'Hermès of Gold' beguiles the affluent with exclusivity, ancient designs

Consumer buying may be generally weak in China, but not at the exclusive outlets of the "Hermès of Gold" – a jeweler that targets the affluent amid record-high bullion prices in world markets.

At the Chenghuang (City God) Temple outlet of Laopu Gold Co in Shanghai, consumers have to take a numbered ticket and queue for their chance to browse.

"It's like buying luxury handbags," said a woman who had been waiting in line for an hour.

While traditional gold retailers struggle with weak consumer spending, Laopu is defying gravity. Its high-margin, ancient-style gold pieces are flying off the shelves. On Friday, its shares (6181.HK) rose to a record high after the company upgraded its profit forecast.

Rival jewelers like Chow Tai Fook (1929.HK) and Luk Fook (0590.HK), who cater for a more middle-income demographic, have been beset by sliding sales, though their shares have risen between 10-20 percent in the last month on the back of world gold prices.

Beijing-based Laopu Gold is the first in China to adapt traditional Chinese craftsmanship to modern jewellery design. Its strategy of market exclusivity has earned it the nickname "Hermès of Gold."

Nomura analysts said the company has the potential to become the first truly Chinese luxury brand.

Gold is in hot demand across a world worried about geopolitical tensions, trade wars and inflation. Gold futures in New York have hit a record high of US$2,923.80 a troy ounce, nudging the watershed US$3,000 mark. The gold price has soared 40 percent in the last 12 months.

Why the bull market? Many reasons. Gold has long been considered a safe haven in times of stress or uncertainty. Then too, many central banks have been buying up bullion for their reserves.

Gold jewellery accounts for about half of total gold demand, and Laopu Gold is reaping the benefit by becoming a standout in the luxury jewellery market.

Founded in 2009 by Xu Gaoming, a civil servant-turned-entrepreneur, the brand has carved a niche with its "ancient style" gold pieces, featuring intricate techniques like filigree and engraving. They have become a status symbol among China's affluent consumers.

The brand's retail strategy mirrors that of top luxury fashion houses. The company operates only in elite shopping malls such as Beijing SKP, Shenzhen MixC and Guangzhou Taikoo Hui, targeting upper crust consumers willing to pay for exclusivity. With just 38 stores nationwide, the brand has built a reputation for scarcity, fueling demand.

Since its Hong Kong initial public offering last June, Laopu Gold's stock has soared over 1,300 percent, pushing its market valuation over HK$100 billion (US$13 billion), despite a broader slowdown in the jewelry business.

On Friday, the company forecast 2024 net profit of between 1.4 billion yuan (US$194 million) and 1.5 billion yuan, up from 416.3 million yuan in 2023.

Chinese and Indian consumers are the world's biggest purchasers of gold jewelry

At Laopu Gold's Chenghuang Temple store in Shanghai, a winding queue of customers clutching numbered slips spilled onto the sidewalk.

"No more numbers, no more numbers!" a security guard shouted above the chatter, waving off late arrivals. "We've already handed out over 900 today."

At the front of the line, a Shanghai resident surnamed Li stood by as his wife browsed inside. Earlier this year, he said he spent 47,000 yuan on a pendant at a Laopu Gold shop in Hong Kong store during the Chinese New Year holiday.

"Now, the price of the same piece has already risen to over 50,000 yuan," he said, shaking his head in amazement.

A tourist surnamed Feng from Anhui Province was carefully examining two gourd-shaped pendant necklaces she had just bought for about 30,000 yuan.

"It's really the design that drew me in," she said. "You just don't see this at other gold stores."

But not everyone is convinced.

"Isn't this just a classic case of hunger marketing?" commented a passerby who stopped to gawk at the long queue outside the shop. "The brand was quiet before, and now suddenly it's on fire – limited numbers, restricted purchases. Hard not to think it's all hype."

For Laopu, location is everything. While many traditional gold retailers choose to tap lower-tier cities, Laopu refuses to go anywhere but the top. Its boutiques are found only in the country's biggest cities and ultra-luxury malls.

This strategy isn't just about foot traffic; it's about curating a clientele. Laopu believes that positioning itself alongside Cartier, Van Cleef & Arpels, and Tiffany & Co not only delivers the highest net-worth clientele but also reinforces its brand as a luxury house rather than a commodity gold seller.

The strategy seems to be working so far.

At the Beijing SKP ultra-luxury mall, ladies don't blink at Laopu's price tags.

In Laopu's IPO prospectus, the company said about 65 percent of its revenue comes from products priced between 10,000-50,000 yuan, while 25 percent comes from pieces exceeding 50,000 yuan. That contrasts with rival Chow Tai Fook's average gold jewellery price of about HK$6,000.

But what truly differentiates Laopu's pricing model is its deviation from traditional gold retailers who follow the standard "gold price per gram + labor cost" formula. Laopu instead prices its jewellery according to daily fluctuations on the Shanghai Gold Exchange. That means its prices remain largely unaffected by shifts in raw material or production costs, distancing itself from weight-based gold sellers.

As gold prices surge this year, Laopu announced a 5-12 percent increase in prices late last month.

"It is now officially in the 'luxury' category," said one consumer on social media. "Buying requires rational decision-making."

Take Laopu's "Yue King's Sword" as an example. The 812-gram gold piece is priced at over 970,000 yuan.

"Based on today's gold price, it's worth just over 700,000 yuan," one netizen scoffed online. "The markup is insane. I just don't get the world of the wealthy."

At roughly 1,200 yuan per gram of gold, the sword is no anomaly. Nearly all of Laopu's pieces price gold at far above the market rate, with some exceeding 1,500 yuan per gram.

"Laopu's prices are high, but at least you rarely see someone else wearing the same piece," said Dai Qian, who had just spent over 30,000 yuan on a "Ruyi Yuanman" pendant before the latest price hike. "I'm willing to pay for the craftsmanship and cultural significance."

Mass-market rivals such as Chow Tai Fook and Luk Fook, who don't focus on wealthy customers with strong spending power, have suffered from the general slowdown in discretionary spending.

Even luxury fashion houses likes Louis Vuitton and Hermès have shifted away from middle-class expansion, raising prices to focus on high-net-worth customers whose purchasing power has so far remained resilient.

Social media has also fueled the frenzy surrounding Laopu Gold.

On platforms like Xiaohongshu and Douyin, posts showcasing the company's intricate designs and "must-buy" status flood users' feeds, reinforcing the idea that these pieces are exclusive, desirable and worth the premium. Some buyers see it as an investment in culture and craftsmanship, while others simply fear missing out.

This psychological loop – where scarcity drives demand, demand fuels hype and hype reinforces scarcity – has amplified Laopu's allure. But the question lingers: Can the hype last or will Laopu Gold's magic start to wear thin?

Competition is intensifying. Rival brands are rolling out similar designs at half the price.

And when it comes to resale, pawnshops don't factor in branding or craftsmanship, only raw gold value.

Whether Laopu's high-margin model can sustain itself remains an open question that only time and market conditions will answer.