Per reporter: Zhang Yun Per editor: Liang Xiao
Can domestic jewelry be "on an equal footing" with international first-line brands such as Hermès and LVMH?
On 16 June, Chow Tai Fook disclosed its 2022 annual report, with turnover approaching HK$100 billion (HK$98.938 billion), up 41% year-on-year; Profit attributable to shareholders of the Company reached HK$6,712 million, representing an increase of 11.4% year-on-year. At the same time, the company's stock price has risen sharply in the past two years, and the latest market value reached HK$137.4 billion.
From the perspective of revenue scale, Chow Tai Fook far surpasses domestic competitors such as Lao Fengxiang, Chow Tai Sang, and China Gold, and has already sat in the position of the boss of the gold and jewelry industry, compared with Hermès and LVMH (only counting watches and jewelry), not to mention more.
"In FY22, driven by strong demand for gold products, gold products in Chinese mainland saw double-digit increases in the same store and a slight increase in average selling prices." On June 22, the spokesman of Chow Tai Fook Jewelry Group replied to the "Daily Economic News" reporter by email that although the fluctuation of gold prices affects consumers' desire to buy, the demand for gold products is still urgent under the festive atmosphere and shopping discounts.
However, from 2022 onwards, due to the impact of the epidemic and the high base, the growth momentum of Chow Tai Fook has slowed down significantly. But the company said it believes the retail and jewelry markets can grow sustainably in the coming years.
One of Chow Tai Fook's confidences may come from young people. The reporter visited the major gold stores in Shanghai offline, including many young consumers. Will this year's young people become the basic plate of jewellery consumption?
Gold jewelry revenue accounts for more than 70%.
Chow Tai Fook (HK01929, HK$13.74, MARKET CAPITALIZATION HK$137.4 billion) is the number one gold jewellery retailer in The Market Share in China. In fiscal 2022, Chow Tai Fook's sales approached HK$100 billion (about 12 billion euros), not only further narrowing the gap with Cartier's parent company Richemont (19.18 billion euros), but even catching up with the 184-year-old Hermès (about 9 billion euros).
Image source: Screenshot of Chow Tai Fook's FY2022 annual report
In Chow Tai Fook's view, the sharp increase in revenue came from the strong recovery of gold jewelry consumption and the expansion of retail stores.
From an apprentice in a gold shop to one of the four major families in Hong Kong, Cheng Yu tong took over the family business in the hands of his father-in-law, Zhou Zhiyuan, and pioneered a road to prosperity with equal emphasis on gold and diamonds. From upstream raw material procurement to midstream design and production, to downstream logistics, wholesale and retail, Chow Tai Fook holds the whole industrial chain in its own hands and regards it as the most core competitiveness.
It is easy to start a business and difficult to keep a job. As the third generation successor of Chow Tai Fook, Zheng Zhigang after the 80s was entrusted with the responsibility of "revitalizing the family business", integrating e-commerce into jewelry sales and taking charge of the smart retail sector. In FY2022, the retail value of the Company's smart retail business increased by 62.7%, and the contribution of this business to the retail value of the Chinese mainland was further expanded from 7.2% to 8.6%.
A spokesman for Chow Tai Fook Jewelry Group told reporters that in the e-commerce sector, the company has been committed to creating explosive models and launching e-commerce-exclusive differentiated product series to meet diversified customer needs and manufacturing hot topics. After continuous product adjustment, in FY2022, the retail value of e-commerce platforms in mainland e-commerce has increased from about 50% in the same period last year to about 55%. From the perspective of consumption quota, consumers still mainly buy daily wear styles with more suitable prices on e-commerce platforms. In FY22, the average selling price of products sold through e-commerce platforms was HK$1,800, up more than 5% from the same period last year.
In addition, the spokesperson further said that the company uses technology to create a convenient omni-channel customer experience, such as entering multiple e-commerce platforms and launching self-developed smart retail tools, increasing online touchpoints and further reaching young consumers.
By product, all of Chow Tai Fook's product categories have shown positive growth, gold jewelry is still Chow Tai Fook's basic disk, revenue accounted for more than 70%, and last year's growth rate reached 52.5%, the growth rate far exceeded platinum K gold, jewelry inlay, watches and other businesses.
Image source: Screenshot of Chow Tai Fook's FY2022 annual report
In fiscal 2022, Chinese mainland, Chow Tai Fook's main source of revenue, saw sales surge 45.6% year-on-year, accounting for 87.9% from 85.1% in the previous fiscal year. In FY2022, Chow Tai Fook continued to strengthen the development of the Chow Tai Fook Heritage Series in the Mainland, including enriching its product range, identifying new cross-border collaboration opportunities and adding a special area for the Heritage Series. The average price (Chinese mainland) of gold jewellery and products increased from HK$5,000 in FY2021 to HK$5,500, driven by the hot sales of Chow Tai Fook Heritage Collection.
Chow Tai Fook said in his annual report that this was due to strong demand for gold jewellery and products. From the performance data disclosed by Lao Fengxiang and China Gold, it can also be seen that the enthusiasm of Chinese for gold consumption has increased unabated.
Young people also love to buy gold?
In the view of the spokesman of Chow Tai Fook Jewellery Group, the recent international situation has continued to be tense, and the demand for safe haven has caused gold prices to fluctuate. The trend of gold prices is also one of the important factors influencing consumers' purchase decisions.
Since May, under the influence of global inflation prompting the Fed to raise interest rates and the dollar index to strengthen, the attractiveness of gold assets has weakened, and the price of spot gold has widened, falling from $1897/ ounce at the beginning of the month to $1787 / ounce on May 13, hitting a four-month low and recovering, closing at about $1850 / ounce at the end of the month.
