Laopu Gold's jewellery is selling like hot cakes despite tepid consumer spending in China
2025.02.10
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."
Laopu's appeal among the young and affluent is also tied to its promotion of "heritage gold" - a type of pure gold jewellery that blends ancient crafting techniques, Chinese culture and design elements inspired by the Buddhist faith.
Sheila Zhang, a Beijing-based financial professional, bought a prayer wheel necklace that cost around 20,000 yuan in January. She said her first impression of Laopu was that "it's very different from the other brands".
Shoppers in an outdoor mall in Beijing. Photo: AP alt=Shoppers in an outdoor mall in Beijing. Photo: AP>
The shop she visited at Wangfujing, a commercial district in the city centre, offers two main categories of jewellery: one featuring traditional Chinese and Taoism-inspired accessories, and another one focused on Buddhism.
"Overall, Laopu is very simple and clear in its offerings, which, compared to other brands that overwhelm you with options, surprisingly makes it easier to make a choice," she said. "I liked it a lot, because its style is very unique."
Zhang is not the only person who feels this way. On RedNote, the Chinese social media app that recently rose to international fame due to the US crackdown on TikTok, there have been more than 1.2 million posts featuring the hashtag "Laopu Gold." These posts feature the intricate craftsmanship of the jeweller's necklaces and rings, as well as videos of long queues outside its stores.
"I'm loving this brand. I have to work hard to make more money," wrote one RedNote user named Yoyo Zaizai, who posted a picture of herself wearing a gold pendant. "It's so beautiful. Once you start buying Laopu, you can't escape the 'pit.'"
With the price of gold hitting an all-time high this week, sparked by demand for safe-haven assets amid turmoil sparked by US tariffs, Laopu Gold stands to benefit. China International Capital Corporation projected in October that the company's net profit could reach 1.7 billion yuan in 2025, adding that in 2026, it could hit 2.3 billion yuan.
But a downside risk looms. With the company's shares rising as gold prices have shot up, Laopu could lose favour among consumers when gold prices start to fall.
"When that happens, the question is whether Laopu's brand strength can offset some of the negative impact of the downward cycle of gold prices," Lin said. "It is a possibility."
