Report on Jewellery Industry in Hong Kong
REPORT ON JEWELLERY INDUSTRY IN HONG KONG Prepared for Mr. Kevin Lee CEO of Sparkle Limited Prepared by Ms.
Mary Chan Sales manager for Sparkle Limited On February 18, 201 Sparkle Limited Date: February 10, 2011 To: Mr. Kevin Lee, CEO, Sparkle Ltd. From: Ms. Mary Chan, Sales manager, Sparkle Ltd Subject: Report about Jewellery Industry in Hong Kong The attached report, requested by you dated Jan 5, analyze the current business opportunities in jewelley industry in Hong Kong and also the possibility of establishing a retail jewellery shop in Hong Kong.I hope you will find the results of this report beneficial in making the decision of setting up a new retail store in Hong Kong. The purpose of the report was designed to investigate the below areas: 1.
Opportunities of in Hong Kong’s jewellery trade 2. Feasibility of Sparkle Ltd to open a new retail store in Hong Kong. The scope of the report mainly focuses on the following areas: 1. Economic environment in Hong Kong 2. Our major competitors review 3. Demand of jewellery industry in Hong KongSecondary research included the annual sales report of our main competitors, government publications, information from Hong Kong Jewellery Association, books and online references.
A more comprehensive analysis in each area is given and conclusions are drawn. Sparkle Ltd. is always a company with good reputation in exporting and manufacturing jewellery overseas. The positive and supportive results are indicated by this report and I hope it would be helpful for you to decide whether to expand new business in Hong Kong. I would be grateful to discuss this report in depth with you at your convenience and request.Table of contents 1.
Executive Summary 2. Introduction 3. Scope of study 4. Procedure 5. Findings & Analysis 5. 1Economic environment 5.
2Competition in Hong Kong Jewellery Industry 5. 2. 1 Traditional brand 5. 2. 2International brands 5. 2.
3 New brands 5. 3Consumers review in Hong Kong Jewellery Industry 5. 3. 1Local customers 5. 3.
2Mainland tourists 5. 3. 3Foreigner tourists 6. Conclusions 7. Recommendations 8.
Sources of data 1. Executive Summary This report, authorized by M. Lee, aims at looking into the possibility of opening a new retail store in Hong Kong.It is limited to the following areas, consumers and competitors review and economic environment. Secondary research is conducted, like research report and online resources were collected in this report.
It was found that under our financial constraints, it is feasible and profitable to introduce a new retail shop in Hong Kong market due to improving economic situation, increasing customers buying incentive and demand from mainland china and also local customers. In order to make a success in the introduction, we recommend the company opens a new retail shop in Tsim Sha Tsui because of favorable location which can attract customer flow.Also, we suggest the company uses undifferentiated marketing strategies to serve all types of customers as their behavior are not too distinct and different. Besides, it is very costly to use several marketing strategies for each type of markets and it is not necessary to spend money on it. 2.
Introduction This study shows a practical outline of jewellery trade in Hong Kong. The facts and statistic would help you in deciding whether to expand our company into Hong Kong jewellery market. Hong Kong’s economy is recovering during recent years after economic tsunami in 2008.Also, jewellery market is growing faster and drastic as more Hong Kong people and tourists are in favor of buying luxurious and delicate jewelleries. In order to take this advantage, a report is conducted in order to better reflect the jewellery industry in Hong Kong. This report, which you requested on 5 Jan, (1) evaluates the opportunities in retail jewellery trade in Hong Kong, (2) and also analyses the feasibility of opening a retail jewelry shop in Hong Kong.
3. Scope of study Jewellery is mainly divided into 3 categories: diamonds, precious gems and gold.As people’s consumption powers increases with rapidly growth on economic development, and also their preferences on luxurious products like jewelleries increase, their demand on jewelleries rises at a dramatic rate. Besides, jewellery is a competitive industry in Hong Kong, knowing our competitor’s strategies are essential. Hence, this report is restricted to the following areas: 4. Procedure Secondary research was carried out in this study.
Secondary research consisted of magazines, online resources, annual report of Hong Kong famous jewellery shops, data from Jewellery Association government statistics report, and press release.It provides realistic and factual information to help us to make a more comprehensive result and helps us better understand the current market situation. Result of this research, would be fully investigated in the following parts of the report. 5. Findings and Analysis 5.
1 Economic Environment: In 2010, the strong rebound of the Hong Kong economy with improving employment condition has spurred private consumption and retail sales in Hong Kong. In addition, the strong inflow of PRC tourists and their increasing consumption power also support the growth of Hong Kong retail sales. The value of total retail sales in Hong Kong increased by 18. % over a year earlier to HK$263,057mn for the ten months ended 31Oct2010. With further improvements in unemployment rate and economic condition expected, we estimate Hong Kong retail sales to grow 12. 0% in 2011.
