During the Spring Festival holiday in the Year of the Dragon, the gold stores in the county were sold out.
The author saw in the counter of a shopping mall in a county in southwest Henan that there was an endless stream of customers. The most core intersection of the county was covered by a three-storey old Fengxiang gold store. Walking along the main road, Chow Tai Fook, Luk Fook, China **, Mengjinyuan and other stores are lined up in turn, and some gold shops and *** shops are interspersed among them.
According to the author's incomplete statistics, this county with a population of 540,000 has as many as 13 gold store brands in the county, with a total of 19 gold stores, mainly concentrated in the main road of the commercial street less than 1,000 meters away from the center of the county.
How did a small county squeeze out so many gold stores? What are the secrets in the crazy involution of the county gold store?
Returning youths buy gold stores in the county town
The Spring Festival has always been the peak season for sales, and the Year of the Dragon is loved by people, after the soaring gold price in 2023, gold shops have riveted their sales for the Spring Festival in the Year of the Dragon.
The author learned from the industry that some large ** retailers and manufacturers reported that the sales of pure gold products hit a new high during the order fair before the Spring Festival. In terms of total volume, it is similar to last year, and the main impact is the sharp rise in gold prices.
Deng Ronghua, general manager of Chow Tai Jin brand, told the author that during the Spring Festival, many young people will consider ** when returning to their hometowns to bring gifts to their parents, so the general sales of gold stores in counties and towns will be better, and the sales of gold stores in some big cities will be mediocre because of the return of people to their hometowns.
The county gold store has its own rules of the game.
In a shopping mall, in addition to Chow Tai Fook, Luk Fook and other brands, the mall has also launched its own brand ** jewelry counter.
We are now listed at a price of 510 grams, and the cost of labor varies from 15 grams to 150 grams depending on the style. The clerk of the mall's own brand greeted the author warmly. During the same period, Chow Tai Fook's listed gold price reached 620 yuan, and the listing price of the Shanghai ** Exchange was around 480 yuan. Another brand, which is listed at about 620 yuan, can be discounted to about 550 yuan in its stores in the county.
Deng Ronghua told the author that in the county and township markets, consumers pay more attention to the cost performance of gold purchases, and will carefully compare prices, so the price increase can not be too high, and requires a certain brand, some brands with too high premiums in the county market will not be adaptable. In the case of the brand, half of its more than 1,000 stores are in large towns, and the price increase ranges from tens of yuan per gram.
At the counter of the above-mentioned gold store, the author saw that "fixed price" products accounted for a considerable proportion, including zodiac shaped bracelets, transfer beads, etc., and the clerk also enthusiastically promoted the zodiac shaped bracelets for the Year of the Dragon. In addition, inlaid products such as "gold inlaid jade" and diamond rings also occupy a considerable proportion.
It costs millions to open a gold shop, who will believe it if you don't make money? The owner of a gold store in a county town in Hunan said, but if it is all pure gold products sold by the gram, it will definitely lose money.
He revealed that the main profit of the gold store is the fixed price**, mosaic products, and its gross profit is much higher. In addition, brands such as Chow Tai Fook and Lao Fengxiang have a long history, and customers are more recognized, so they can have a certain brand premium.
According to the prospectus of Mengjinyuan, the gross profit margin of ** jewelry products is 49%, while the gross profit margin of K gold jewelry and diamond inlaid jewelry is 256%。
But on the other hand, pure gold jewelry is becoming more and more popular among people, and the sales of K gold and inlaid products have declined sharply, and increasing revenue without increasing profits has become a challenge for some gold stores.
Taking Chow Tai Sheng's 2022 financial report as an example, the average revenue of a single franchised store during the reporting period was 194240,000 yuan, a year-on-year increase of 2032%, but the gross profit per store is 34060,000 yuan, down 1299%。The main reason is that the wholesale business of ** products with low gross profit has increased significantly, while the mosaic products with high gross profit have increased significantly. Hong Kong-funded brand Chow Sang Sang also pointed out in the 2023 interim report that the overall gross profit margin decreased by 05 percentage points to 28%.
