Monday, 7 May 2012

Dazzled by Diamonds

An almost 64-carat diamond ring by Cartier
Hong Kong jewellery Chow Tai Fook isn't waiting for high-end customers -- it's literally bringing bringing them in.

Last week 75 mainland couples and families were invited on a three-day, two-night, all-expenses paid trip, featuring harbour cruises, visiting personal stylists and wine tastings while staying at the Grand Hyatt Hong Kong in Wan Chai.

These guests were chosen because they spent at least 1 million RMB ($158,508) last year with Chow Tai Fook and were invited to the jeweller's first auction in Hong Kong.

The high-end jewellery market is very competitive because that's where the money is. Last week Cartier gave a very lavish presentation at the InterContinental Hong Kong where guests wandered in a "garden" setting, looking at baubles with astronomical price tags.

"Our mainland VIPs -- especially in first- and second-tier cities -- like to buy diamonds, said Chow Tai Fook executive director Adrian Cheng Chi-kong. He said the margin for diamond pieces was about three times higher than for gold.

The auction was carried out in Putonghua, where 100 couples attended as well as 25 couples chosen from a list of 55,000 VIPs in Hong Kong.

The highlight of the auction was an 18K white gold diamond and blue sapphire necklace called "the galaxy" that was sold at HK$7.5 million to a buyer from Beijing who was introduced to the jeweller by private bankers in Hong Kong.

Cheng says partnering with private banks helped Chow Tai Fook identify VIP clients. Sounds like a good strategy.

An orchid brooch with a large ruby stone by Cartier
Interestingly he predicted growth was expected to pick up in the second half of the year after the leadership change in China -- in the fall -- as a lot of clients "are still waiting for political sentiment to clear". We are already starting to see China's economy slow down, unless he thinks it's going to be a soft landing...

Chow Tai Fook has over 700,000 clients on the mainland where it has a presence in 320 cities. Cheng said any city with a population over 300,000 is a target. Which means practically every county would be eligible.

Consultants Frost & Sullivan says in its research that China became the second-largest jewellery market in 2010, with retail sales at HK$302 billion, just behind the United States.

In Hong Kong and Macau, mainlanders make up the largest group of customers buying jewellery, with 49 percent settling the bill using China Union Pay (China's version of paying by debit) or in cash in the first half of this financial year.

While gold still accounts for about half of all sales diamonds are how to really win mainland customers, Cheng said.

Another interesting fact -- last year, imports of polished diamonds to China hit $1.29 billion, up 85 percent from 2009, according to the Diamond Administration of China.

Diamonds are China's best friend, so it seems.

However, a friend of mine who is in the jewellery business heard that a high-end jewellery store had two VIP clients, mainland women who put down deposits for very expensive pieces.

Separately they said they would pay the difference in about a week, but then the money never showed up.

When they contacted these clients, one said her husband had gone bankrupt and had no more money, while the other said her better half had gone to jail.

If we start hearing more of these stories then we'll know which way Hong Kong's economy will be going...

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