Laopu Gold, a Beijing-based jeweller known for its handmade accessories, has emerged as a favourite among affluent consumers, as global luxury brands like Louis Vuitton and Gucci grapple with tepid consumer spending in China and sluggish sales across the region.
With just 36 stores in Greater China, the Hong Kong-listed company sold 3.5 billion yuan (US$482.7 million) worth of pure gold and gem-set jewellery in the first half of 2024, up 148 per cent from a year earlier, according to its interim report. Its net profit skyrocketed nearly 200 per cent to reach 588 million yuan during the same period.
Laopu Gold’s shares are up more than 550 per cent since the company’s trading debut in June, reaching a high of HK$457 (US$58.7) on Tuesday.
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With gold prices on the rise for nearly a year and consumer sentiment remaining subdued due to a slowing China, demand for mass-market gold jewellery has been declining. But Laopu’s performance is “vastly different,” in that it is “focused entirely on the high-end market,” said Richard Lin, the chief consumer analyst at SPDB International, an investment bank.
“Affluent consumers are not only less affected by broader economic conditions, but more importantly, unlike the average consumer who buys gold as an accessory or for consumption, they also consider the investment value of gold products,” he said.
Laopu’s success is partly attributable to its pricing model. Unlike competitor Chow Tai Fook Jewellery – which sells the bulk of its gold accessories based on a dynamic pricing model that rises and falls with the yellow metal – Laopu follows a “fixed price” model, where prices remain unchanged though they involve a hefty mark-up to reflect the company’s intricate craftsmanship.
For Laopu, this means more profit. According to its interim report, the company’s gross margin reached 41.3 per cent in the first half of 2024, compared to around 20 per cent for Chow Tai Fook.
“With the price of gold now around 600 yuan (US$82.30) per gram and likely to keep rising, many consumers are thinking, since we have to pay extra for the brand and craftsmanship anyway, we might as well choose Laopu given the quality of its products,” said Lin. “So fundamentally this is about brand power.”
