Recently, the gold market has rushed to the hot search.
On the one hand, the price of gold has soared. On the evening of September 12, the international gold price once again set a new record. As of the close, international spot gold rose 1.88% to $2558.485 per ounce, and COMEX gold futures rose 1.85% to $2587.2 per ounce, both hitting record highs. The retail price of domestic gold stores also rose, and many gold jewelry stores raised their listing prices overnight, with the highest price increase of 15 yuan per gram to 761 yuan per gram.
According to Guangdong Radio and Television Station, a Guangzhou customer recently cashed out with a bunch of gold bars and gold jewelry, including more than 320 grams of gold bars and more than 450 grams of gold jewelry, including more than 120 grams of dragon and phoenix bracelets, with a total value of more than 400,000 yuan.
On the other hand, the gold store ushered in a cold snap. According to the financial report of the first-tier brand Chow Tai Fook, after a net closure of 89 stores in the first quarter, it closed 91 stores in the second quarter, a decrease of 180 stores in just half a year, and an average of one store closed a day. Similarly, other brand jewelry businesses are not having a good time.
Why can't the gold store catch the "splashing wealth" brought by the soaring gold price?
The owner, who only had more than 10 customers in the morning, was considering closing the store for transformation
In a high-end shopping mall in Hangzhou, a row of cold gold shops is a concrete expression of this "cold snap".
On weekends, when the surrounding sports brands and fashion clothing stores are crowded, the salespeople of this row of gold stores stand at the door in unison, or gather together to chat, or greet customers.
In high-end shopping malls, gold stores are deserted. Photo by Tan Xiaofeng
Song Cheng (pseudonym) is the person in charge of a brand franchise store with two gold stores in Jiaxing and Hangzhou. He told reporters that in previous years, May Day, Mother's Day, and Qixi Festival were all peak seasons for gold sales. Before 2019, when the market was good, it was common to sell hundreds of thousands of yuan or hundreds of thousands of yuan a day. "In the past, in the half month before and after May Day, sales could usually reach four or five million yuan, but now they can only be sold for a fraction, less than 1 million yuan." Song Cheng said.
The owner of a gold shop pointed out to reporters, "Previously, although we made concessions in the processing fee of gold jewelry, and discounted the actual gold price per gram of gold jewelry to around 680 yuan/gram, there were still only a handful of customers who actually bought gold jewelry." At least 80% of the more than 10 customers in the morning gold shop were intimidated by the high gold prices. ”
He looked around at other gold stores in the same mall and found that they were also "crowded". Faced with this situation, he has considered "closing the store" at the end of the year for transformation. In fact, the record high gold price is having an increasingly significant impact on the layout of gold stores in downstream gold companies.
Image source: National Business Daily
According to the semi-annual report of Chow Tai Fook, a Hong Kong-listed company, from April to June, the retail value of Chow Tai Fook decreased by 20% year-on-year, of which the retail value in the mainland is expected to decrease by 18.6%, and the retail value in Hong Kong, Macau, China and other markets decreased by 28.8% year-on-year. In addition, from April to June this year, Chow Tai Fook jewellery stores in Chinese mainland closed a net of 91; In the first quarter of this year, Chow Tai Fook's stores in the mainland market decreased by a net of 89 stores. This means that in just six months, Chow Tai Fook's jewelry stores on the mainland have decreased by 180, with an average of one closing a day.
Luk Fook Group's operating data from April to June showed that its overall retail revenue fell 23% year-on-year, with retail revenue in Hong Kong and Macau down 31% year-on-year and Chinese mainland down 3%. In terms of stores, Luk Fook Group saw a net decrease of 99 stores globally and a net decrease of 102 stores in the Mainland during the quarter.
At a time when gold prices are soaring, has consumers' enthusiasm for buying gold really faded?
According to statistics from the China Gold Association, in the first half of 2024, the consumption of gold bars and coins increased by 46.02% year-on-year. What really faded was people's enthusiasm for gold jewelry. The data shows that in the first half of the year, the consumption of gold jewelry, which has been performing well in the past, fell by 26.68% year-on-year.
Zhou Yongcheng, chairman and general manager of Chow Sang Sang Group, also said at the shareholders' meeting held a few days ago that due to the rapid rise in gold prices, which restricts consumers' willingness to spend, this year's sales performance is worse than expected.
"For jewellery, gold is the raw material. If the price of gold rises only slightly, consumers can still be said to be investing in jewelry, but after rising to 700 yuan per gram, the price of gold jewelry has obviously exceeded consumers' expectations, and sales have fallen off a cliff. Song Cheng said that before the Spring Festival this year, consumers' enthusiasm for gold buying once reached a peak in recent years, and merchants were full of confidence at that time.
A change of choice under the hurricane
Buying gold jewellery is consumption, and buying gold bars is investment. At a time when gold prices are soaring, this kind of conceptual differentiation is becoming more and more obvious. In a brand gold store in Linping, Hangzhou, Ms. Zhang, a customer, bought 3 gold bars at once, a total of 300 grams, the gold price of the day was 735 yuan/gram, the gold bars were 646 yuan/gram, and the 3 gold bars cost a full 193,800 yuan.
