Luxury retailing in China takes a great leap forward. Hong Kong, Macau and Shanghai lead the charge.
Ephraim Zion, managing director of Dehres, one of Hong Kong’s biggest diamond suppliers, shakes his head in dismay. “The location of the VS is right there,” he says, pointing to the inclusion in the center of a 30-carat D-color diamond, a cushion cut. “It reflects right off the stone.” It’s day one of the first-ever Macau International Watch & Jewellery Fair at the Cotai Strip Convention and Exhibition Center at the Venetian Macao, a one-hour ferry ride from Hong Kong—no time to be dealing with subpar merchandise. Zion loupes the diamond and shakes his head again. “This absolutely would not work,” he says with finality. “They wouldn’t buy it.”
By “they,” Zion means his best customers, the coterie of Hong Kong sophisticates for whom a VS clarity grade simply won’t do. Because if there’s one thing to know about the commercial hub of the Asian continent, it’s that it attracts the most astute diamond and jewelry buyers in the world.
China’s luxury ground zero
The market’s sophistication is borne of years of trading. With its spectacular harbor setting, Hong Kong has thrived as an international marketplace since the British anointed the territory an entrepôt after defeating China in the Opium Wars of the mid-19th century. When the communists seized control of the Chinese mainland in 1949, scores of refugees shifted their corporate headquarters to Hong Kong. By the 1980s, its reputation as a financial and banking center was secure. Despite taking a hit in 1997, when the Asian financial crisis rattled investor confidence, the newly christened “special administrative region” entered the new millennium back in Chinese hands, eager to promote itself as a commercial steppingstone to the Middle Kingdom.
Today, with mainland China gearing up to become the definitive market for luxury retailing in the 21st century, Hong Kong’s wish to be at the vanguard of Asia’s consumerist frenzy has all but come true. Proof of the locals’ shopping savoir faire lies in the nearest mall. At the International Finance Centre (ifc) in Hong Kong Island’s Central district, for example, a luxury mall boasts 200 international brands, among them Bulgari, Chopard and David Yurman.
As if the boutique selection weren’t enough, the ifc mall also houses the flagship location of Lane Crawford, Hong Kong’s answer to Barneys New York. Its chic jewelry emporium displays triple-strand brown pearl necklaces from Barney Cheng for about $37,000, rosecut diamond bangles from Aishwarya for about $20,000 and loose gemstones for a “create your own” jewelry service, like a 4.08 oval padparadscha sapphire worth a cool $61,000—which is to say nothing of what’s found down the street or at nearby malls.
The Landmark in Central and Pacific Place in the Admiralty district offer the stiffest brand-name competition, while a handful of independent jewelers serve Hong Kong’s moneyed classes from discrete showrooms located in or near the city’s finest hotels.
But it hasn’t always been this way. When Ronald Abram, an Afghan-Israeli jeweler who owns an eponymous boutique in the Mandarin Oriental hotel in Central, arrived in Hong Kong in 1974, “there were no brand names in town, only Cartier and Chow Tai Fook,” he says, referring to the mid-market chain that’s been a fixture on the Hong Kong retail scene since 1939.
Oh how times have changed. Today, across the street from the Mandarin Oriental sits the Prince’s Building, a crossroads of global jewelry brands including Cartier, Piaget and Chanel. Meanwhile, Abram sets himself apart by stocking “super gems.”
“People are getting rich all over the world and they all want the best quality,” says Abram, considered by some to be the Laurence Graff of Asia. “And with all this, China hasn’t even begun. That’s the most important factor. We’re talking the new generation of Chinese—Ivy League grads who speak many languages and want the best of the best.”
Top gems and high society
To find it, Asia’s most important collectors head to the auction houses, a phenomenon that’s driven prices of fine-quality stones and signed jewels (not to mention paintings and other collectibles) up, up and up. To wit: Christie’s staged its first Magnificent Jewels sale in Hong Kong in 1994, when total sales of $1.6 million seemed more than adequate. “In November, we made nearly $50 million,” says Vickie Sek, director of the jewelry and jadeite department for Christie’s Asia. “We’ve been breaking our own record every year.”
Christie’s Asia. “We’ve been breaking our own record every year.” While Christie’s New York and Geneva showrooms have seen similar growth, sales at those locations are still fueled largely by trade buyers. In Hong Kong, private buyers outweigh the trade by a landslide: 80 percent to 20 percent. “Trade [buyers] only set a certain price to do business,” Sek says. “But when a private likes something, they just bid. They know that items in the jewelry shop can no longer satisfy their interest. They want to see something unusual.”
Unusual in this context means outstanding jadeite necklaces, flawless diamonds in 20-carat-and-up sizes, signed Art Deco pieces by Cartier and Van Cleef & Arpels and art jewels by the region’s most talented designers: Edmond Chin of Etcetera, Michelle Ong of Carnet and Wallace Chan of Wallace Gems, to name three.
What’s behind Asia’s ultra-luxe appetite? “Every economy in the Far East, with the exception of Japan and Thailand, is in growth mode,” Dehres’ Zion says. “All are consuming diamonds.” He attributes the strength of the market to buyers from Asian countries with a history of political instability, such as Indonesia and the Philippines, who prefer to secure their wealth in hard assets. “Every tycoon’s got diamonds,” he says.
Others say Hong Kong’s virtual lack of crime combined with a “black-tie” social culture encourage people to buy noteworthy jewels. “Wearing a 10-carat diamond to lunch with your girlfriends isn’t strange,” says Rachel Plecas, a former Hong Kong Tatler editor who now does publicity for Ronald Abram and other luxury clients. “Ladies buy two types of rings: one to wear in Hong Kong and another to wear everywhere else.”
