China's 'Hermes of gold' shines despite lacklustre demand for high-end goods
BEIJING, March 20 (Reuters) - Vivian Wang bought a gold medallion decorated with a carved dragon from Laopu Gold (6181.HK), opens new tab nearly a decade ago, but forgot about the brand until last year when it appeared all over her social media feeds.
Swiping through post after post about Laopu Gold, the sales and marketing professional from Shanghai came across her dragon medallion, which was now selling for double what she paid at 220,000 yuan ($30,440.14).
Wang decided to brave the lines outside Laopu's Shanghai store in tourist hub Yu Garden to make another purchase, this time an intricate jewellery box constructed from thinly woven gold strands with a dragon and phoenix on the lid. Wang said she would like to pass it on to her 8-year-old daughter one day.
"I'm a jewellery lover, Tiffany, Cartier or Bulgari, these are all brands I have bought," Wang said, citing rival retail chains owned by LVMH (LVMH.PA), opens new tab and Richemont (CFR.S), opens new tab. "I have diamonds and gemstone jewellery but ... long-term it's gold that offers the best way to preserve value."
"After the pandemic, people want to pursue something more elevated that offers some spiritual sustenance ... this traditional dragon and phoenix box has an auspicious meaning; it also offers this kind of spiritual sustenance."
Laopu Gold is a notable outlier in China's luxury goods market, which has been hammered by an extended consumer malaise due to concerns over job and wage security and a prolonged property slump.
The company has blended Chinese cultural elements within contemporary designs to emerge as a uniquely homegrown luxury brand. The strategy has been fortified by its use of gold, considered a safe investment by Chinese consumers during periods of instability.
Laopu Gold did not respond to interview requests from Reuters.
But a source with direct knowledge of Laopu's business said its annual sales approached 10 billion yuan in 2024, up from 3.18 billion in the previous year.
"Laopu's average store revenue is nearly 300 million yuan, compared to the average single-store revenue of most international jewellery brands in China, which generate around 100 to 200 million annually," the source said.
Investors have been paying attention. Since its Hong Kong IPO in June 2024, Laopu's share price has surged ten-fold, from HK$40.50 to HK$725 ($93.30).
A NEW LUXURY CONTENDER
The company has come a long way since founder Xu Gaoming, a former fisheries clerk, started his first gold jewellery business in 2009 and established the brand Laopu Gold - which translates to "old store" - in 2016.
With prices for most of its popular products ranging from 10,000 to 50,000 yuan, Laopu now competes more directly with Western luxury brands such as Tiffany and Cartier.
Its exclusivity is drawn in part from a strategy pulled from the playbook of its Western competitors.
As rising gold prices in 2024 pushed investors toward bullion and coins and gold jewellery sales in China fell 24.69% to 532.02 tonnes, Laopu twice raised prices on its designer jewellery and trinkets. It again upped prices by 5-12% last month.
Laopu has also eschewed the spot price for gold to which other domestic competitors peg their selling rates, charging a premium for design and branding.
Its best-selling gourd-shaped pendant — a symbol of good fortune in Chinese culture — contains 24.4 grams of gold but sells for over 29,000 yuan, nearly 1,200 yuan per gram.
Other brands might sell similarly weighted products for 900 yuan per gram in line with the 700 yuan per gram price of gold.
And while gold-focussed brands including Chow Tai Fook (1929.HK), opens new tab and Lao Feng Xiang (600612.SS), opens new tab each have store networks in the thousands, Laopu has chosen to keep its retail experience exclusive.
It has just 37 stores across greater China, including Hong Kong and Macau, and now plans to enter the international market with an upcoming Singapore store.
Chinese consumers have dubbed Laopu the "Hermes of Gold".
While Chinese brands have stolen market share from Nike (NKE.N), opens new tab in sportswear and L'Oreal (OREP.PA), opens new tab in beauty, they have struggled to threaten global luxury players which charge a premium for storytelling, heritage and design.
High-profile entrants in this space, such as clothing and furniture maker Shang Xia (co-founded by Hermes but since sold to Ferrari-owner Exor) and the Kering-owned jewellery brand Qeelin, have found a niche audience for products that attempt to balance Chinese and Western luxury elements.
But analysts say Laopu is a contender to fully break through the luxury glass ceiling.
"It's not an imminent threat to global luxury groups because to build a luxury brand takes a long time. You need a story, you need a history, you need the craftsmanship, but it's possible," said Jonathan Yan, a principal at consultancy Roland Berger in Shanghai.
"If you have the best-in-class design, good quality, good service, it's possible."
($1 = 7.2273 Chinese yuan renminbi)
($1 = 7.7706 Hong Kong dollars)
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