Jewelry retailers continue to sparkle as sales increase despite gathering economic clouds. Emma An reports.

As inflation remains high, the retail business may be the biggest victim. But some, such as jewelry sellers, have barely felt the pinch. Mainland jewelry sales expanded by 48.7 percent in value terms through the first eight months of 2011, being the biggest gainer among all consumer goods and far outstripping the 14.9 percent gain in car sales and 19.5 percent growth in sales of cosmetics.

"The impact will be temporary," said Chan Sai-cheong, director of Chow Tai Fook Jewelry Co (CTF), in reference to the downward pressure eroding purchasing power may put on sales.

But Chan believes that the jewelry retail industry will keep powering ahead on the back of the nation's ever-expanding economy.

Moreover, the global slowdown also has a silver lining. As more foreign capital is rushing to China in search of returns, said Chan, it will give a boost to domestic retailers.

As a well-known jewelry seller in Hong Kong, CTF has over 1,200 stores, out of its total 1,300, on the mainland. The company's 2010 sales topped 30 billion yuan.

The company, controlled by billionaire Cheung Yu-tung, plans to list in Hong Kong in December and is looking to raise $3-4 billion to fund its expansion on the mainland.

The decision to go public comes as the jewelry chain racing to unveil another 1,000 stores from 2010 to 2016.

The target, if met, will make an average annual growth of 15-20 percent in the number of stores CTF runs there.

The company is looking beyond the traditional luxury strongholds of Beijing and Shanghai. More effort will be made for the new rich in far-flung parts, Chan said.

"People's love for jewelry knows no geographical boundaries," he said, suggesting people are readier than ever to splurge on things to add some color to their life as their basic needs are met with economic growth.

Mainland consumers are more acutely aware of brands, Chan said, and they are prepared to pay a premium for that. A survey found that mainland buyers are willing to pay a 30-50 percent price premium for Hong Kong brands and up to 80 percent for foreign ones.

"Mainland consumers have strong confidence in Hong Kong brands," Chan said.

Compared to fine jewelry brands from abroad, those from Hong Kong enjoyed a much wider reach in times past and are quickly building up their share in the domestic jewelry retail market.

As CTF ponders more expansion across the border, mainland tourists already account for 70 percent of the company's sales in Hong Kong, while several years ago, almost 90 percent of the jeweler's products in the city were sold to locals, Chan noted.

Luk Fook, a local jewelry retailer with 657 stores on the mainland as of March, derives more than 50 percent of its local sales from mainland visitors. The year to March saw its revenue from the mainland jump 64 percent after soaring 55 percent the previous year.

Mainland spenders were again instrumental in the 40 percent increase in Chow Seng Seng's 2010 revenue. While mainland operations contributed 33 percent of the company's total retail revenue, 41 percent of its sales in Hong Kong came from mainland tourists. This year, the biggest HK-listed jewelry maker continues to benefit from demand by mainland visitors. Its sales in the first six days of the "Golden Week" holiday jumped more than 50 percent year-on-year, the jeweler said on Friday.

TSL Jewelry, with some 85 percent of its retail outlets on the mainland, meanwhile generates close to 50 percent of its total revenue from mainland business.

The opening up of the domestic jewelry retail market in 2003 following China's accession to the World Trade Organization has allowed famous jewelry retailers from abroad as well as the ones from Hong Kong to make deeper inroads into the country and live up to the wishes of Chinese shoppers.

Tiffany & Co, whose first store in Beijing opened 10 years ago, expects to more than double the number of stores it operates in China to 30 within the next four to five years.

"China is going to see tremendous change," Chan observed. The legion of high-spending shoppers is set to rise rapidly, he predicted.

As the biggest jewelry retailer in China, "CTF has no intention of going global", said Chan. But the company is intent on taking the lead in the Asian market. "We do business only where there are Chinese," Chan remarked.

That means selling not only to, in Chan's words, "those at the top of the pyramid" who have no problem spending a million dollars on a single jewelry piece. But also to the masses whose budget usually falls between several thousand and a couple hundred of dollars.

emmaan@chinadailyhk.com

(HK Edition 10/08/2011 page2)