|
 Superman and the Angry Birds team also feature in 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.
"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 Reuters.
"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 jewellery 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 jewellery 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.
GOLD FOR THE MASSES
Chow Tai Fook's U.S.-based competitor Tiffany & Co, best known for
its expensive diamond necklaces and engagement rings, also gets
about 30 percent of sales globally from its less expensive jewellery,
primarily silver items costing less than $500 that have long been
part of its selection.
This lower-end jewellery is the company's most profitable, though
sales growth in this category has slowed in recent years. Earlier
this year, Tiffany hired a new designer to make its silver jewellery
more contemporary and the company introduced some new silver
jewellery lines.
Chow Tai Fook's fashion jewellery, which costs between HK$200 and
HK$2,000 ($26 and $260), is also 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.
[to top of second column] |
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.
IMAGE CONSCIOUS
But as it pushes into rapidly changing jewellery, Chow Tai Fook
faces the challenge of retaining its reputation for exclusive,
luxury items while also appealing to the masses.
The company, founded in 1929, aims to achieve this by selling some
of its fast jewellery products online, where most customers are aged
between 20 and 35.
Chow Tai Fook also maintains three distinct store layouts that cater
to its clients — the high-end luxury consumers, the youth and the
mass market, managing director Wong said.
Analysts say focusing on the younger generation is key.
"The company has to ensure this group of people gets familiar with
the brand and they won't feel your products are out-of-date," said
UOB-Kay Hian analyst Tai.
"They have to groom a new group of customers to support the brand
and products."
($1 = 7.7523 Hong Kong dollars)
[By Donny Kwok © 2013 Thomson Reuters. All
rights reserved.]
(Additional reporting by Alexandra Hoegberg in Hong Kong and Phil Wahba in New
York; editing by Anne Marie Roantree and Miral Fahmy)
Copyright 2013 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
