Hong Kong Jeweler Chow Sang Sang Plans 50 New Mainland China Locations

Within 2 Years, Brand Hopes Mainland Chinese Will Account For 75 Percent Of Sales

Chow Sang Sang has 232 locations in 70 cities in mainland China

One of Hong Kong’s best-known jewelers, along with Chow Tai Fook (周大福) and Luk Fook (六福珠宝), over the last decade Chow Sang Sang (周生生) has embarked on a massive expansion effort in the mainland China market, looking to take advantage of growing demand particularly in second- and third-tier cities. According to the jeweler’s 2011 Annual Report, Chow Sang Sang currently operates more than 315 locations throughout the Greater China region, with sales of HK$17.1 billion (US$2.2 billion) in 2011 and net profit reaching HK$1.1 billion ($142 million). Among the regions in which the brand operates, mainland China accounts for the greatest annual turnover, with sales increasing 64 percent last year to HK$4.5 billion ($580 million).

As of the beginning of this year, Chow Sang Sang operates 232 locations in 70 cities throughout the Chinese Mainland, making it by far its largest and most lucrative market. However, demand from mainland tourist-shoppers continues to buoy sales in Hong Kong and Macau as well, with Chow Sang Sang deputy GM Winston Chow saying last week that turnover in these two cities grew 48 percent last year mostly due to sales to tourists, reaching HK$7.9 billion ($1 billion).

As Chow said at the grand opening of Chow Sang Sang’s newest flagship in Hong Kong’s mainland Chinese tourist-shopper magnet, Tsim Sha Tsui, in an attempt to continue to benefit from growing demand for gold and diamonds in mainland China, Chow Sang Sang plans to open 50 new stores in the Mainland within the next “one to two years.” Added Chow, the jeweler hopes that a larger footprint in mainland China will help raise the proportion of sales to this growing demographic from the current 64 percent to 75 percent within the same time frame.

Considering analysts think rising rents and stronger competition may cause a slowdown in Hong Kong’s jewelry sector, Chow Sang Sang’s renewed focus on Mainland expansion looks like a smart move. As the Wall Street Journal noted last week, “HSBC thinks a more structural shift could…be in play, with less visitor growth from the Mainland coming to Hong Kong as hotel room supply remains tight and the cost of staying in the city continues to increase.” While Chow Sang Sang still stands at a competitive disadvantage against much larger rival Chow Tai Fook, which has more than 1,500 watch and jewelry outlets in 320 cities in the Greater China region and plans to open upwards of 200 points-of-sale yearly through 2015, steadily rising demand in the “affordable luxury” segment in mainland China should continue to see revenue rise in the medium-to-long term.

Categories

Industry Sectors, Investment & Real Estate