5. 1. 1 Strong rebound of Hong Kong economy in 2010 Though the risks of a relapse into recession in the US and Europe remain, the tilt of balance of global economy landscape towards the East, especially the Mainland China, has resulted in faster economic growth in the emerging Asian economies in 2010 compared with the West. In line with increasing integration with Mainland, Hong Kong real GDP grew 7. % for the nine months ended 30Sep2010. 5.
1. 2 Increasing economic ties with Mainland While external demand could remain weak compared with the level before the global financial crisis, and the advanced economies are still the main driving force for the final demand in global trade, we think the increasing integration between Hong Kong and Pearl River Delta will continue to support the economic growth of Hong Kong. 5. 1. 3 PRC tourists-another Hong Kong retail sales growth driver Hong Kong retail sales sector is largely underpinned by the strong inflows of tourists, especially from PRC.For the ten months ended 31OCT2010, the number of total tourist arrivals increased by 24.
7% to 29,434,487. Among the total, 64. 0% are from Mainland China and arrivals from Mainland grew 29. 4% for the ten months ended 31Oct2010 to 18,845m025. Their consumption power has also increased due to appreciation of RMB and increasing disposable income per capita.
5. 2 Competition in Hong Kong Jewellery Industry The definition of Competitors is that companies are in competition with at least one other firm over the same group of customers.They provide similar products to consumers with a competitive prices and professional services. There are three sorts of competitors in Jewellery Field. Those are traditional competitors, international competitors and new brand competitors.
As for traditional competitors, their companies were founded by local entrepreneurs from a long time ago. Take Chow Sang Sang and Chow Tai Fook as examples, the former was organized in 1973 and the latter was established in 1941. The brand image as a traditional Jewellery Shop they created is deep rooted in the mind of Hong Kong folks.As for international competitors, they are well-known as an international brand and a brand providing with high-end and high quality jewellery, such as Tiffany & Co. , and Georg Jensen. As for new brand competitors, their shops were organized in recent years, like Qeelin in 1997.
5. 2. 1 Traditional brand 5. 2. 1. 1.
Profits According to their financial report, Chow Sang Sang Holdings International Limited, an investment holding company, engages in the manufacture and retail of jewelry; wholesale of precious metals; and securities, futures and commodities broking business.It also involves in the bullion broking, diamond trading, and property investment businesses; sale of corporate gift products; and provision of nominee and information technology services. The company operates 39 Chow Sang Sang shops and 8 Emphasis shops in Hong Kong; 22 Emphasis shops in Taiwan; 3 Emphasis shops in Macau; and 165 Chow Sang Sang shops in various cities in the Mainland China. It also owns and operates a jewelry store under the Midtown Jewelry brand name in Hong Kong Disneyland, as well as offers its products through its Website, eshop. chowsangsang. com.
The company was founded in 1934 and is based in Kowloon, Hong Kong. On the other hand, Chow Tai Fook Jewelry Co Ltd, a Hong Kong-based jewelry company, has announced that it has purchased a diamond for US$35. 3 million or HK$275 million at an auction, and that the diamond, which is called The Cullinan Heritage, weighs 507 carats and was discovered in Cullinan Mine in South Africa. The large diamond was found in September 2009 alongside three other diamonds weighing 168 carats, 58. 5 carats and 53.
3 carats, respectively. Chow Tai Fook Jewelry purchased the 168-carat diamond for US$6. 8 million in November 2009. Cheng YuTung, chairman of Chow Tai Fook Group, the parent of Chow Tai Fook Jewelry, said that the diamond is very rare and exceptional. Chow Tai Fook Jewelry currently owns more than 1,000 chain stores in China and Malaysia and hopes to have more than 2,000 stores by the end of 2020.
The firm’s annual total sales exceed HK$30 billion and its market value exceeds HK$100 billion, sources reported. 5. 2. 1. 2.
Target customers As a traditional brand in Hong Kong, Chow Tai Fook and Chow Sang Sang target at local residents and mainland tourists. Local residents would purchase old or diamond accessories when special and formal ceremonies are hold such as Wedding or First Month Celebration. Mainland tourists would be the potential buyers as they have more buying power than ever before under the flourishing economy of China. Moreover, the group aged at 30-50 is aimed by Chow Sang Sang and Chow Tai Fook. 5. 2.
