Patriotic Generation Z fuels pandemic-era jewellery boom in China Country’s biggest retailer Chow Tai Fook banks on young people’s love of traditional
Jaunary 20 2022
People born after 1995 are driving demand for ‘China chic’ jewellery featuring traditional symbols such as dragons and phoenixes © Chan Ho-him/FT China’s biggest jewellery retailer Chow Tai Fook is banking on the young, patriotic and affluent Generation Z cohort buying “China-chic” pieces to fuel growth.
The strong demand from those born after 1995 for jewellery inspired by Chinese symbols such as dragons and phoenixes — the traditional emblems of emperors and empresses — has driven substantial growth during the pandemic. “[Gen Z] is one of the cohorts that has the ability [to pay] and is most willing to spend big,” said Chow Tai Fook managing director Chan Sai-cheong in an interview with the Financial Times.
“Many of them are not breadwinners of their families . . . so they can enjoy life more compared with their parents.” The younger generation is patriotic and willing to spend on domestic brands over the foreign brands that had enjoyed more prestige in the past, said Chan. Guochao — a trend roughly translated as “China-chic” — has led to an explosion of Chinese luxury brands.
“They love our [traditional] products, which can go with the style greatly,” said Chan. Millennial and Gen Z cohorts accounted for more than 56 per cent of sales for Chow Tai Fook’s “heritage collection” between April and September of 2021, according to the company.
Founded in 1929, Chow Tai Fook grew from one goldsmith’s shop in the southern Chinese city of Guangzhou to become known as the Tiffany’s of the east. The company has prospered during the pandemic. Total retail revenue at the Hong Kong-listed jeweller soared 79 per cent between April and September last year to HK$44bn ($5.6bn). During that period, revenue from mainland China rose 82 per cent to HK$38bn.
Chow Tai Fook plans to open more than 2,000 new outlets across China by 2025 © Paul Yeung/Bloomberg Its shares have risen almost 150 per cent since January 2019, before the pandemic hit, to HK$13.30 on Wednesday. Chan said growth was partly because of China’s “one-child” policy — implemented between 1980 and 2015 to curb the nation’s population — that resulted in members of Gen Z growing up in middle-class households with disposable income.
The cohort makes up about 15 per cent, or about 200m, of China’s population, according to McKinsey. With more than 5,000 stores in more than 660 cities in mainland China, Chow Tai Fook is plotting a rapid expansion even as President Xi Jinping pushes his “common prosperity” social reforms and cracks down on corruption.
The company plans to open more than 2,000 new outlets across the country by 2025, many of which would be located in smaller third- or fourth-tier cities that have a fast-growing middle class. The company is focusing on “affordable luxury” or simpler gold jewellery items, such as pendants, bracelets and rings, with most items priced on an average of no more than Rmb10,000 ($1,575). China’s personal luxury goods market has doubled in size between 2019 and 2021 to represent about $69bn, or 21 per cent, of the overall global market, according to a Bain & Co report issued in November.
Gold jewellery at a Chow Tai Fook store © Chan Ho-him/FT That growth took place when luxury markets in Europe, Japan and the rest of Asia only “partially recovered” last year and had still not reached pre-Covid levels, it said. Xianchi Dai, associate professor of marketing at the Chinese University of Hong Kong, believed the demand for high-end jewellery in mainland China would only get stronger.
Growth “will continue over the next [few] years”, said Dai, adding that “common prosperity” would further drive sales as the middle class increased and Gen Z shopped online. “[Gen Z] likes different types of jewellery . . . their preference for the design of Chinese cultural elements could also rise during times of high international tensions,” he said. “They have grown up during the digital age and thus they are much more friendly to online shopping.
” One of Chow Tai Fook’s rivals, Hong Kong-listed Lukfook Jewellery, also has plans to open up to 350 new outlets this year, with many of them located in lower-tier cities, while also expanding its ecommerce platforms to reach the younger generation. “[We will] step up our efforts to promote the sales of affordable luxury jewellery products . . . in the young consumer market,” said Nancy Wong, Lukfook’s executive director and deputy chief executive.
“The mainland China market will be our growth driver.” The focus on China comes as Chow Tai Fook and Lukfook’s sales in Hong Kong are losing momentum. Revenue has picked up but is still lower than pre-pandemic levels as a result of fewer mainland Chinese tourists, who were the largest consumers.
For now, the retailers are still holding out hope for a border reopening between Hong Kong and mainland China, which has been in talks for weeks but has yet to materialise, to help boost growth in the city. Peter Suen, Chow Tai Fook’s executive director, said: “A partial resumption of quarantine-free travel might not be able to bring us swift growth [in sales] . . . but that is definitely a better situation.”
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