Mainland's richest see glitter that's not gold
Last week, 75 mainland couples and families were invited on a three-day, two-night, all-expenses-paid trip, touring on harbour cruises, visiting personal stylists and indulging in wine-tasting treatments, while staying at the Grand Hyatt in Hong Kong.
The trip, however, came at a price. These were guests who spent at least 1 million yuan (HK$1.23 million) last year with Chow Tai Fook, and who were later invited to the jeweller's first auction in Hong Kong. The event was part of a brand revamping campaign for Chow Tai Fook.
High-end diamond jewellery and ultrawealthy mainlanders could bring Chow Tai Fook into a new era, at a time when big names like Tiffany and Cartier are making inroads in its home market, and when competition with Hong Kong rivals like Luk Fook and Chow Sang Sang is bitter.
'Our mainland VIPs - especially in first- and second-tier cities - like to buy diamonds,' said Chow Tai Fook executive director Adrian Cheng Chi-kong. He said margins from diamond pieces were around three times higher than for gold products.
In the Grand Hyatt ballroom, the few middle-aged men in polo shirts at each table seemed underdressed compared to most of the other attendees, but they were doing most of the bidding in the auction, which was carried out in Putonghua.
All told, 100 VIP couples were invited to the event, as well as 25 couples chosen from a list of about 55,000 VIPs in Hong Kong.
The most expensive piece of jewellery, an 18-carat white-gold diamond-and-blue sapphire necklace, known as 'the galaxy', sold for a bid of HK$7.5 million to a buyer who flew in from Beijing, after being introduced by private bankers in Hong Kong.
Partnering with private banks and wealth-management divisions was key for Chow Tai Fook to attract VIP clients, Cheng said.
Growth was expected to pick up in the second half after the leadership change in China, added Cheng, as a lot of clients 'are still waiting for political sentiment to clear'.
Chow Tai Fook has more than 700,000 VIP clients on the mainland, where it now has a presence in about 320 cities, and envisions entering more than 700 in total.
Any city of more than 300,000 people could be a target, Cheng said.
China became the second-largest jewellery market in 2010, with retail sales at HK$302 billion, exceeded only by the US, according to research by consultants Frost & Sullivan.
The mainland market has taken off over the past decade, fuelled by a combination of looser rules governing jewellery imports and gold, and increasing affluence.
About 56 per cent of Chow Tai Fook's sales came from the mainland in the six months to last September. Even in Hong Kong and Macau, mainland tourists constituted the largest single group for jewellery retail sales, with more than 49 per cent of sales settled through China UnionPay or in cash in yuan in the first half of this financial year.
Even though gold still accounted for about half of sales, diamonds were the key to winning over the wealthiest on the mainland, Cheng said.
Last year, imports of polished diamonds to China hit US$1.29 billion, up 85 per cent from 2009, according to the Diamond Administration of China.
In the six months to last September, about 24 per cent of turnover came from gem-set jewellery, and about 53 per cent from gold products.
