Jeweller sees rural areas as goldmine
Chow Tai Fook, the largest jewellery and watch retailer on the mainland, is to open more shops and increase production capacity to cater for the growing demand among newly-affluent Chinese for gold necklaces and diamond rings.
The Hong Kong-based privately-held company, controlled by property tycoon Cheng Yu-tung, is to open 1,000 additional outlets on the mainland, doubling its existing network by 2020. It will also add more production lines to its two jewellery processing plants in Shunde, Guangdong, and Shenzhen.
Half of the investment planned for the next decade will go to third- and fourth-tier cities in rural areas, based on the company's strategy of serving the growing consumption power of Chinese farmers.
'In China, jewellery is no longer something to be worn only on big occasions. People will now buy necklaces or rings in different styles and colours to match their daily outfits,' said Kent Wong Siu-kei, managing director of Chow Tai Fook Jewellery.
'Consumers in big cities like Beijing and Shanghai now buy jewellery casually when they do their weekend shopping. We expect that will be happening in smaller cities as well in 10 years' time,' he said.
Jewellery sales on the mainland totalled US$30 billion last year, making it the third-biggest market in the world after the United States and Japan. Chow Tai Fook currently holds about a 10 per cent market share, followed by another Hong Kong brand, Chow Sang Sang, according to estimates from the China General Chamber of Commerce.
Chow Tai Fook started to promote its brand and products with TV commercials in the early 1990s even before the country opened the gold-trading sector to overseas companies. Since opening its first shop in Beijing's Guiyou Shopping Centre in 1998, it has developed a network covering almost all the first- and second-tier cities in every province of the country.
Wong said gemstones and diamonds were becoming increasingly popular with mainlanders while gold accessories remain its top-selling items.
Unlike Hongkongers who preferred traditional and classic designs, mainland buyers were more willing to try modern designs, Wong said. This explained why Chow Tai Fook often elected to launch new designs on the mainland before selling them in Hong Kong.
In a country as vast as China, he said, a company needed to adjust its inventory in line with consumer preferences in different regions.
'For example, people in coastal cities such as Dalian are more interested in bigger European-styled pieces made with gemstones and pearls; jade is especially well received in Xian, one of the oldest cities in the country; and Guangdong people love to buy single diamond rings or necklaces, which they believe can maintain value,' he said.
Chow Tai Fook has nearly 100 shops in Hong Kong, Macau and Taiwan. Last month it celebrated the opening of its 1,000th mainland shop in Beijing. 'In the past, what consumers cared most for was whether the jewellery they bought was genuine. Today they will pay more attention to the shopping environment. That will be a focus in our new shops in future,' Wong said.