China's biggest jeweler sees gold in the masses

Gold for the masses

Chow Tai Fook's fashion jewelry, which costs between HK$200 and HK$2,000 ($26 and $260), is a far cry from the luxury offerings that have traditionally accounted for over 80 percent of sales, and which on average cost about 10 times as much.

But the shift to expand mass-market retail is already paying off. Chow Tai Fook saw its net profit rise by a forecast-beating 92.3 percent in the six months ended September, with same-store sales growing 33.2 percent.

Chow Tai Fook, which has a market value of nearly $16 billion, is not alone in targeting the masses.

Smaller rival Luk Fook Holdings International, with a market value of $2.4 billion, is looking at opening stores in busy railway stations to expand its reach in China and raise its profile in less developed cities and the vast hinterland.

Building brand loyalty also makes good business sense.

Repeat purchases by Chow Tai Fook's Hong Kong members contributed almost 17 percent to total revenue in Hong Kong and Macau for the six months ended September, while those from its China members made up nearly one-quarter of total sales in the mainland, company data shows.

"We are seeing a significant surge in retailers investing in loyalty programs in order to increase consumers' loyalty as it's getting harder and harder for retailers to drive growth by purely relying on their quick pace of expansion," said Brian Negley, vice president of consumer research firm Nielsen China.

Image conscious

But as it pushes into rapidly changing jewelry, Chow Tai Fook faces the challenge of retaining its reputation for exclusive, luxury items while also appealing to the masses.

The company, founded in 1929, aims to achieve this by selling some of its fast jewelry products online, where most customers are aged between 20 and 35.

Chow Tai Fook also maintains three distinct store layouts that cater to its clients - the high-end luxury consumers, the youth and the mass market, managing director Wong said.

Analysts say focusing on the younger generation is key.

"The company has to ensure this group of people gets familiar with the brand and they won't feel your products are out of date," said UOB-Kay Hian analyst Tai.

"They have to groom a new group of customers to support the brand and products."