{"id":14433,"date":"2022-03-09T11:14:18","date_gmt":"2022-03-09T05:44:18","guid":{"rendered":"https:\/\/gjepc.org\/solitaire\/?p=14433"},"modified":"2022-03-09T11:15:00","modified_gmt":"2022-03-09T05:45:00","slug":"greater-china-jewellers-rapid-expansion-accelerates","status":"publish","type":"post","link":"https:\/\/gjepc.org\/solitaire\/greater-china-jewellers-rapid-expansion-accelerates\/","title":{"rendered":"Greater China Jewellers\u2019 Rapid Expansion Accelerates"},"content":{"rendered":"\n

Diamond analyst <\/em>Paul Zimnisky<\/strong> studies the frenzied pace of store expansion undertaken by China\u2019s three jewellery retail giants.<\/em><\/h4>\n\n\n\n

Through just three quarters of the company\u2019s current fiscal year which ends 31st<\/sup> March, 2022, Chow Tai Fook has already opened a record number of net new stores. So far in fiscal 2022, the company has opened 1,055 net new stores, which compares to 741 in all of fiscal 2021 and 586 in fiscal 2020. <\/strong><\/p>\n\n\n\n

The aggressive store expansion is a component of Chow Tai Fook\u2019s \u201cDuel Force\u201d strategy which also includes \u201csmart retail,\u201d i.e. enhancing the \u201cautomation level\u201d of the company\u2019s supply chain. During a Virtual Media Day event last year, the management quantified that the store expansion plan aims to reach 7,000 stores by March 2025 \u2013 the company had 5,646 stores as of calendar-year-end 2021, which compares to under 1,300 stores a decade ago.<\/p>\n\n\n\n

The strategy focuses on penetrating \u201clower tier and county level cities\u201d in Mainland (China) via a franchising model given the ability to leverage local knowledge and access.<\/p>\n\n\n\n

While the \u201ctier system\u201d is not formally acknowledged by the Chinese government, \u201cTier I\u201d colloquially refers to the four largest cities in Mainland China including Beijing, Shanghai, Guangzhou and Shenzhen. \u201cTier II\u201d is considered to include roughly 30 \u201clarger\u201d cities, and \u201cTier III\u201d approximately 70 emerging cities. \u201cTier IV\u201d is considered to include in excess of 70 smaller, but also quickly emerging cities, et cetera.<\/p>\n\n\n\n

It is estimated that there are now over 170 cities in China that host a population in excess of one million people.<\/p>\n\n\n\n

\"\"<\/a><\/figure><\/div>\n\n\n\n

Other major jewellers in China, including Luk Fook and Chow Sang Sang, continue to rapidly open new stores as well. For instance, Luk Fook has plans to open 360 net new stores in the fiscal year ending March 2022, which would boost the company\u2019s store count by over 15% year-over-year to 2,322 locations.<\/p>\n\n\n\n

In a direct communication with Paul Zimnisky last year, a Luk Fook executive said that the company also prefers to penetrate lower tiered cities with a \u201clicensing\u201d model, i.e. franchising, because \u201cChina is so big\u201d and \u201cit\u2019s a very efficient way to do fast expansion.\u201d<\/p>\n\n\n\n

Last year, Chow Tai Fook said that it expects \u201csales in the consumer market in Mainland China (to) surge rapidly in coming years,\u201d driven by the Chinese government\u2019s \u201cDual Circulation Strategy\u201d and \u201c14th Five-Year Plan.\u201d<\/p>\n\n\n\n

The former is a Chinese economic policy that was implemented in early-2020 aimed at stimulating domestic consumption while (at the same time) remaining open to international trade and foreign investment. The latter is the latest in a series of social and economic development initiatives first implemented by the government in 1953.<\/p>\n\n\n\n

With the latest \u201cFive-Year Plan,\u201d which runs from 2021 through 2025, the economic aim is to \u201cstimulate consumption in all sectors\u201d driven by middle-class growth. The Plan includes early-stage initiatives to grow the per capita GDP in China to the equivalent of $30,000 by 2035, which would be almost three times the 2020 level.<\/p>\n\n\n\n

For context, per capita GDP in the US, Japan and India (three of the diamond industry\u2019s largest markets) is about $65,000, $40,000 and $2,100, respectively, according to World Bank figures. China has a population of about 1.4 billion people; the US, Japan and India, have an estimated 330 million, 125 million and 1.4 billion people, respectively.<\/p>\n\n\n\n

Speaking to the anticipated impact of the Chinese economic initiatives, Chow Tai Fook management recently told Paul Zimnisky that \u201cdevelopments in lower tier cities and rural areas are expected to present huge potential.\u201d<\/p>\n\n\n\n

Chow Tai Fook, Luk Fook and Chow Sang Sang represent the three large \u201ccorporate\u201d jewellers in the Greater China market \u2013 which is considered to collectively encompass markets in Mainland China, Hong Kong, Macau, and Taiwan. Greater China is estimated to currently account for upwards of 20% of global diamond jewellery demand.<\/p>\n\n\n\n

Paul Zimnisky forecasts that China and India, combined, could outpace the US as the largest consumer of diamond jewellery by the end of this decade. The US, by itself, currently represents half of global end-consumer diamond demand.<\/p>\n\n\n\n

—<\/p>\n\n\n\n

Paul Zimnisky, CFA is an independent diamond industry analyst and consultant based in the New York metro area. For regular in-depth analysis of the diamond industry please consider subscribing to his <\/em>State of the Diamond Market<\/em><\/a>, a leading monthly industry report; an index of previous editions can be found <\/em>here<\/em><\/a>. Also, listen to the <\/em>Paul Zimnisky Diamond Analytics Podcast<\/em><\/a> on iTunes or Spotify. Paul is a graduate of the University of Maryland’s Robert H. Smith School of Business with a B.S. in finance and he is a CFA charterholder. He can be reached at <\/em>paul@paulzimnisky.com<\/em><\/a> and followed on Twitter <\/em>@paulzimnisky<\/em><\/a>.<\/em><\/p>\n\n\n\n

Disclosure: At the time of writing Paul Zimnisky held a long position in Lucara Diamond Corp, Star Diamond Corp, North Arrow Minerals Inc,<\/em> Brilliant Earth Group and Barrick Gold Corp. Please read full disclosure at <\/em>www.paulzimnisky.com<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Diamond analyst Paul Zimnisky studies the frenzied pace of store expansion undertaken by China\u2019s three jewellery retail giants. Through just three quarters of the company\u2019s current fiscal year which ends 31st March, 2022, Chow Tai Fook has already opened a record number of net new stores. So far in fiscal 2022, the company has opened…<\/p>\n","protected":false},"author":7,"featured_media":14435,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85,79],"tags":[],"thb-sponsors":[],"class_list":["post-14433","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-demand-mapping","category-viewpoint"],"acf":[],"yoast_head":"\nGreater China Jewellers\u2019 Rapid Expansion Accelerates - Solitaire magazine is a International jewellery magazine - India\u2019s leading B2B gem and jewellery magazine<\/title>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/gjepc.org\/solitaire\/greater-china-jewellers-rapid-expansion-accelerates\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Greater China Jewellers\u2019 Rapid Expansion Accelerates - Solitaire magazine is a International jewellery magazine - India\u2019s leading B2B gem and jewellery magazine\" \/>\n<meta property=\"og:description\" content=\"Diamond analyst Paul Zimnisky studies the frenzied pace of store expansion undertaken by China\u2019s three jewellery retail giants. 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