A gold display at a Chow Tai Fook store in Beijing. (Jing Daily)
Luxury industry commentators often discuss the fact that China has yet to produce a major luxury brand that can compete with global giants from Europe. A new study by Deloitte finds that the exceptions to this, however, are Chinese jewelers, who are on par with the world’s biggest luxury giants.
In the consulting firm’s “Global Powers of Luxury Goods 2015” report released this week, it ranks the top 100 global luxury brands based on 2013 fiscal year data. According to the report, Hong Kong jewelry giant Chow Tai Fook ranked as the fourth-largest luxury goods company in the world after LVMH, Richemont, and Estée Lauder, coming in ahead of market heavyweights like Luxottica, Swatch, and Kering (which has recognized the power of Chinese jewelry brands with its own stake in local jeweler Qeelin). The company saw 2013 fiscal year sales of $9.9 billion, with 34.8 percent growth during that year.
Chow Tai Fook wasn't the only Chinese jeweler on Deloitte’s top 100 list. Mainland Chinese brand Lao Feng Xiang came in at 16th with $4.1 billion in revenue, while Hong Kong jewelers Chow Sang Sang and Luk Fook were listed at 24th and 25, respectively. In addition, Zhejiang Ming Jewelry Co. came in at 37th. The only non-jewelry Chinese company on the list was Hong Kong conglomerate Trinity, which owns Cerruti 1881 and Gieves & Hawkes, which came in at 71st on the list.
As China’s luxury market slowed over the the time period, the companies from Hong Kong and China remained strong with 33.4 percent sales growth, a rate that was three times the growth of the second best-performing country, the United States. This group wasn’t insignificant, either—it represented 11.3 percent of all luxury goods sales by brands on the top 100 list.
The report noted several key factors that led to these companies’ growth. “The jewelers took advantage of improved market sentiment and consumer confidence as a result of the ‘gold rush’ effect driven by the slump in the international gold price early in 2013, as well as continuing the rapid expansion of their store networks and e-commerce,” it says.
Next year’s report may yield much lower rankings for Hong Kong jewelry brands, however, after Hong Kong’s 2014 student protests and 2015 anti-mainland demonstrations hit jewelers hard. Chow Tai Fook recently reported that its net income for the year ending in March plummeted 25 percent to $704 million, causing stock prices to fall. But it wasn’t just Chow Tai Fook that felt the Hong Kong slump, which hit Western luxury retailers hard as well—especially watchmakers.
The mass-market appeal of these jewelers, which offer products at a range of price points and have local expertise at offering culturally relevant pieces such as gold jewelry for Chinese weddings, is set to boost growth in the long-term. In fact, a Morgan Stanley report recently found that local Chinese brands are still dominant in the Chinese jewelry market, stating that “despite the high disposable income per capita, mass market jewelry brands such as Chow Tai Fook, Chow Sang Sang and Luk Fook still own the lion’s share of the jewelry market in Hong Kong.”
The main challenge for these brands now—as well as for all global luxury brands—will be to strategically cope with the Hong Kong slowdown. Chow Tai Fook is already strategizing with plans to expand in areas where Chinese tourists are shopping instead of Hong Kong, such as duty-free areas in South Korea. It has already opened a store in the popular duty-free destination Jeju Island, and plans to open more in South Korea in the future. For local mainland and Hong Kong companies, expansion out of their home market may be more of a challenge than it is for global conglomerates, but they will certainly have a built-in advantage in appealing to the massive buying power of Chinese tourists.