The demand for "pleasing oneself" self-wearing by young women in first- and second-tier cities is not popular in county gold stores.
Tang Xiao (pseudonym), a female white-collar worker who returned to her hometown from Beijing, told the author that her experience of visiting the county gold store was not very comfortable. "The clerk showed me all the big gold medals of the men's model, and I emphasized that it was when I wore them that the clerk took me to see the rings and necklaces. Later, a couple came to the store, and the clerk immediately greeted each other warmly. ”
The demand for weddings is still the main consumer force of gold stores in the county, and the "three golds" for marriage are almost just needed.
Ning Ning (pseudonym), a post-95 county girl, told the author that buying a diamond ring will depreciate rapidly, and ** can maintain or even appreciate its value, so she didn't buy a diamond ring at all when she got married. In addition, she regarded the "three golds" as her own "private money" accumulation, and the requirements for the "three golds" were: not too fancy, not ugly, but heavy. The reason why I chose a certain brand is because I have acquaintances, and the price of gold per gram can be discounted by another 20 yuan.
Despite the lack of statistics, Deng Ronghua estimates that about 65 percent of the sales in the county's gold stores are driven by wedding demand. Therefore, its brand also focuses on the wedding market, "buy three gold for marriage, and go to Chow Tai Jin".
Chow Tai Fook sounded the clarion call to "seize the county seat".
The streets of the county town are almost crowded with gold stores. Tang Xiao sighed to the author.
The owner of the above-mentioned Hunan gold shop also introduced that there are 11 jewelry stores in his county, and 9 of them are crowded on a street in the county.
But the gold shops can't stop expanding and sinking. In 2023, Laopu** and Mengjinyuan Jewelry have successively sprinted to the Hong Kong Stock Exchange, and Liuliufu, which was listed on the A-share market, also announced that it will be listed on the Hong Kong stock market. The main common purpose of the fundraising is to speed up the pace of store opening.
Yuyuan shares, which owns the old temple ** and Yayi jewelry, are also in a hurry. In March 2023, Yuyuan Co., Ltd. threw out a fixed increase plan of up to 8 billion yuan, of which the most important capital investment is the jewelry fashion offline sales channel and brand expansion project, that is, the expansion of direct stores and the construction of brand franchise channels of Laomiao and Yayi, with a total investment of 463.3 billion yuan.
Yuyuan Co., Ltd. pointed out that in 2023, the leading enterprises Chow Tai Fook, Lao Fengxiang, and Liuliufu have accelerated the pace of opening stores. The market share of the company's Laomiao brand continues to rank third in the industry, but the gap with Chow Tai Fook is expanding year by year. Yuyuan plans to add 2,679 new stores in the next three years, bringing the number of stores in Laomiao and Yayi to 7,244, catching up with the scale of last Tai Fook's mainland stores by the end of March 2023.
Liuliufu also bluntly said in the prospectus that seizing market share and channel resources through the layout of offline stores is still an important strategy for the market expansion of leading jewelry companies. In the jewelry industry chain, the status of manufacturing business is declining, and accelerating the expansion and establishment of nationwide sales channels can gain the initiative in sales, bring more premiums to brands, and become the inevitable choice of more brands.
In this round of gold store sinking market expansion competition, Chow Tai Fook took the lead in sounding the horn.
In 2018, Chow Tai Fook launched the "New Town Plan" to open franchisees to open stores in third-tier cities and below in mainland China, with the goal of opening more than 7,000 jewellery stores by 2025.
With a well-thought-out strategy and the support of our franchisees, we were able to reach this milestone two years ahead of schedule, helping us to capture the opportunities of economic recovery and growth in the future. Chow Tai Fook said in the 2023 financial report.
