Established in 1848, Lao Feng Xiang is one of the oldest jewellery chain stores in China. Over its long and storied history, the brand has ably weathered several storms, the latest being the Covid-19 pandemic. Despite the coronavirus crisis, Lao Feng Xiang grew its retail business and recorded a 4.22 per cent year-on-year increase in total revenue to RMB 51.72 billion (around US$7.5 billion) in 2020. This was just the latest strategic feat of Shi Lihua, chairman of the jewellery brand's holding company, Shanghai Lao Feng Xiang Co Ltd.

Shi is largely credited for turning the celebrated brand around at the turn of the millennium. He joined as general manager in 2001 when the company was on the brink of sinking into the red and its factories were shuttered due to losses. True to its Chinese phoenix name and logo, the jewellery chain store soared under Shi’s leadership. In the two decades since he took over the reins, points of sale increased from 20 to over 4,400 last year, and annual sales grew 70-fold from RMB 710 million (around US$102.9 million). Shi shares with JNA the pivotal elements of
Lao Feng Xiang’s growth strategy in China and beyond.

How did Lao Feng Xiang handle the challenges of the Covid-19 pandemic?

Shi Lihua: In the very early stages of the pandemic, we set a plan in motion to nimbly adapt to the changing environment. We assessed the market situation and trend carefully and cautiously, both during and after the lockdowns. Our usual centralised, national inventory sourcing events for our franchisees gave way to more than 10 regional events to provide greater convenience while maximising business opportunities. Some 95 per cent of our points of sale are franchised stores, which enable expansion into Tier 3 and Tier 4 cities and capitalise on franchisees’ regional advantages. This business model is asset-light with rapid capital turnover. Over the years, we have established a network of high-quality suppliers and resources that allowed us to quickly adjust and recover during the pandemic without significantly affecting our operations and sales.

As a jewellery brand with over 170 years of history, how does the company strike a balance between legacy and innovation?

Shi: The Tang (618 - 907 AD) and Qing Dynasties (1636 -1912 AD) were the two pinnacles of gold and silver craftsmanship in China. In terms of legacy, Lao Feng Xiang adheres to brand tradition and ensures that craftsmanship skills are passed down from generation to generation. In 2008, the "Lao Feng Xiang Gold and Silver Intricate Craftsmanship Technique" was certified in the National Intangible Cultural Heritage List. The company has developed an employee incentive system and has its own team of national and municipal levels of Arts and Crafts Masters, senior technicians and designers. We advocate the “Culture of Maestro” to cultivate a new generation of craftsmen and technical talents. There are many instances of family members working under one roof.

We strive for innovation in concept, management, production, technology and design. In the future, competition will focus on the areas of talent, technology and innovation. The company not only needs a complete and powerful marketing network but also modern, automated, intelligent manufacturing bases.

We have established two production centres of gold jewellery and jewellery-setting in Dongguan. Our 4,500-square-metre gold jewellery factory has an annual manufacturing capacity of nearly 50 tonnes of gold jewellery. Our jewellery-setting factories in Shanghai and Dongguan can produce over half a million pieces per year.

We develop around 4,000 new designs every year. With our independent R&D on advanced automation equipment and manufacturing technology, the factory breaks free from the traditional handmade fabrication of gold jewellery. High-tech products account for more than 72 per cent of its total revenue.

As a jewellery retail brand, Lao Feng Xiang has its own design and manufacturing capabilities, setting it apart from other jewellers that carry third-party products. Our strategy is to integrate science, industry and trade; combine manufacturing, supply and marketing; and produce a vertically integrated value chain and diversified product lines.

Aside from traditional brick-and-mortar stores, what other sales channels and innovative platforms has Lao Feng Xiang tapped?

Shi: In addition to regular in-store retail, we focus a lot on VIP members and high-end sales. In terms of our offerings, our products and designs are suitable for the Chinese market. We carry low-, mid-range and high-end pieces for different consumer segments. Our portfolio goes from entry-level products to high-end jewellery worth tens of millions of dollars.

Our product structure takes into account Chinese consumers’ traditional demand for gold, jadeite and nephrite. We have likewise expanded our portfolio in response to growing market appreciation of diamonds and coloured gemstones.

Lao Feng Xiang has also embarked on new branding and customer financing initiatives. Our expansive range was showcased in a novel branding exercise – a grand exhibit at Shanghai’s Fengxian Museum from late 2020 to early 2021, which put our brand and our jewellery in the limelight. Meanwhile, the pawn shop department of the company has launched its financing services. After purchasing high-end Lao Feng Xiang products, consumers can mortgage the goods for financing of around 75 per cent to 80 per cent of the original price. This service enhances the financial value and benefits of our jewellery products.

Please share your growth and expansion targets for China and beyond.

Shi: Our goal is to reach RMB 100 billion (around US$ 14.5 billion) in annual revenue in five years. We're also the first Chinese jewellery brand to expand overseas, with shops in New York and Vancouver, among other cities. We expect international sales to reach about RMB 3 billion (around US$ 434.9 million) in three to five years.

Lao Feng Xiang embodies the pride of Chinese national enterprises. Our slogan is “brand confidence, culture confidence, road confidence and industry confidence.” On top of jewellery pieces, we have expanded into watches, eyewear, accessories and the like, which are rich in jewellery elements. We are gradually realising the vision of evolving from a Chinese national jewellery brand to an international luxury brand.

How do you evaluate the jewellery and luxury market in China?

Shi: At present, Chinese consumers continue to pay a lot of attention to the cost of jewellery materials. They are still learning to appreciate the value of brand, craftsmanship and design, so it is difficult for homegrown Chinese brands to charge a high premium for brand recall and recognition. However, as brand development strengthens, designs and craftsmanship improve, and consumer appreciation evolves, China has the potential to build its own luxury brands.

In numbers: Lao Feng Xiang

Points of sale: 4,450 in 2020 including 19 stores overseas
Market share of China’s jewellery retail sector: 7 to 8 per cent
2020 revenue: RMB 51.722 billion (around US$7.5 billion), +4.22 per cent
2020 net profit: RMB 1.586 billion (around US$230 million), +12.64 per cent
Brand value: RMB 34.329 billion (around US$4.98 billion)
Product structure: 14 categories including gold, diamond, pearl, coloured gemstone, jadeite and nephrite, eyeglasses and watches
Annual use of gold: Around 100 tonnes