HAVING gained a foothold in the Greater China market, Hong Kong-based jewellery chain Chow Tai Fook has now set its sights on South-east Asia, and has plans to leverage Singapore as its regional hub.
But first, the company needs to learn more about the market, and it intends to do so by setting up its second store in Singapore.
"I think the challenge is that we don't know the country very much. We are very fresh, we are the newcomer, even though we are the top player in mainland China," says Chow Tai Fook's managing director, Wong Siu Kee.
Today, the jewellery chain derives 99 per cent of its revenues from mainland China, Hong Kong, Macau and Taiwan. Singapore and Malaysia have one store each.
But come December 2014, the jewellery chain will set up its second store here at ION Orchard - its first step to understanding Singapore and the South-east Asian market.
The company had thought that the shop it opened at Marina Bay Sands four years ago would give it a better understanding of the local market, but located right beside the casino, it ended up attracting mostly Chinese tourists, and some from South-east Asia.
The Chinese traveller who comes to Singapore might know Chow Tai Fook, says Mr Wong, "but we still need to raise our brand in Singapore and South-east Asia . . . hopefully with a new location, we can draw more local customers and learn more about their demand".
For now, the company will stick to learning more about Singapore and South-east Asia, and does not have any definite plans for regional expansion in the short-term. So the bulk of its business will still come from the Greater China region in the near future.
Incorporated in 1929, Chow Tai Fook specialises in mass-luxury jewellery, with gold products making up 50 per cent of its total sales (from this, 20 per cent are gold coins and bullion).
To protect against price volatility, 70 per cent of the company's gold is hedged, mainly through gold borrowing but also via forward and futures contracts.
Gold demand in Chow Tai Fook's largest market, China, is mostly in line with GDP growth, says Mr Wong, and will remain stable in the coming few years due to physical demand from investments and weddings. In the next 5-10 years, he predicts, 12-13 million couples will get married in China and as a result, there will be strong demand for jewellery.
The company has more than 2,000 brick-and-mortar stores in China, but has been aggressively ramping up its e-commerce presence, though this constitutes only one per cent of total revenue.
But in the next 5-10 years, the brand will be investing even more into e-commerce.
"E-commerce is not just a buy and sell platform, but also a marketing campaign to access emerging customers," says Mr Wong.
Chow Tai Fook established its online sales channels in 2014. By the first half of the year, there was 60 per cent growth in online sales; today, with 120,000 unique visitors daily, it is the top jewellery brand on Alibaba's T-mall (China's biggest B2C platform).
According to the director of Chow Tai Fook's branding department, Alan Chan, a few elements contributed to its e-success. Firstly, the brand has dedicated a strong support system of over 200 employees to its e-platforms, and also offers a variety of products online (some are sold exclusively online).
At present, those born between 1980 and 1990 account for 10-15 per cent of Chow Tai Fook's total revenue.
The company projects that e-commerce transactions will rise to 5 per cent of total sales within five years, from one per cent currently.
Now, because of technology, the world is flat and customer behaviour is changing, says Mr Wong. The company needs to identify this change and predict future demand.
"And after you predict this change, how fast can you refine your product and service?"
That is Chow Tai Fook's biggest challenge, says Mr Wong.