As of the end of 2023, Chow Tai Fook had 7,501 jewellery stores in mainland China, a net increase of 1,873 stores from the end of 2022, with franchised stores accounting for 77%. The number of stores has doubled in the past three years, and the speed of expansion has shocked the industry.
Chow Tai Sang, which had more than 200 more stores than Chow Tai Fook at the end of 2021, has lagged behind Chow Tai Fook by more than 2,400 stores by the end of 2023.
In an exclusive interview with Jiemian News in July last year, Huang Shaoji, managing director of Chow Tai Fook Jewellery Group, said that under the saturation of large and mature jewelry markets such as Beijing, Shanghai and Chengdu, jewelry brands rely on franchisees to expand in the sinking market, with the primary purpose of expanding market share and finding new performance growth points.
Benefiting from the rapid expansion of franchise stores, Chow Tai Fook's retail value from March to September 2023 increased by 17 year-on-year1%, and the turnover in the mainland reached 406HK$8 billion.
Gold stores want to be the next Chow Tai Fook, but the capital cost of opening a store is too high, limiting the pace of expansion of the brand. Chow Sang Sang, who insists on self-management, has only 1 10 of Chow Tai Fook's current stores.
According to the author's fundraising and store opening plan of Yuyuan Co., Ltd., the single store investment of its directly operated stores reached 7.12 million yuan, while the single store investment of franchised stores was only 250,000 yuan.
Liuliufu pointed out in the prospectus that the gross profit margin of self-operated stores is higher and the profitability is stronger, which is more conducive to the maintenance of brand image, but it needs to occupy more liquidity. The franchise model can make full use of the franchisee's business district resources and financial advantages, accelerate brand expansion, and diversify business risks, and the difficulty lies in the maintenance of brand image and franchisee management.
Want to open a gold shop? Prepare 4 million first
The race to open a store is far from over.
In an institutional survey at the end of 2023, China** said that in 2023, the company's new product matrix will be rich, the gold price will be **, and the profit of dealers will increase compared with the previous year. Consumers' enthusiasm for the first is continuous, the company gives franchise policy support, strengthens the training of front-line staff and other multiple reasons, franchisees have a strong willingness to open stores. The company has reached the set target of 4,000 stores and will maintain a growth rate of 10% in the future.
How much does it cost to open a gold shop?
According to Guoxin**'s estimates, taking a jewelry store of about 100 square meters in a third-tier city as an example, its opening cost reaches about 6.5 million yuan, of which the franchise management fee does not exceed 100,000 yuan, and the investment in goods is as high as 5 million yuan.
Deng Ronghua pointed out that the main threshold for opening a gold store does not depend on the requirements of the brand, but on the local market. The brand franchise fee and service fee are not too much, and the stocking investment is the most important. Even if you invest hundreds of thousands, you can open a jewelry custom store, but you don't have much inventory. But to open a gold store in the county, a slightly decent scale will cost more than 4 million. "Under normal circumstances, it is enough to have 5 kilograms of goods, but if other gold stores have more than 10 kilograms of goods, 5 kilograms is not suitable. Even the smaller the place, the bigger the store. ”
The main high-end market of the old shop ** prospectus shows that its single store cost reached 30 million yuan, but its gross profit is leading in the industry, and the past operating conditions show that the average month can achieve breakeven, and the average five months can recover the initial investment of the store (including rent and decoration costs, etc., excluding inventory).
However, the gross profit level of the old store** makes it difficult for the industry to match, and with the decline in the gross profit margin of the industry, the return on investment cycle of opening a gold store has been continuously extended.
Guoxin** pointed out that the main focus of gold store franchisees is the medium and long-term stable income. **The gross profit margin of the product is lower, and the pricing mechanism is more transparent, and the overall terminal gross profit margin is reduced to about 10%. However, thanks to consumers' preference for ** products, ** products can obtain higher gross profit through high turnover. Diamonds and other categories of products have higher gross margins, but the turnover is slower.
