its profile in less
developed cities and the vast hinterland.

Building brand loyalty also makes good business sense. Repeat purchases by Chow Tai Fook’s Hong Kong members contributed almost 17 percent to total revenue in Hong Kong and Macau for the six months ended September, while those from its China members made up nearly one-quarter of total sales in the mainland, company data shows.

“We are seeing a significant surge in retailers investing in loyalty programs in order to increase consumers’ loyalty as it’s getting harder and harder for retailers to drive growth by purely relying
on their quick pace of expansion,” said Brian Negley, vice president of consumer research firm Nielsen China.