The "price war" drove the owner of the gold store in the county crazy: more than a dozen stores on 1 street, saying that they couldn't make money and were ready to close
Source of this article: Times Weekly Author: Zhou Jiabao
Editor's note: The Spring Festival is a great migration of the Chinese population from cities to towns. Farewell to the prosperity and return to the homeland, the small town that lingers with the local sound has changed its appearance again, there are new formats, new models and new scenes of commerce, and there are also people and sophistication that make us feel warm. On the occasion of the Spring Festival of the Year of the Dragon, Times Weekly, Times Finance and Consumer Reports jointly launched a series of reports on "Big Year in a Small Town", focusing on the big business in the small town, the changes and warmth of the small town.
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Returning youths have ignited the gold market in the sinking market.
"Zodiac gold jewelry sells the best, and the products in the shape of the Year of the Dragon are also popular. Before the Chinese New Year, we will stock more, but some styles are still out of stock. Zhu Li, the owner of a gold store in Zibo, Shandong Province, told Times Finance that since February, store sales have increased by about 20% compared with 2023, and she expects that the peak consumption of this year's Spring Festival will be around Valentine's Day on February 14.
Young people who have returned to their hometowns have become the main force of gold consumption in the county during the Spring Festival. An old temple gold salesperson in a county town in Sichuan told Times Finance that in the past two weeks, not only has sales increased, but the proportion of young people who come to the store to consume has also increased significantly, "everyone is coming back from the city for the New Year."
As early as before the Spring Festival holiday, Lin Cheng, who worked in Guangzhou, had a plan to go back to his hometown to buy gold. "I went to buy gold the next day after I went home, and the shops were very lively, Chow Tai Fook, Lao Miao, Liuzhou Fu, and many other unfamiliar brands were on the same street. In the end, I bought a 20-gram gold bracelet for my mother, and after counting the derogation discount, it was about 11,000 yuan in the end. ”
According to Frost & Sullivan data, from 2017 to 2022, the compound annual growth rate of sales of gold jewelry products in third-tier and below cities exceeded 11%, higher than the 6.7% and 8.3% in first- and second-tier cities. At the same time, the size of the gold consumption market in third-tier cities and below also increased from 102.4 billion yuan in 2017 to 174.2 billion yuan in 2022.
However, there is an undercurrent behind the jewellery consumption boom in the sinking market.
A number of gold shop owners in the county town lamented to Times Finance that although the atmosphere of the Chinese New Year has promoted the growth of gold sales, compared with previous years, the profits of this year's Spring Festival are much worse than before. On the one hand, the opening of more and more branded gold stores has made "price wars" the norm, and on the other hand, young people with strong purchasing power have begun to tilt towards more cost-effective products and solutions when consuming gold.
县城金店们在比价中赤身肉搏。
Gold consumption is also cost-effective, and white-collar workers flock to gold shops
The wind of cost-effective consumption has blown to the gold retail market.
"The price of gold is too high right now. Referring to the decision to go back to the county to buy gold, Lin Cheng bluntly said that the price concession was the main reason. "There are few gold store discount activities in big cities, and some brands in the county have cheaper gold prices and labor costs than specialty stores in first-tier cities. ”
Take the gold price listed in Chow Tai Fook stores as an example. In October last year, the price of pure gold grams in a Chow Tai Fook store in Guangzhou fluctuated between 590 yuan/gram and 600 yuan/gram. However, since January this year, the gold price of the store has almost remained at about 620 yuan/gram, and by February 5, the price of pure gold gram weight in the store has risen to 627 yuan/gram.
The bracelet that Lin Cheng bought in a gold store in his hometown in Hunan County, the listed price of pure gold was about 580 yuan/gram, and the listed gram price in the store alone was nearly 50 yuan lower than the above-mentioned Chow Tai Fook store. After the promotion is superimposed, the arrival price of the bracelet is about 530 yuan/gram.
It's not that you can't afford gold in first-tier cities, but that the gold store in your hometown is more cost-effective. The international gold price continued to rise, the investment and financial sentiment increased, and "spend less money, buy more gold" has become an important behavioral characteristic of young people's gold consumption.
Social platforms are flooded with all kinds of gold buying strategies. Lin Cheng found that friends who were still clamoring to pay for design and buy branded gold jewelry two years ago have also begun to shop around and are no longer willing to pay more brand premiums.
Another interesting phenomenon is that a large number of young people have begun to abandon the purchase of finished gold jewellery and flock to gold shops. According to Tech Planet, as the Spring Festival approaches, a gold shop in Beijing is full, and the on-site queue starts for 3 hours. A master in the store said that about 1,000 grams of gold was played in the last day, and the monthly income was 900,000 yuan based on the average manual cost of 35 yuan/gram.