Some people in the jewelry industry told the author that a jewelry city in a certain place in East China can sell one kilogram a day, but a diamond can't sell one for a few days. Despite the lower gross margin, the product allows for a better turnover of funds. More and more jewelry stores are switching to selling** or increasing their sales of ** categories.
Deng Ronghua said that the main income of opening a gold store is not only the labor cost of the product, but also part of the future gold store is a medium and long-term investment, and the gold store should maintain a certain inventory for a long time, and in the long run, it will be sustainable. It is just that the industry trend is that the gross profit space is compressed, and the gold store has shifted from making a lot of money to a steady stream of income. Deng Ronghua expressed optimism about the earnings of the gold store.
The author also learned from the industry that in the first two years, sales were sluggish due to travel restrictions, but due to the sharp rise in gold prices, gold stores made a lot of money by "inventory".
The high price of gold may weigh on consumption
In 2023, the domestic gold price soared by 17%, becoming one of the best-returning investment categories.
According to the World ** Association, total jewellery consumption in China reached 630 tonnes in 2023, up 10% year-on-year, with a record high of RMB282 billion due to the surging renminbi gold price. This was mainly due to the recovery of China's economy, the growing power of consumers seeking to preserve their value, and the growing demand for wedding jewellery.
However, in quantitative terms, total jewellery consumption in 2023 is below the long-term average. Under the high price of gold, consumers have no choice but to buy gold jewellery with small gram weight and low total price, and the "gold bean" type of gold purchase model has also become popular.
According to the 2023 China Jewellery Retail Market Insights, products weighing less than 10g and less than RMB2,000 contribute the most to jewellery retailers' sales.
After a record** consumption in the Chinese market in 2023, 2024 will be full of challenges.
According to the analysis of the World ** Association, high gold prices and potential economic slowdown may put pressure on gold jewellery consumption. In addition, in folklore, the lunar calendar of 2024 does not have the beginning of spring, which is considered unsuitable for marriage. This will also have a potential impact on the demand for wedding jewellery. In recent years, the overall decline in the marriage rate has further weighed on consumer demand for gold jewellery.
Under the high price of gold, consumers are paying more attention to the cost-effectiveness of the purchase channel. The author noticed that many users on social media began to buy gold bars from the bank and then went to the gold shop to customize jewelry, and the labor cost can be as low as 10 yuan, which can even save more than 150 yuan per gram compared to gold jewelry purchased in brand stores.
The information on social media is becoming more and more transparent, and the rise of network channels, more and more customers have begun to skip Chow Tai Fook and go directly to Shenzhen Shuibei, where the processors are located, or from "Shuibei", which will further squeeze the cost and profit margin of channel providers.
A boss who owns a number of gold stores in Guangdong told the author that although the sales were very good last year, they were still under great pressure, especially in Guangzhou and Shenzhen, and were hit by the "Shuibei model". "If you say how good the market is, many people have to rush in, worried that it is not very responsible. ”
Deng Ronghua also pointed out that the current gold price information is becoming more and more transparent, only Chow Tai Fook and other brands can enjoy a higher brand premium, the high gross profit model is no longer suitable for most brands, and some large brand franchisees have very low profit margins, and may even lose money.
Wang Lixin, CEO of the World Association in China, told the author that the market has developed very maturely, and the gold stores in third- and fourth-tier cities and even fifth-tier cities have been relatively complete in terms of quantity and brand coverage, and the sinking layout of the entire industry has been basically completed. In addition, in the future, the country's first-class jewelry consumption is unlikely to show explosive growth, and the industry should compete with high value-added and high-quality, rather than simply the competition in the number of stores.
Laopu** is currently one of the brands with the highest gross profit in the industry, and it has attracted a group of high-net-worth customers to pay for it through design and craftsmanship. But the question of industry insiders is, how many brands can become the next long-established shop?