HONG KONG— Chow Tai Fook, one of the dominant jewelers in China, recently showcased its diamond collection to about 150 of its top clients.
In a suite at the Grand Hyatt Hotel in Hong Kong, the jeweler displayed more than a dozen rare colored and clear diamonds, including a 102.8-carat yellow diamond, a 4.47-carat flawless pear brilliant blue diamond and a 16.27-carat fancy pink diamond ring. Diamonds were arrayed in specially designed display boxes depicting a fairy-tale type of love story. There was another room to the back of the suite set up with even more jewelry — mostly diamond jewelry costing $1 million and up as well as emeralds, rubies and jade.
“A lot of these are museum pieces so we are trying to showcase our capabilities,” said Adrian Cheng, executive director of Chow Tai Fook responsible for VIPs and marketing.
Hong Kong-based Chow Tai Fook is traditionally known for its gold jewelry— something that isn’t expected to change anytime soon given that 85 percent of the jeweler’s points of sale are in second- and third-tier Chinese cities, where gold is still preferred. But there are two factors driving the company’s efforts to play up its diamond jewelry: diamond jewelry has a much higher profit margin, at about 60 percent versus gold’s 15 to 20 percent. Moreover, VIP customers and young, affluent clients tend to buy more diamond than gold products.
Chow’s Tai Fook’s VIP customers buy about 60 to 70 percent nongold products, said Cheng.
“VIPs are more on the diamond than gold side, so we are doing lots of VIP events promoting VIP appreciation,” the executive added.
Despite headlines about Chinese consumers cutting back on purchases, Chow Tai Fook has found that VIP sales are “actually growing enormously,” said Cheng. VIP sales account for about 30 percent of overall revenues, but are expected to grow to 40 to 50 percent within a few years.
In response to this trend, Chow Tai Fook is in the midst of revamping its VIP program in Hong Kong. It has doubled the entry-level to VIP status to 200,000 Hong Kong dollars, or $25,786 at current exchange, worth of purchases in a year. The company’s program has VIPs organized into three tiers, with the top tier spending 1 million Hong Kong dollars, or $128,394, a year. The jeweler currently has 50,000 to 60,000 VIPs in its program and aims to grow that number to 200,000.
To attract customers with fat wallets, Chow Tai Fook is rolling out money-back rebates as well as more exclusive productions, personalized service and expanding its concierge service, Cheng said
As customers become more sophisticated, they look for “experiential luxury” or “a luxury lifestyle associated with Chow Tai Fook,” he said, adding that the company has arranged activities such as wine tastings, heritage tours around Paris and exclusive residential viewings.
Chow Tai Fook will also be rolling out a special Web site for VIP customers within the next six months. After Hong Kong, the jeweler plans to revamp its VIP service in Mainland China as well. The company currently has 700,000 VIP customers in China, where the minimum spending amount to get VIP status is lower.