Redred

Chow Tai FookCiti International Case

Competition

Team TST 1Cory LevinsonJason Sigmon

Krysta Singh Emily Zhao

10/29/2013 2Situation Strategy Implementation Bottom Line

Takeaways

Clear Understanding of Best Strategy

Reasons for Selecting Strategy

Implementation


Agenda

StrategyCritical Success Factors

Chosen Solution

ImplementationActionable Steps

Overview of Strategic Plan

Bottom Line Financial

Timeline

Situation

Current Environment

Definition of Success / Timeframe

Analysis


Changing Channel Dynamics

How can Chow Tai Fook continue to be the number one mass market jeweler in Mainland China?

Intensifying Competition Shifting Needs in Customers

Current Environment


Market Potential

Population Growth

Jewelry Ownership

Urbanisation Growth

Disposable Income Growth

Rise of Middle Class

From 2006 to 2010, total population increased from 1,330mm to 1,360mm

From 2006 to 2010, Chinese urbanisation rate was higher than 40%, increasing from 43.9% in 2006 to 49.7% in 2010

From 2006 to 2010, per capita disposable income of the PRC increased from RMB11,759 to RMB19,109 at a CAGR of 12.9% The urban population of middle class in the PRC is expected to increase from approximately 235mm in 2010 to nearly 330mm by 2025

Per capita jewelry ownership is 1/5 of Hong Kong and less than 1/10 of the US and Europe in 2009


Market Forecast


Department Store Channels


Market ProliferationLow-end; 10.40%

Mass Luxury; 56.70%

High-end;

32.90%

Low-end Mass Luxury High-end

36.70%

39.60% 39.10

%

Low-end Mass Luxury High-end

34.60%

39.10% 39.10%

Low-end; 7.60%

Mass Luxury; 53.80%

High-end;

38.60%

Chin

aH

ong

Kong

, M

acau

, Oth

er

CAGR


Chinese Online Consumers

Chinese consumers currently prefer apparel online shopping


Jewelry Stores in China Industry Revenue

• SOMEONE MUST FIND A PROJECTED INCREASE IN ONLINE SALES (CHART) OR MAKE ONE UP• NOTE: jewlery sales will probably not increase as fast b/c customer desire to look/ feel

touch product in person


Consumer Perceptual Map

Price

Confidence & Trust

High

High


Consumer Perceptual Map

“CTF is not positioned as a luxury brand. It has its own DNA and culture. We are a mass luxury brand with wide product ranges to fulfill our customers’ dreams during their life stages”

Kent Wong, Managing Director, Chow Tai Fook Jewellery GroupPrice

Quality

High

High


Communication Channels

Traditional Social Media Word of mouth LAST

E-commerce

Role

Percentage of sales will decline

Shift from awareness to action Brand loyalty

Become a second traditional platform

Future outlook

UsageImportant but

declining Increasing presence (goal of loyalty programs)

Limited E-commerce sales

Drive immediate/ short term sales Create awareness Create loyal

customersDrive non-

traditional sales


Breaking Social Media Trends

Social Media spread awarenessIncreasing level of engagement

by online customers

Sales Opportunity

Goal: Creating Action

Current Trend


Utilizing Shifting Environment

Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12100

150

200

250

300

350

400

282

309

345359

377 380

233

277

303318

356

388

118

155

209224

240 242

Internet Surfing Medium

Desktop Mobile Laptop

User

s in

Mill

ions

Movement from information to communication allows a conversation with the customer, ultimately allowing us to drive sales


Xiao Qin and Wang Keyu’s 25th

upcoming wedding

anniversary

CTF discretely reminds Wang Keyu about the

event

Wang Keyu is directed to

several platforms to purchase an

anniversary present from CTF

Brand recognitionIncreases potential returning customers

Utilizing Data Analytics

Customer profiles Notifications Sale Generation Brand Loyalty


Data Analytics Current

• We have contracted with one of the top data analytic and mining companies Analyx based in Berlin Germany. Analyx helps Chow Tai Fook– Manage Product Offerings– Pricing– Demand Estimation– Customer Profiling– Customer Retention


Data Analytics Integration

Offline

Adaptation of trends in-store

Online

Websites, social media platforms,

mobile

Birthdays, anniversaries, habits,

zodiac sign

Customer ProfilingTrend

Identification

Can identify shifts in customer buying

patterns


Goals of Data Analytics

• Our Goal from using data analytics is to get a better sense of the wants, needs and desires of our past, current and future customers.– We need to use the data analytics to develop better customer

profiles.– We need to use this as an early warning system that identifies

changing trends and can differentiate between individual events and shifts in customer buying patterns.