1. 3. 4P Analysis Chow Sang Sang and Chow Tai Fook offered customers with the series of diamond, gold and jewelry for bridal and signature. Their prices of their products are ranked lowest when compared with two other competitors as they only focus on local market.They promote their products via TV ads, website and posters. In order to increase their sales, they offer discounts to customers and give them free gifts.
Their stores mainly distributed in Mong Kok and Tsim Sha Tsui. 5. 2. 2 International brands 5. 2.
2. 1 Profits For Tiffany & Co. , their Sales in Asia-Pacific increased 24% to $127. 1 million in the third quarter and 31% to $360. 9 million in the year-to-date.
On a constant-exchange-rate basis, sales increased 20% in the quarter, due to strong growth in most countries, and rose 24% in the year-to-date; on that basis, comparable store sales rose 11% and 13%. . 2. 2. 2 Target Customers For the international brands like Tiffany & Co.
, and Georg Jensen, they targets at foreign tourists and consumers which have high-income. Like many other powerful brands Tiffany & Co. , is going after the 35 year-old female educated customers and has expendable income. Strong brand loyalty. Apart from Tiffany & Co. , in order to focus on Hong Kong market, Georg Jensen provides customers with unique Scandinavian design jewellery and also concentrates on women with high salary.
5. 2. 2. 3 4P Analysis Tiffany & Co. rovides a myriad of collections such as Tiffany Circlet, Tiffany Jazz and Tiffany Legacy. Georg Jensen promotes different categories to customers, like fusion, moonlight, and heritage to name it but a few.
As they are well known and professional, their prices are the highest. So as to attracting high income group, their prices would be adjusted to be much higher. Because Tiffany & Co. is a famous brand, they do not have to spend a lot of money to advertise their products. As for Georg Jensen, their brand is not well known by Hong Kong people when compared with Tiffany & Co.
They do not even have Hong Kong website for their shops. They are located at the Tsim Sha Tsui , Kowloon Tong and the west. 5. 2. 3 New brands 5.
2. 3. 1 Target market Qeelin’s target market is women who love haute jewelry (highest quality) from luxury brands. They have a discerning eye and look for handmade pieces with special stones. They do not follow trends; they follow what they consider to be the best.
5. 2. 3. 2 4P Analysis Qeelin offered with different collections of jewelry such as bobo, qin qin, ling long and wulu. Although being a new brand, the prices offered by Qeelin are quite high.
Not only does they target at Hong Kong Market, they also look at European Market. Qeelin is a new competitor. With a view to shed the light, they invite Maggie Cheung to be their spokeswoman and attend different functions. They promote their products via website and posters too. It is located at the west too. 5.
3 Consumers review in Hong Kong Jewellery Industry: Although with the economic tsunami, the jewelry industry in Hong Kong has not been affected heavily. This has something to do with the prosperous tourist industry in Hong Kong that lots of mainland tourists come to Hong Kong to buy the jewelry items.The average spending amount for jewelry is $10000 in recent 2 months this year. So in this part, we will show the spending pattern of both local people and tourists. 5. 3.
1 Local customers First, we focus on local customers in Hong Kong as one type of our consumers. 5. 3. 1. 1 Purpose Most of the buying motivation is because they have to buy for special events, like wedding. They need to buy for themselves or giving others.
Some of them may for ceremony use, like anniversary and birthday. 5. 3. 1. 2 Period To the local residents in Hong Kong, they will not go to buy jewelry items during a specific period of time.
They will usually buy jewelry when there are some events like wedding or birthday. So the sales amount among local residents is quite stable. 5. 3. 1.
3 Spending pattern Their spending power and willingness to spend is lower than before. Due to the effect of economic tsunami, local people still think that their financial positions have not yet been recovered. They are not willing to spend on luxury items. Many of them would not purchase in large amount as gold price is quite high nowadays and as shopping in Hong Kong is convenient and easy, local customers will only buy when they really need.Different people will have different preference, some prefer younger design, while some favor in traditional one. Their favorite jewelleries are gold, silver and diamond.
In addition, more than half of them prefer buying in Tsim Sha Tsui as the shopping environment is better and quieter. 5. 3. 2 Mainland Tourist Mainland tourists become one of the major sources of income of many jewellery shops due to the improving economic development in mainland china. 5.
3. 2. 1 Purpose Most of them come to Hong Kong to buy jewelleries because they have better confidence towards Hong Kong Jewellery shops.As there are many fake jewellery products in China, and there are many traditional jewellery shops and well-know international brands in Hong Kong which are more trustable, so mainland tourists prefer buying jewelleries in Hong Kong. 5. 3.