Macau’s new millionaires
But not even Hong Kong, with its “limousine lunches” and charity balls, rivals Asia’s flashiest new-money destination: Macau, the island territory whose colonial Portuguese past belies its present as the Far East’s answer to Las Vegas.
When Macau’s big spenders aren’t dropping their money at the baccarat tables, they’re loading up on baubles at any of the dozens of jewelry outlets that have sprouted in the finer casinos over the past year. The Wynn is, by all accounts, the chief luxury destination, with the Venetian Macao a close second. It’s a far cry from the days when Macau was a sleepy fishing village presided over by the businessman Stanley Ho. The billionaire’s Sociedade de Jogos de Macau monopolized the territory’s gaming concession until 2002, when the government opened the casino business to foreign competitors. The fivestar properties now going up along the Cotai Strip, an area of reclaimed land named after the islands Coloane and Taipa, are expected to entice millions of visitors in the coming years.
Ho’s granddaughter and Macau native Sarah Ho, the designer behind London’s SHO Fine Jewellery collection, has “mixed feelings” about the changes. As a child, she played hide-and-seek with her sister in Ho’s flagship Casino Lisboa. “There was so little to do when I was growing up, so it’s nice to see all these new developments,” she says. “But it was also so quiet and peaceful back then.”
Philippe Léopold-Metzger, CEO of Piaget SA, is another witness to the region’s luxury evolution. In 1996, he moved to Hong Kong as managing director of Cartier-Asia Pacific, heading five key subsidiaries for the group. That experience serves him well today. Piaget, which he joined in his present capacity in 1999, is seeing explosive growth in the region. “Even if America slows down, we are so strong in Asia, Europe and the Middle East that it will not be so bad,” he says.
Indeed, this seems to be the mindset among global brand directors. Whereas once they might have scorned China as a producer of shoddy merchandise and counterfeit goods, they now salivate over its luxury market potential. Underscoring this shift in thinking is the certainty that Chinese money is crucial to the trade’s growth over the next decade.
During the Macau jewelry show, a scene in the pressroom helps illustrate this: An American representative of the World Jewelry Center, the duty-free complex of wholesale and retail jewelry spaces scheduled to open in Las Vegas in 2011, sits down with two prospective Chinese clients.
“Here are some details on the developer,” the American rep says to the Chinese men, passing them a brochure. “You go to the JCK show? This is four kilometers away—very, very close.” The rep speaks in the choppy, abbreviated English people typically reserve for babies or pets, anxious to communicate with the Chinese men, whom he’d like to sign a letter of intent to lease or buy a space in the complex: “We hope to add your name to the list. No money now. Just to say that you’re interested in the project. Money later.”
Where money works hardest
That the Far East, and not the United States, is where the real deals will be done seems a foregone conclusion at the Diamond Trading Company (DTC), which announced in late January that it was slashing its U.S. marketing budget and laying off 11 people at JWT in New York, citing fears of recession.
“In the past, we’ve had a mixed philosophy about putting money into a declining market,” says Janet Sussens, the U.S. market manager at De Beers Group Marketing in London, acknowledging that while the United States remains the group’s largest market—by a long shot—the focus is shifting to stimulating demand in emerging economies of the East. “We’re always looking to put our money where it works hardest.”
Look no further than China, where growth in demand for diamond jewelry reached 18 percent in 2006.
Intriguingly, the DTC’s tack in the Far East is in stark contrast to its nearly 60-year history of promoting diamond jewelry in the United States. “Our strategy is shifting from a more generic demand-growth model to a more proprietary one,” Christina Hudson, Sussens’ counterpart in Hong Kong, says. “As a result, our focus is on our Forevermark brand going forward.”
Available at exclusive retailers in Hong Kong, Japan, China and India, the Forevermark is a special symbol and unique identification number, invisible to the naked eye, inscribed on the table facet of selected diamonds above 0.30 carats in size. DTC’s campaign to win the hearts and minds of consumers in mainland China will likely face its first test in Shanghai—as China’s window to the West, it’s the country’s undisputed luxury portal.
“Beijing is where you have the most amount of money and more serious buyers and also more jadeite,” says Brenda Kang, a jewelry specialist with Christie’s in Shanghai. “But Shanghai is more willing to spend on diamonds and has a bigger social scene, so they’re willing to be seen in flashier pieces.”
Plaza 66 on Nanjing West Road lies at the heart of the city’s burgeoning luxury market. The six-story luxury mall boasts a dedicated watch and jewelry gallery that is easily the city’s swankiest shopping. Across the street, at Citic Square, sits the mammoth new Montblanc flagship, a 6,500-square-foot store. “Just another manifestation of the massive priority currently being invested in the Chinese luxury market,” spokeswoman Florie Gruber says.
If it’s ambience they seek, Shanghai’s luxury shoppers head to the Bund, the elegant embankment where grand old bank buildings from the 1930s, when Shanghai served as the Far East’s financial hub, have been transformed into posh restaurants, bars and shopping arcades, home to boutiques for Cartier, Patek Philippe and the like.
Considering Shanghai’s luxury boom from the nearby Huangpu River promenade—with the stately buildings of the Bund on one side and the skyline of Pudong, Shanghai’s gleaming new financial district on the other—it’s easy to think that the future is now and you’re standing in the midst of it. What seems harder to grasp is that the future belongs not to Shanghai but to China’s sprawling hinterlands, whose collective consuming power the industry has yet to fully comprehend.
“Whilst the big cities like Shanghai, Beijing and Guangzhou are important, there are many other first-level cities with important jewelry sales,” concludes an understated James Courage, chief executive of Platinum Guild International and a frequent visitor to China. “With around 666 cities in total, many with over a million people, there is plenty of room for growth.”