CHINA FASHION BUSINESS

▼The following discussion and summary from the Coldy Fashion Circle address industry-related issues. These insights are the product of collective wisdom and do not represent individual opinions. The aim is to benefit industry professionals.

Classification of Gold

The gold market was highly active in 2024, with prices rising from 480 yuan per gram at the beginning of the year to nearly 600 yuan per gram, an increase of 20%. Taking the Shenzhen Shui Bei market as an example, the price of gold jewelry reached 574 yuan per gram by the end of August, which has attracted widespread market attention.

The application fields of gold can be divided into the following categories:

1、Jewelry Field. Gold jewelry is the most direct form of consumption. In recent years, the continuous innovation in design styles and craftsmanship has significantly enhanced its appeal to the younger consumer group.

Specific craftsmanship includes:

1. • Ancient-style craftsmanship: Traditional handcrafting techniques
   • Enamel craftsmanship: Producing fine textured effects
   • Sandblasting craftsmanship: Creating a matte texture
   • Drawing craftsmanship: Forming delicate lines
   • Filigree craftsmanship: Traditional fine gold wire weaving techniques
   • Stamping craftsmanship: Mass-producing basic styles
   • 3D hard gold craftsmanship: Three-dimensional shaping techniques
   • 5D hard gold craftsmanship: More complex three-dimensional effects
   • Engraving craftsmanship: Mechanical carving of patterns
   • Polishing craftsmanship: Enhancing surface luster
   • Enamel craftsmanship: Special color treatment
   • Hydrogen-free hard gold: New hardening treatment technology

Recently, innovative craftsmanship has emerged, such as the fluorescent enamel craftsmanship launched by Chow Tai Fook, which has added new design elements to traditional gold jewelry. The processing fees for different crafts vary greatly, ranging from a few yuan to hundreds of yuan per gram, depending on the complexity and difficulty of the craft.

2、Investment and Value Preservation Field:

• Individual investors purchase gold bars as a tool against inflation.
• Gold financial products provided by banks and other financial institutions.
• Central bank gold reserves: In the first half of 2023, many countries around the world increased their gold reserves, a trend that is often seen as an important market signal by investors.

In terms of gold purity, the market is mainly divided into two categories:

1、Pure Gold Standard. According to the “Regulations and Naming Methods for the Purity of Jewelry Precious Metals” issued by the Standardization Administration of China on November 1, 2014, and implemented from May 4, 2016:

1. • Gold with a purity of no less than 99% can be called “pure gold.”
   • Gold with a purity of 99.96% or above can be called 24K gold or pure gold.
   • Theoretically, 100% pure gold cannot be achieved in practice.

2、Karat Gold Standard:

1. • 18K gold requires a gold content of more than 75%.
   • 14K gold requires a gold content of more than 58%.

These karat gold products usually add other precious metals to increase hardness and durability.

Craftsmanship innovation has enabled modern gold jewelry to go beyond the traditional function of value preservation and also possess artistic and fashionable qualities. The final retail price of gold jewelry consists of two parts: the base gold price and the processing fee. The level of processing fee directly reflects the complexity of the craft and the difficulty of production, and the processing fee for some fine crafts may reach hundreds of yuan per gram.

Although industrial applications are less involved in the clothing industry, they have a wide range of applications in fields such as electronics and medicine. These diversified application scenarios jointly support the market demand for gold and also affect the trend of gold prices.

In recent years, the innovation in craftsmanship and design breakthroughs in the gold jewelry industry have made products more in line with the aesthetic needs of modern consumers. The unique appearance and texture presented by different crafts allow consumers to obtain a better wearing experience while preserving value. This shift reflects the trend of gold jewelry from a purely value-preserving means to a fashionable accessory.

Market Conditions of Gold

The emergence of innovative craftsmanship has injected new design vitality into traditional gold jewelry. For example, the fluorescent enamel craftsmanship recently launched by Chow Tai Fook presents a richer visual effect for gold jewelry. The processing fees for different crafts vary greatly, ranging from a few yuan to hundreds of yuan per gram, mainly depending on the complexity of the craft and the amount of manual input.