However, in addition to anti-inflation demand, as gold has always had the attributes of a safe-haven asset, the risk challenges facing the global economy are also regarded as an important factor in the international gold market. As of June 22, the international gold price remained volatile near $1830/ ounce.
Image source: Screenshot of Chow Tai Fook's FY2022 annual report
For the future market, some gold market analysts predict that the gold price may be down in 2023, and some analysts believe that anti-inflation and risk avoidance factors pull each other, and gold prices cannot have a clear direction.
On June 22, the price of gold in some gold stores fell, with the largest decline of 5 yuan / g. The gold shop with the first gold price is Lao Fengxiang, with a price of 516 yuan / gram, and Chow Tai Fook, Zhou Shengsheng and Chow Tai Sang are 512 yuan / gram, 510 yuan / gram and 513 yuan / gram, respectively.
For the impact of gold price fluctuations, a spokesman for Chow Tai Fook Jewelry Group told reporters that in the case of rising gold prices, the price of gold jewelry will also rise, which may affect the willingness of some consumers to buy gold products, but Chinese have the tradition of buying gold gifts, because gold symbolizes a bumper harvest, wealth and health, so in the festive atmosphere and shopping preferences, the demand for gold products is still urgent.
On the evening of June 20, when the Daily Economic News reporter visited Chow Tai Fook, China Gold and other Shanghai stores, the counter sales staff mentioned that in June, thanks to the Dragon Boat Festival, 618 and other promotional activities, gold jewelry sales gradually rebounded, while at other times, especially during the 520 period, gold jewelry sales among young consumers were relatively good, but the demand for physical gold investment was relatively weak, and it is expected that the next peak sales season will be during the Mid-Autumn Festival National Day.
A store in Chow Tai Fook in Shanghai
Image source: Photo by reporter Zhang Yun
"In the past, the style of gold was old," so people bought gold bars to preserve their value, and now young people will buy more gold jewelry for fashion." Yayi gold store jewelry consultant told reporters that in recent years, various brands have grasped the market of young people, whether it is ancient gold or fine gold, there has been a leapfrog development in product design and processing technology, she recommended to reporters the combination of gold bracelet and millet chain stacking, saying that it is now very popular among young people such a collocation.
In order to meet the needs of young people, gold jewelry has also moved a lot of brains in style innovation, from the zodiac style, transfer beads, fortune cats, to the joint models cooperated with Disney, Harry Potter, Big Talk Westward Journey and other cultural and entertainment big IP cooperation, the major brands are competing for deer, aiming at the aesthetics of the younger generation.
After the 90s, Xiaoyu (pseudonym) bought Chow Tai Fook's zodiac gold pendant. She said in an interview with reporters on WeChat: "Because the shape is cute, I like it when I see the photo, and I pay the most attention to design when I buy jewelry." In addition, combined with the level of personal consumption, the value of gold jewelry is also more stable. ”
Franchise stores in the sinking market have expanded significantly, and thousands of new stores will be opened in the next fiscal year
When young people are planted by brands, large-scale offline stores become an important part of reaching consumers.
In order to understand the basic budget of wedding rings and three gold and other wedding sets in advance, Ms. Shen, who is preparing for the wedding, decided to go to various jewelry stores to shop around.
In a gold store, Ms. Shen told reporters: "At first I just looked at the style in the store, and did not want to buy immediately, just try to inquire, the clerk according to my needs, take out the computer on the spot to estimate, after her introduction, I added the membership group, there is a small for large, old for new after-sales service, after there is a price reduction benefit can also be known in time." ”
In the eyes of many consumers, as a must-have for life events, the purchase of gold bracelets and other products, or have to look at the offline store, which is obviously irreplaceable by online shopping.
For the question of how to grasp consumers' purchasing preferences, a spokesman for Chow Tai Fook Jewelry Group told the "Daily Economic News" reporter that Chow Tai Fook has been attracting different types of customers by expanding product differentiation. "For the next generation of consumers, we are determined to improve product design and storytelling. For example, the Chow Tai Fook Heritage Series, which pays tribute to traditional Chinese culture, is deeply loved by young consumers under the national tide. ”
In FY2022, Chow Tai Fook maintained the pace of store openings, with a net opening of 1,311 Chow Tai Fook jewelry retail outlets for a total of 5,902 retail outlets throughout the year. Chow Tai Fook said in his annual report: "We believe that cities and towns in the third tier and below have great potential to open stores."
According to the operating model, the newly opened 6 direct retail outlets are mainly located in shopping malls in first- and second-tier cities; As of March 31, about 74% of Chinese mainland retail outlets operated on a franchise model. In fiscal 2022, the retail value of franchises increased by 62.1%; The productivity of newly franchised retail outlets and stores has steadily increased, and the wholesale turnover has increased by 79.9% year-on-year.
Chow Tai Fook said in its annual report that the gross margin of the franchise business is generally lower than that of the direct business, due to the higher comparative base due to the surge in international gold prices in the first half of FY21, coupled with the increase in the contribution of the wholesale business and sales of gold jewellery and products, resulting in a narrowing of the adjusted gross margin by 490 pips in FY22.
In this regard, a spokesman for Chow Tai Fook Jewellery Group said that with the rise of the urban and rural economies in the mainland, it is expected that more young people in small towns will stay in the local development, and the consumption potential will be accelerated, and franchisees have rich local resources and connections in low-tier cities and townships.
"In the future, we will continue to expand our business footprint mainly through provincial generations and franchisees to expand our lower-tier cities." At the same time, we will also open direct stores, expecting direct stores to account for about one-third of the domestic retail value. In FY23, our store opening target is to open approximately 1,000 Chow Tai Fook jewelry stores. The spokesman said.
(Cover image source: Photo by reporter Zhang Yun)
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