Millennials have been accused of killing everything from breakfast cereals to Big Macs. But for the world's largest jewellery chain, the millennial generation – generally defined as those born in the 1980s or 90s – is emerging as a key target market as it seeks to diversify its customer base.
Hong Kong-based Chow Tai Fook Jewellery Group is designing a new brand that specifically targets young customers as it steps up a multi-brand strategy to reach a more diverse group of customers.
Adrian Cheng, Chow Tai Fook’s 37-year-old executive director, told FinanceAsia in an interview that the new brand, which will be unveiled next year, will help the company tap into the rising group of millennial customers.
“Millennials… are more mobile, more digital,” said Cheng. “They may not be very loyal to certain brands. They’re much more conspicuous in spending.”
Hong Kong’s retail market has been struggling to pick up as mainland tourists shift towards other overseas destinations for shopping. Data from the Hong Kong Tourism Board showed there were 1.9% fewer visitors in June than in the same month the previous year, while the number of visitors from the mainland declined by 3.4%. This has been cited to explain a drop of 0.6% in retail sales in the first half of the year compared with the same period a year ago.
Hong Kong retailers – and the landlords who have traditionally charged some of the world's highest rents – have been turning toward the mass market of local consumers, especially the younger generation. That has seen mall owners offer more food and beverage options and leisure activities other than shopping to drive revenues.
“We have always been focusing a lot on locals, and also people who share the same vision amongst the tourists,” said Cheng, who’s also vice-chairman of New World Development, the property giant founded by his grandfather, late billionaire Cheng Yu-tung. “In retail we also see that there is a big loophole, in that people are very bored with big shopping malls, big retail market places that have homogeneous brands, that have a homogeneous way of presenting marketing that is not suitable for current generation.”
Seeing the different needs of the younger generation, Cheng founded K11 art malls – shopping malls merged with art galleries that aim to infuse culture and art into the shopping experience.
After the first two pilot art malls in Hong Kong and Shanghai, Cheng is planning to open K11 projects in nine Chinese cities, with a total floor area of 1.9 millon square metres.
“The new generation is not only about buying and selling, or offering services,” said Cheng. “They are more about community, about wellness, about appreciating the beauty of life.”
Meanwhile, as Hong Kong increasingly loses its status as a paradise for Chinese shoppers, many retailers are following the steps of Chinese tourists by shrinking their presence in Hong Kong while opening stores in emerging destinations.
Despite a focus on Asia, Cheng’s Chow Tai Fook is looking at other regions for expansion, including the Middle East, a travel destination favored by many Chinese tourists. The jewellery chain operates a total of 2,381 sales points globally, including five in South Korea and three in the United States. It generated annual sales of $6.6 billion in the latest fiscal year, 65% more than US giant Tiffany.
Back on Chinese territory, the former British colony is no longer the spot retailers favour most. Some are looking to the other side of the Pearl River Delta and detecting a revival in the gambling enclave of Macau.
The former Portuguese colony had been on a seemingly unstoppable rise since the start of the 21st Century, bolstered by China's economic growth and massive investment from local and international companies since the gaming market was opened up in 2002.
Business plunged after China's anti-corruption crackdown kicked in in 2015, but the city has been seeking to diversify its entertainment options as it seeks to lure back big-spending Chinese.
Tourist spending has started to pick up. After two consecutive years of falls in total visitor arrivals, Macau had 7.69 million visitors in the second quarter, even higher than its level in the same period in 2014. Total non-gaming spending of mainland Chinese rose to 13.75 billion patacas ($1.67 billion) in the second quarter, a 17.5% rise from a year ago.
“The retail business [in Macau] is doing great,” said Karson Choi, chairman of Unique Timepieces Watches Group, one of Hong Kong’s largest luxury-watch retailers. “Recently we’ve got many more Korean customers [in Macau], and the purchasing power of mainland Chinese tourists is still very strong.”
Sales at Unique Timepieces’ over 20 shops in Macau rose by about 50% in the first half of the year compared with a year ago, while sales increased by 10% in the group’s eight Hong Kong shops in the same period, Choi said in an interview with FinanceAsia.
Choi, son of billionaire "king of toys" Francis Choi, said while he’s positive about the retail business in Macau and planned to open two or three shops there next year, expansion has to come in a gradual way.
“Chinese tourists have many options today,” he said. “Not just Hong Kong, they can go to Macau, South Korea, Japan or Europe – tons of destinations out there – So we have to be cautious.”
