Chow Sang Sang looks to millennials and Gen Z to replace lost business from absent mainland Chinese tourists

Chow Sang Sang Holdings, one of Hong Kong’s largest jewellery retailers, saw half of its sales evaporate after tourists from the mainland disappeared, but things are looking up after shifting its focus to a younger and local clientele.

The jewellery retailer, which has about 700 stores in the Greater China region including Macau and Taiwan, has partnered with London-based Victoria and Albert Museum to use iconic British designs as themes for its shops and for a jewellery line inspired by art pieces in the museum.

The company’s move to introduce affordable daily wear jewellery items targeted at millennials and Gen-Z buyers has boosted sales by 20 per cent over the past two years, partly making up for the lack of tourists and improving the bottom line.

“At the start of 2019, tourists accounted for 50 per cent of our business, but with social unrest followed by Covid-19 for over two years now, 50 per cent of the business has gone,” said Winston Chow Wun-sing, director and deputy general manager at Chow Sang Sang.

In mid-2019 when the anti-government protests broke out, tourists started giving the city a wide berth, leading to a 14.2 per cent decline in arrivals to about 56 million for the year, according to government data.

This was compounded by the Covid-19 pandemic in early 2020, when Hong Kong virtually closed its borders to stem the spread of the disease, resulting in a 93.6 per cent drop in tourist numbers to 3.57 million. Last year, arrivals further declined by another 97.4 per cent to just 91,398.

The absence of tourists was reflected in the company’s earnings. After posting a profit of HK$1.01 billion (US$129 million) in 2018, it fell 36 per cent to HK$643.5 million in 2019. In 2020, it decreased by another 15 per cent to HK$544.5 million. Last year, profit improved 16 per cent to HK$744 million, but it was still over a quarter lower from 2018.

“In traditional retail, 20 to 30 per cent of your sales are your margins, when sales drop by 50 per cent, you can tell what happens,” Chow said.

The outlook is unlikely to improve quickly even after the borders with the mainland are opened as tourists may potentially opt to travel to faraway places after being cooped up at home for such a long time, he said.

Chow is not pinning his hopes on tourists for sales to improve. “I think the contribution of tourists to our business will definitely improve once Covid-19 is under control. However, we will be happy if we can even achieve half of the lost tourist sales in the next two years.”

Chow Sang Sang, meanwhile, is seeing a resurgence in sales from Hong Kong-based buyers, with sales growing 20 per cent in the last two years. The company’s strategy to develop a loyal customer base especially among younger buyers was paying off, Chow said. The government’s consumption vouchers also helped a bit, he added.

Chow Sang Sang’s flagship store at K11 Musea in Tsim Sha Tsui offers shoppers interactive screens and spots worthy of Instagram shots as a way to spark interest among young shoppers.

Affordable everyday jewellery items, digital push and updated designs and product lines suited to young couples are also helping Chow Sang Sang gain popularity with millennials and Gen-Z buyers alongside its current customer base of 35+plus age group, which makes up most of its existing customer base.

“We now have a higher percentage of buyers from the younger generation because we’re trying out new things,” Chow said.

Chow Sang Sang’s Minty Collection, affordable daily wear jewellery, has been cited by market research company Euromonitor International as one example of how companies could adapt to the changing preferences amid the pandemic.

“With economic prospects remaining uncertain, affordable fine jewellery is expected to grow further,” Euromonitor said.