HONG KONG — Jeweler Chow Tai Fook has big expansion plans for China, particularly the country's second to fourth tier cities, including provincial capitals.
Executive director Adrian Cheng said that more than 80 percent of the company's planned store openings in the next few years will be in located in cities other than Beijing, Shanghai, Shenzhen and Guangzhou.
"We will be opening more stores in places where we already have a presence and also excavate new cities," Cheng said Monday on the sidelines of an auction dinner thrown for 240 VIP customers. "Recently, we've noticed that the per-capita spending of VIPs in third- and fourth-tier cities has been catching up with first- and second-tier cities," said Cheng, a grandson of the jeweler's founder and also an executive director of property company New World Development.
Chow Tai Fook, which already can be found in 320 cities in the country, is planning to open a net of about 200 points of sale per year for a total of over 2,000 by 2016, the executive said. The company currently has 1,600 points of sale in mainland China, Hong Kong and Macau.
Chow Tai Fook became the world's biggest listed jewelry retailer in terms of market capitalization in December when it raised 15.8 billion Hong Kong dollars, or $2 billion, in an initial public offering.
At the dinner, mainland Chinese and Hong Kong customers who were considered VIPs for purchasing at least 1 million Hong Kong dollars, or $128,885, worth of jewelery per year from Chow Tai Fook dined on roasted suckling pig and wine.
Twelve lots of jewelry including necklaces, rings, earrings and bangles went on the auctioning block. An 18-karat white-gold necklace with diamonds and blue sapphires sold for $968,000, the highest price paid for a lot at the auction.
The dinner was not the only lavish enjoyment the guests were receiving this week. The company was treating them to a three-day, all-expenses-paid break including a stay at the Grand Hyatt, yacht ride and wine-tasting. The company has 700,000 VIPs in China and 50,000 in Hong Kong and the guests were selected from among them. Event organizers prohibited journalists from interviewing the VIPS present in Hong Kong.
While the appetite for jewelry waned elsewhere last year, it remained robust in China, where glimmering trinkets are important as as gifts for important occasions and celebrations. The jewelry market in greater China looked set to grow at a compound annual growth rate of 38.6 percent from 2010 to 2015, according to a report by market researcher Frost and Sullivan.
Helen Lau, a senior analyst at brokerage UOB Kay Hian here, said demand for gold jewelry in mainland China and Hong Kong grew 14 percent last year, compared to a decline of 3 percent globally. It likely would overtake India as the biggest consumer of gold jewelry by the end of 2012 with demand at about 580 tons for the year, she said.
The Chinese harbor a cultural affinity for gold and consider it a protection against inflation, so demand will stay strong, she said.
She noted that in the third- and fourth-tier cities, women "feel proud to wear gold accessories in public and take it as a symbol or wealth. This is in contrast to first-tier cities like Shanghai and Beijing, where people don't openly wear gold jewelry."
Chow Tai Fook is not the only jeweler widening its footprint in the country. Hong Kong-listed Chow Sang Sang opened 55 stores in China last year. Luk Fook Holdings, also listed here, said in April that it would open 30 shops in China before May 1.
Last year, De Beers Diamond Jewellers opened stores in Beijing, Tianjin, Dalian and added a second store to Hong Kong. It is planning to expand further, it said in its 2011 operating and financial review.
Compagnie Financière Richemont, whose brands include Cartier and Piaget, said in its 2011 interim report that China is now its third-largest market after Hong Kong and the United States.
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