Ms. Zhang said that the reason why she chose gold bars is because the price of gold continues to rise, and there seems to be no better investment product than gold at the moment. What's more, there are no processing fees for gold bars, which is more cost-effective than buying gold jewellery.
Gold prices have risen, and investors prefer gold bars. Photo courtesy of the interviewee
This illustrates the dilemma faced by gold shops today: gold jewellery is much more profitable than gold bars, coins, etc. The reporter's investigation found that the gold price of most gold brands will be 20% to 30% higher than the international gold price, and gold jewellery needs to be subject to additional processing fees on this basis. Processing fees vary from brand to brand, with jewellery prices generally ranging from $60 to $100 per gram higher than the store's listed gold price. At a time when jewellery consumption is sluggish, the profits of gold stores have been greatly compressed.
Young people running into the market to buy gold is another change in the gold market.
According to the 2022 China Gold Jewellery Consumption Industry Consumer Insights Report, from 2016 to 2021, the proportion of Gen Z (usually young people born after 1995) buying gold has increased from 16% to 59%, making it the top of the list of gold jewellery consumption potential among all age groups. The data of the "2023 Jewelry Industry Trend White Paper" also shows that among the people who buy gold, women aged 18 to 34 and women in first- and second-tier cities are the mainstay. And their appearance has also quietly changed gold consumption. This change also exposes the shortcomings of traditional gold stores.
Jinyafu Group is a one-stop comprehensive service provider of precious metals, and is a supplier of many brand jewelers in China. The person in charge of Jinyafu's Hangzhou operation center said that most young people have a mentality of taking both consumption and investment into account, and they prefer lightweight products, such as gold bars and gold beans with low gross profit products. 1 gram of gold beans each, there is no manual fee, but it is consistent with the gold price of jewelry. Although it is much higher than the market price, it is regarded by young people as a means of fighting inflation and forcing savings.
At the same time, young people also prefer to buy gold online rather than buying gold in offline physical stores. A few days ago, Dewu APP released data showing that the gold jewelry category achieved a year-on-year increase of 300%. According to a staff member of Dewu, dealers who act as agents of many gold jewelry brands such as Jin Dasheng will have sales of hundreds of millions of yuan in Dewu in 2023, a year-on-year increase of more than 1,600%, and the GMV (total merchandise transaction) target will double in 2024.
At present, traditional gold brands have begun to deploy online business in the face of offline decline. For example, although Zhou Dasheng only has 3 people operating in Dewu, it has achieved a sales growth of hundreds of times by strengthening the operation of nodes such as Valentine's Day, 520, and Qixi Festival, and the "Happy Birthday Small Gold Coin" launched by Saturday Fu Zaiwu has also achieved hot sales, with a cumulative sales volume of more than 10,000 pieces.
According to the "2024 Qixi Festival Gift Consumption Observation Guide" released by Taobao, the transaction volume of gold categories with value preservation attributes increased by 255% month-on-month. Douyin also launched the "Qixi Sweet Season" theme venue, platform data shows that from August 2 to August 8, the number of Douyin group purchase orders related to jewelry vouchers increased by 238% year-on-year before the holiday.
According to data released by the China Jewelry and Jade Jewelry Industry Association, from 2019 to 2023, the online retail sales of gold, silver and jewelry increased from 153.4 billion yuan to 339.8 billion yuan, with a compound annual growth rate of 22.0%.
Strategies for new and existing merchants
Is there no chance for offline stores at all? Not really.
At present, gold brand merchants are paying more and more attention to market segments. Strengthen the rejuvenation strategy through technology upgrading, IP co-branding, cultural traceability, creative design, etc., and realize market value.
Recently, "Black Myth: Wukong" out of the circle has also made gold rub a wave of popularity, and many brands have launched gold jewelry with related elements while the iron is hot, such as Zhou Shengsheng's "Golden Hoop" ring and Mingpai Jewelry's "Wukong Knot" bracelet. Chaohongji focuses on young consumers, and a series of super popular cartoon image IPs such as Sanrio, Kuromi, Doraemon, and Crayon Xiaoxin are favored by young people.
"Wukong Fever" brings fire-related gold jewelry. Photo courtesy of the interviewee
In addition to cartoon IP, in recent years, national style IP has also often appeared in gold jewelry. In a conspicuous position at the entrance of a Chow Tai Fook store, there are co-branded gold ornaments from the Forbidden City series. Its unique style attracts people passing by who can't help but take a sideways look. The staff said that this is a joint model launched by Chow Tai Fook and the Palace Museum this year, and it is currently available online and offline, which is very popular with consumers.
In order to cater to different consumers, the craftsmanship and style of gold products are also constantly enriched. For example, fashion gold products created by using ancient gold, 3D hard gold, wire drawing, sandblasting and other processes.
Judging from the efforts of major brands, a series of measures are not only aimed at the current fluctuations in gold prices, but also aimed at the longer-term future. But it is undeniable that the soaring price of gold has indeed stimulated merchants to accelerate the pace of transformation and upgrading.