2. 2Period They will come here during some special holidays like The National Day in October or the International Labor Day. During this period, the sales figure in jewelry industry has a larger increase. 5. 3. 2.
3 Spending pattern With the appreciation of Yuan, many mainland tourists come to Hong Kong to buy luxury items.In recent two months, their spending in Hong Kong has risen for 4. 4%. Most of the mainland tourists prefer to buy traditional pure gold, patina and diamond jewellry in Hong Kong. Some of them purchase in bulk quantities as they do not always come to Hong Kong.
Besides, buying in a large amount can get discounts and free gifts easily. In terms of design, many of them like modern and creative design instead of traditional eastern style in the age group between 21 and 35, who are most willing to buy jewellry in Hong Kong.Also, mainland tourists prefer buying in Tsim Sha Tsui because it is convenient and there are more choices available for them. 5. 3. 3 Foreigner tourists Although foreigner tourists are the major customers of jewellery sales in Hong Kong, it still occupies some of the total sales.
5. 3. 3. 1 Purpose Their motivation of buying is quite free and random. Most of them buy in Hong Kong is because they cannot find Chinese designs locally.
So when they visit in Hong Kong, some of them buy jewelleries as souvenirs to give their relatives. 5. 3. 3. 3 PeriodThey will buy jewelleries when they come to Hong Kong during holidays, like Thanksgiving Festival and Christmas.
Therefore, we could observe a significant increase in sales especially in November and December among foreigner tourists. 5. 3. 3. 3 Spending pattern Their spending pattern is similar as mainland customers.
As they are tourists, most of them willing to buy in larger quantities. They prefer Chinese and traditional design and style as it is difficult for them to buy in their own countries. So many of them prefer buying gold, which is a kind of traditional jewelleries nowadays.They are more favor in shopping in Tsim Sha Tsui as it looks upper-class and most of the salesperson there can speak English fluently so that they can communicate better. 6. Conclusions According to the findings and analysis we mentioned before, the following are the conclusions: 1.
Firstly, there is great potential profit in Hong Kong jewellery market because of improved and better economic situation local and in mainland China, growing demand towards jewelers from customers and high spending power of them. Therefore, it is advisable to enter into Hong Kong jewellery market 2.Secondly, competition is quite keen and various as there are mainly three types of competitors. If we want to develop better, we have to differentiate our product well from our customers. 3.
Although there are three types of customers, if we look at each of them carefully, we can find similar buying behaviors. Also, we should not only focus on type of markets only, we aims at using undifferentiated marketing strategies to serve for all three types of customers. 7. Recommendations 7. 1 Product Strategy We can divide our product into two groups, traditional design and younger design.
From the above, it shows foreigners favor in traditional design and mainland customer like creative and younger design. We should not neglect either one of the market, so both designs should be included. 7. 2 Distribution strategy We suggest opening new stores in Tsim Sha Tsui. It is because Tsim Sha Tsui seems to be a more popular shopping place, no matter for tourists and local people from the findings above. Tsim Sha Tsui attracts more customer flow, and salesperson can speak English fluently there, also with a better shopping atmosphere and environment, it is a better choice than Mong Kok.
. 3 Promotion Strategy We recommend using personal selling to induce sales. As many customers may not have specialized knowledge towards jewelleries, an experienced salesperson can persuade and answer all customer’s enquiries on jewelleries. Also, salesperson should be fluent in speaking in English,Pu Tong Hua and also Cantonese in order to deal with different types of customers. Besides, we can advertise through magazines as this can gain customers’ attention and impression of our company and then attract them to buy it.In addition, we can also advertise online for mainland tourists and foreign tourists to get a look on it, like placing advertisements on Facebook, Twitter, sina. com. cn, Baidu etc. 7.
4 Pricing Strategy As competition is keen in jewellery industry, we cannot set too high and expensive price on our products. We can imitate our competitors pricing strategies during introduction stage. And after we grow longer and become more well-known, we can develop our own pricing strategy. But as we are not actually competing with international brands, like Tiffany & Co. we should not set extremely pricing.
We can refer to some new brands’ pricing strategies as to our customers; we are one of the new brands too. 8. Sources of data http://www. ifc. com.
hk/en/mall/detail. jsp? id=89 http://realblogging. com/ron-seigel/luxury-real-estate-marketing-essentials-kissing-goldfish/ http://www. tiffany. com/? origref=http%3a%2f%2fhk. search.
yahoo. com%2fsearch%3b_ylt%3dA3xsaFiNUF1Nwe8A08rwzAt. %3fp%3dtiffany%2band%2bco%26fr2%3dsb-top%26fr%3dFP-tab-web-t%26rd%3dr1=1 www. qeelin. com