In the field of investment and value preservation, gold is mainly used in the form of gold bars as a tool against inflation. It is worth noting that in the first half of 2023, many central banks around the world purchased a large amount of gold, an action that is often seen as an important market signal by investors, affecting the buying or selling decisions of individual investors.

Gold also has a wide range of applications in the industrial field, although it is less involved in the clothing industry, it occupies an important position in other industrial fields. These diversified application scenarios jointly constitute the market demand base for gold.

In recent years, the innovation in design and craftsmanship of gold jewelry has attracted a large number of young consumers. Gold jewelry is no longer just a traditional means of value preservation, but also a kind of accessory that combines value preservation and fashion attributes. The final selling price of jewelry consists of the base gold price and processing fees, with significant differences in processing fees due to different levels of craft complexity. The high added-value processing of some crafts makes modern gold jewelry more in line with the aesthetic needs of the younger generation.

How to Choose Gold

The gold industry chain is divided into the upstream mining, midstream processing and wholesaling, and downstream retail terminals. The upstream gold mining is mainly dominated by state-owned enterprises, with high technical requirements, and corporate profits are significantly affected by the grade of mineral resources. The midstream link mainly involves the processing and wholesaling of gold, including the production of gold bars and jewelry products, with profits affected by processing technology and production scale. The terminal retail includes brand stores and shopping mall counters, which generally face a low profit margin. The gross profit margin of gold products of most jewelry brands does not exceed 10%.

In 2023, the Chinese jewelry market size reached 820 billion yuan, of which gold products accounted for more than 500 billion yuan. The market is expected to grow to 1.14 trillion yuan by 2028, with gold products expected to exceed 800 billion yuan. In this rapidly growing market, different brands have adopted different differentiation strategies.

Taking Lao Pu Gold as an example, as a dark horse in the gold industry in recent years, it has adopted a high-end positioning strategy:

• Only 32 stores are opened nationwide.
• The enterprise value reaches 20 billion yuan.
• Processing fees range from hundreds of yuan to thousands of yuan per gram.
• Directly targeted at luxury brands.
• Mainly aimed at high-net-worth individuals.
• The gross profit margin is as high as 45.8%.

In contrast, traditional large jewelry brands such as Chow Tai Fook are facing different operational pressures:

• There is a wave of store closures.
• The supply chain is under significant pressure.
• Large capital occupation.
• The gross profit margin is maintained at only 4%.
• The overall sales performance has declined due to the rise in gold prices.

In wholesale markets such as Shui Bei in Shenzhen, gold products are mainly priced based on the international gold price plus processing fees. Although the gross profit margin is low, the price advantage is obvious. These markets mainly serve small retailers and individual investors. For example, a consumer sold more than 300 grams of gold at 548 yuan per gram in such a market in April this year, while the current gold price has risen to 595 yuan per gram.

In recent years, ancient-style gold has become one of the most popular craft products in the market. This craft is highly consistent with the new Chinese style and national trend culture. Brands have successfully attracted the younger consumer group by integrating traditional cultural elements and adding auspicious connotations in their sales strategies.

The value composition elements of jewelry design include:

• Selection of precious metal materials
• Matching of precious stones
• Fine craftsmanship
• Unique design creativity
• Gemstone quality grade
• Material scarcity

Consumer behavior has also changed significantly. The younger group tends to choose gold instead of traditional diamond rings for wedding jewelry. This trend reflects that the new generation of consumers pays more attention to practical value and values the value preservation and liquidity of gold. At the same time, innovative design and craftsmanship also meet their pursuit of fashion aesthetics.

Gold products in the contemporary consumer market are showing a diversified development trend: they maintain the traditional value preservation function and also meet the fashion needs through design innovation. Brand differentiation strategies and craftsmanship innovation continue to drive market development, and the utilitarian attitude of consumers also promotes gold jewelry to gain more recognition in wedding celebrations and other fields. Some brands maintain high gross margins and cultivate brand loyalty through limited-edition strategies and high-end positioning. This multidimensional market development trend makes gold jewelry not only a means of traditional value preservation but also a carrier of cultural inheritance and fashion expression.

PS: The translation is done by AI.