Why China’s Gold Jewellers Are the Envy of Global Brands
The Surging Popularity of Heritage Gold
Earlier this year, China experienced a gold rush—not for ordinary gold, but for what’s captivatingly known as ‘gufa gold’. Reports highlighted astonishing scenes, including six-hour-long queues outside specialist retailers. Imagine this: a line outside a renowned Shanghai jeweller formed at 5:30 AM, growing to an impressive 900 customers by afternoon. This frenzy represents not just a trend, but a cultural revival deeply rooted in tradition.
What Is Heritage Gold?
Often referred to as ‘ancient-gold’, this category is celebrated for its unmatched purity and is frequently embellished with traditional Chinese motifs. Each piece tells a story—artisan techniques like filament work and hammering breathe life into these exquisite items. Heritage gold isn’t limited to jewelry; it comes in coins, medallions, and even decorative vessels, bridging the gap between functionality and artistry.
One standout in this vibrant market is Laopu Gold, often labeled the ‘Hermès of gold’ in China. The Beijing flagship store became a hotspot during the Chinese New Year, with queues stretching for days.
Laopu Gold: A Case Study in Success
Founded in 2009 by Xu Gaoming, a former fisheries clerk, Laopu Gold was officially established seven years later. Fast forward to June 2023, the company went public, witnessing a staggering 80% rise in share prices on its opening day. By February, Laopu Gold’s shares skyrocketed more than tenfold within the year, becoming one of the hottest names on the Hong Kong Stock Exchange. Profits are anticipated to soar between 1.4 and 1.5 billion yuan (approximately $200 million) in 2024—a remarkable growth of 236 to 260 percent year-on-year.
What Fuels the Craze?
But what exactly is driving the meteoric rise of brands like Laopu? Are global brands feeling the heat? For many Western jewellers, tapping into this nuanced market proves to be a formidable challenge, especially as authenticity plays a critical role.
Global Gold Rush: The Economics Behind the Trend
One significant factor is the rising value of gold itself. Following record highs in March, prices increased even further, influenced by global economic uncertainty and strains such as international trade wars. According to Sean Hoey, Managing Director of IBV International Vaults, geopolitical tensions and market volatility have heightened demand for gold, making it a sought-after safe-haven asset.
Laopu Gold isn’t alone—its competitor, Lao Feng Xiang, established in 1848, also enjoyed a surge in popularity. The intricate craftsmanship of heritage jewelry, coupled with unique brand premiums, makes the price sensitive to broader gold market movements.
Craftsmanship Meets Demand
Recent price adjustments by Laopu, increasing by 5% to 12%, illustrate the strong demand despite higher costs. This reflects a strategical choice as the brand reportedly maintains high-profit margins. For instance, Laopu’s gourd-shaped pendant—an auspicious symbol in Chinese culture—contains 24.4 grams of gold and retails for over 29,000 yuan, a significant markup compared to competitors.
Challenges Ahead
Despite the current boom, experts like Chensuo Sun warn of impending limits to this craze. While younger consumers continue to lean towards lighter, design-forward heritage items, sustained price surges may force a wait-and-see approach, dampening immediate demand.
Laopu Gold faces stiff competition from established giants like Chow Tai Fook and Chow Sang Sang, which dominate the Chinese market with hundreds of stores. With 871 mono-brand stores, Chow Sang Sang dwarfs Laopu, which operates only 33 locations.
Cultural Resonance and Consumer Trends
Interestingly, many purchasers of heritage-gold are fans of global luxury brands, often seen queuing outside Laopu while decked in labels like Chanel and Louis Vuitton. The preference for local Chinese jewellery stems from the higher purity of gold used compared to many Western brands, which typically opt for 18-carat gold.
Cultural confidence, a revival of intricate craftsmanship, and a shift in consumer priorities towards ’emotional value’ have transformed gold from being merely ceremonial to an everyday luxury item. Uniquely designed pieces featuring understated finishes resonate well with younger buyers looking for subtlety over ostentation.
The Future of Gold in China
According to Euromonitor International, gold is irreplaceable for Chinese consumers, especially in contexts like weddings and ceremonies. However, the overall market faces challenges, projected to grow only modestly in the coming years, impacted by waning consumer confidence.
The guochao trend—an emphasis on local pride that encourages purchases from brands resonating with traditional Chinese culture—has reinvigorated hope for brands like Laopu and Lao Feng Xiang. Collaborations with cultural institutions, like the Palace Museum, bolster the status of heritage-gold, sparking a ‘new China chic’ movement.
Conclusion: The Power of Local Brands
In a rapidly evolving market, local jewellers possess a distinct advantage through their intimate understanding of Chinese consumer preferences. As the market becomes increasingly patriotic, the stage is set for Chinese brands to capture greater market share.
As global competitors navigate these complexities—especially in the aftermath of US-China trade tensions—they will need to adapt strategies to maintain appeal and relevance. The ongoing evolution of brand loyalty, characterized by cultural pride and a preference for purity, marks a pivotal moment for the global jewellery market.
For those looking to explore more about the dynamics of the luxury jewellery market, consider checking out Business of Fashion for insights and trends.