The gold shops in the county town are also hot. Before the Spring Festival this year, Lulu, a "post-95" consumer, used two 50-gram gold bars and about 10 grams of idle gold jewelry to make three pure gold bracelets in the county gold shop. She told Times Finance, "Gold shops need to make an appointment, and in the process of gold mining, there are a lot of people who ask about the store." ”
She also calculated an account for Times Finance: "My gold bars are purchased in the bank twice, one is 497 yuan/gram, and the other is 494 yuan/gram, and 100 grams of gold bars cost about 49,500 yuan, and the gold work fee is about 2,800 yuan." I asked some brand gold stores, and the processing fee for bracelets with more than 30 grams is at least more than 20,000 yuan. According to Lulu's calculations, choosing a gold shop can save nearly 10,000 yuan compared to buying a finished bracelet directly.
The price war is very fierce, and it is necessary to sell it if you only earn 10 yuan/gram
Gold consumption enthusiasm is high in the sinking market, but the profits of gold stores in the county are not as good as before. Sinking gold brands, young people comparing prices, and gold wholesalers squeezing into the retail track are all changing the ecology of the county's gold market.
Yang Hai, who runs more than 10 brand gold stores, told Times Finance that at present, the overload of gold stores in the county is a fact that they have to face.
In the past few years, brands such as Chow Tai Fook, Chow Sang Sang, Lao Fengxiang and Chow Tai Sang have accelerated their sinking strategies. "I heard that some provincial agents are tasked with increasing the number of stores by 1/3 on the original basis in three years, which is very challenging. In order to achieve the goal of expanding stores, there is no shortage of radical policies to lower the franchise standards and only seek the number of stores. He said.
Wu Yan is the owner of a gold shop from a county in Sichuan and has joined brands such as Laomiao. The county where he is located has a permanent population of less than 400,000 and a built-up area of less than 20 square kilometers. "There's so much competition! There were originally about 10 gold shops on our street alone, and three new ones have opened in the last year. ”
Yang Hai said that dividing the county's population by 50,000 can estimate the normal capacity of gold jewelry stores in the market. If calculated according to this method, the number of gold stores in the county market where Wu Yan is located is relatively reasonable.
The frantic expansion of stores has also made a price war imminent. Wu Yan pointed out that "for consumers in counties who are more price-sensitive, shopping around has become the norm. We sell 550 yuan/gram, and the customer turns his head and goes to the next door to ask the price, and if they sell it for 530 yuan/gram, we will sell it if it drops to 520 yuan/gram. If you only earn 10 yuan/gram, you have to sell it, what can you do if you don't sell it?"
In addition, the price system of physical gold stores in the county has also had an impact on the "Shuibei model". Many gold jewelry processing factories and source wholesalers have begun to sell gold jewelry to C-end consumers through social media, live e-commerce, and even adding physical stores. This also means that the county gold store may face omni-channel price comparison from consumers.
The lively scene of the Shuibei gold market in Shenzhen in August 2023. Times Finance/Photo
In addition, the change in the sales structure has also made the owners of gold stores complain.
Julie revealed to Times Finance, "Fixed-price products with higher profits can't be sold, and everyone chooses more cost-effective products priced by grams." Products with small gram weight and relatively low prices are sold more than in previous years, but gold bracelets with gram weight have become less popular before the Spring Festival this year. ”
Before the epidemic, the monthly sales of non-gram gold products in the two stores he operated reached 700,000 to 800,000 yuan, "Now, the sales of the two stores can still reach more than 2 million (yuan), but the sales of non-gram heavy products have fallen sharply by more than 50%, and the gross profit margin of pure gold weight products is only about 10%." ”
Yang Hai, who is also in Sichuan Province, also revealed that the average gross profit margin of his stores has dropped from 50% to 20%. Between 2017 and 2019, the profit of the gold store operated by Yang Hai was 2 to 3 times that of the current one.
Closing the shop became a method for gold shop owners to stop losses in time. Wu Yan bluntly said to Times Finance, "It can't be supported, the second store has not made money, and the management fees and rental costs have been rising." The money earned from opening the first store earlier has been subsidized to the second store, which is equivalent to not making money in the business for all these years. So, I'm going to shut it down. ”
Coincidentally, Yang Hai also has plans to withdraw some stores, "The sinking gold store market has entered a reshuffle period, and the owners who open 1-2 stores will be gradually eliminated, or integrated into the large franchisee system." Many bosses around me plan to consider withdrawing their stores after the New Year, and there should be a wave of store withdrawals in March and April. ”
In fact, the growth rate of the third and fourth tier markets is also declining further. According to Frost & Sullivan, the compound annual growth rate of China's gold jewellery market in third-tier cities and below is 11% from 2017 to 2022, and this growth rate is expected to fall to about 6% from 2022 to 2027.
It is worth noting that the overall consumption outlook of the gold industry is also not optimistic. In January, Wang Lixin, CEO of the World Gold Council China, suggested that while jewellery demand in Q1 2024 may remain strong due to volume growth ahead of the Lunar New Year holiday, consumption for the full year may still be challenged by higher gold prices, slower economic growth and weaker demand for wedding gold.
(Except for Wang Lixin, the names in the article are pseudonyms)