Chow Tai Fook: A Chinese Jewellery Giant Changing Tactics
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Case Code: MKTG413 Case Length: 25 Pages Period: 1929-2020 Pub Date: 2020 Teaching Note: Available |
Price: Rs.500 Organization: Chow Tai Fook Jewellery Group Limited Industry: Retailing Countries: Hong Kong, China,United States, Singapore, Taiwan Themes: Channel Strategy & Development, Marketing Strategy, Branding Strategy, Product Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
CTF's Return to Mainland China
After the Chinese economic reforms 9 of 1978, NWDC began operations in China. In subsequent decades, NWDC under Cheng diversified into the areas of hotels, shopping malls, infrastructure, transportation, public utilities, and other businesses. It also made a foray into several international markets. Later, the company was re-organized with CTF and NWDC coming under the group company, Chow Tai Fook (Holdings) Ltd. (CTF Holdings). Gradually, Cheng began to be assisted in the day-to-day operations of the conglomerate by his son Henry Cheng Kar-shun (Henry)...
CTF's Key Brand Characteristics
CTF used "China Red" as the primary background color of its logo in a sign that it was continuing with Chinese traditions and culture. The company’s name in the logo was written in white in two languages, Chinese and English, to signify its internationalization strategy. CTF was mainly involved in the production and sale of mass luxury and high-end luxury jewellery at reasonable prices. Its key brand was the iconic "CHOW TAI FOOK" brand with four core product categories namely, classic, fashion, wedding, and exclusive...
Winds of Change - Driving the Move Towards Millenials
In 2011, the Chinese jewellery industry revenue and growth rate began a downward slide. A slowdown in the Chinese economy began in 2013, with the country’s y-o-y GDP growth rate beginning to decline. Furthermore, Chinese President Xi Jinping's anti-corruption campaign resulted in lowering the demand for luxuries. Adrian then embarked on a strategy to modernize the business and took up a slew of measures to keep up the company’s growth momentum. Aaron Fischer, head of Asia consumer and gaming research at CLSA,....
CTF's Retail Strategy
China’s economic boom resulted in its retail market undergoing rapid and drastic changes, including the explosion of e-commerce. Over the years, CTF constructed a dependable distribution network that could reach most of its prospective market. Gradually, the company adopted an Omni-channel strategy. CTF's retail outlets had two store layouts, Mainstream Shops and Experience Shops. While Mainstream stores were cantered on a theme, there were two types of Experience shops – "heritage" and "gift giving". Heritage Shops resembled treasure vaults with product display conveyors and do-it-yourself ("DIY") gift wrapping...
Adoption of a Multi-Brand Strategy
CTF also adopted a multi-brand strategy which would enable it to offer a diversified range of products and brands aimed at multiple customer segments. This was expected to help grow its overall market share. The particular strategy was also part of the company's intention to shift from an older generation of shoppers and attract millennials. In this regard, the company sought to acquire well-established brands or create new ones. Wong said, "It's a new age of Chinese customers. They are open-minded, well-educated and electronic - savvy, and they travel around the world – it's different from decades ago...
Technology to Improve the Offerings
In May 2018, CTF collaborated with the Gemological Institute of America (GIA) to use Blockchain technology to deliver secure, digital diamond grading reports to consumers for the first time. As a result, clients of CTF's diamond brand T Mark were expected to receive a permanent and absolute blockchain record of their diamond’s GIA grading information. The blockchain platform provided each diamond with a unique ID that stored the stone's characteristics such as weight, color, and clarity. To support the process, the system also incorporated photos and intentional outcome images....
Competitive Scenario
CTF faced competition from high-end international brands such as Cartier, Tiffany, and Bulgari. However, the company believed that competition from these brands was limited as their retail footprint was restricted to Tier I and Tier II cities in China. Moreover, their products were priced higher than domestic brands. According to analysts, though the Chinese preferred to buy international brand luxury handbags or cars, when it came to jewellery, they felt 'value for money' was the key factor and therefore preferred Chinese brands. That particular consumer behavior was thought to be favorable to domestic brands such as CTF......
The Road Ahead
In 2018, CTF launched the 'Smart+ 2020' strategic framework. This was a three-year strategic work plan focused on five elements: products and brands, retail experience, customization, culture, and insights. Each element was supported by a strong commitment to innovation, technology, and sustainability aiming to deliver exceptional customer experience that would create long-term differentiation and loyalty. As of 2019, the company operated more than 3,248 retail stores across 500 cities worldwide. Its stores were located in Hong Kong, Mainland China, the US, Singapore, Malaysia, and South Korea, among others......
Exhibits
Exhibit I: Top 10 luxury goods companies by sales – 2017
Exhibit II: China's Tiered City System
Exhibit III: Time Line of Chow Tai Fook
Exhibit IV: CTF Organizational Framework
Exhibit V: China's Jewellery Industry Revenue Growth Rate from 2010 to 2017
Exhibit VI: China's GDP Trend 2009-2018
Exhibit VII: Chinese Millenials and their Spending on Jewellery
Exhibit VIII: China Jewellery Market Trends 2017-2018
Exhibit IX: Chow Tai Fook Stores by Tier of Cities in China
Exhibit X: CTF Jewellery POS2- Mainland China 2018-2019
Exhibit XI: Jewellery Companies Information
Exhibit XII: CTF Retail Network – Hong Kong, Macau and other Markets 2017-2019
Exhibit XIII: The US-China Trade War Timeline
Exhibit XIV: Summary of Profit or Loss of Chow Tai Fook Jewellery Group Limited
Exhibit XV: Chow Tai Fook Jewellery Group Limited Revenues Trend
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