– Need to integrate findings into developing websites, social media platforms, and mobile that are relevant and sticky to customers.

– This is where you start talking about some examples


Takeaways

• SUMMARY of all of analysis• Bullets• You’ve got the handle on of an overall strategy• Tactical presentation to meet your goals


Vision for Success

Maintain position as market leader

Triple loyalty program within 5 years

Maintain 40% annual growth

Maintain margins at 30%

Develop enhanced customer profiles


Chow Tai Fook Diamond Strategy

Customer Management System

E-Commerce

New Products

In-store Experience

Online Presence

Drive sales while creating loyal customers


The Perfect One

Enternal Memories

Ceremony

Proposal

Brides-maids

Your text here

Your text here

Video Contest

Planning guides

Your text here

Free Wedding

Your text here

Family Friends

Your text to explain this label

RSVP


The Perfect One

• Video Contest• Every year winner receives a wedding worth

of RMB/HKD 250,000

• RSVP list• Gift registry platform• Honeymoon

• Wedding Album featured

Eternal Memories

The Proposal

The Ceremony


The Perfect One

Current Marketing Campaign


The Perfect Package

Proposal

Ceremony

Eternal MemoriesPlanning Guide

RSVPGift registry platform

Photo albumSite Feature

Video ContestFree Wedding, valued up to RMB250,000


New Products

45%

32%

13%

10%

Wedding Market Investment Purchase Parket

Collection Market Other

Limited Edition 生肖 Charms• New zodiac charm each year• Limited production of each

edition• New sets are designed every

12 years• Complete sets will be

rewarded with a free piece of jewelry from a selected assortment


E-commerce strategy

The Ideal Strategy for E-Commerce is one that allows the online and in-store process not only to coexist ,

but to drive customers to both portals.


Summer Prosperity

Promotion during lowest monthsMystery discount between 10%-100% revealed after purchase

Double promotion if used on all three dates

Joy8/8

Life7/7

Luck6/6


Lucky Fortune Discount SchemePotential Discounts

Probability of Receiving Discount

Customers Receiving Discount* Discount Real

Discount10% 80% 80,000 10% 8%

20% 10% 10,000 20% 2%

25% 5% 5,000 25% 1.25%

30% 3% 3,000 30% 0.90%

40% 2% 2,000 40% 0.80%

50% 0.50% 500 50% 0.25%

60% 0.30% 300 60% 0.18%

75% 0.15% 150 75% 0.12%

100% 0.05% 50 100% 0.05%*Based off 100,000

customers Avg: 13.6%


Order Online-Pick up in Store

• For faster and less expensive delivery the customer can order the item online and have their purchases delivered to a store in there area. There will be no shipping costs and the customer will not have to worry about returning what they purchased. Sales people will also work to cross sell accessories and other items to the customer when they come into the store.


Online Concierge

• For loyalty program members of certain levels they will have an online concierge who will answer any questions and concerns about what they might be interested in purchasing.

• Concierge will be available twenty four hours per day


In Store Loyalty Hours

• During certain seasons and holiday periods customers of a certain level will have access to special hours where they can shop and be served in a more relaxed and pleasurable environment.

• Loyalty hours will also be available when the company is introducing limited edition items.

• The highest level customers would also have the option of pre-ordering certain items online


Chow Tai Fook’s global network

Delivering dreams through channel utilization

Distribution Channels

Distribution Channels Customer ChannelsCustomer Channels Sales ChannelsSales Channels Communication

ChannelsCommunication

Channels

Strategy Alignment with Vision


Distribution Channels

Distribution Channels Customer ChannelsCustomer Channels Sales ChannelsSales Channels Communication

ChannelsCommunication

Channels

Expanding Customer Base

Expanding to peripheral customers

Tier III & IV Expansion

Sales Channel Growth

Same Store Sales Growth

POS Growth

NPV $17.3 B

These strategies will allow CTF to continually connect to customers on a deeper level globally, and position itself favorably in the future

Channel Utilization???

Chow Tai Fook’s global network

Delivering dreams through channel utilization


Positioning w/ competitors

Change in share of economy

Old Economy(Agriculture & Manufacturing) Cheap labor abroad Exploit economies of scale M&A to exploit economies of scale High-value products

New Age Economy(Recreation, Personal Services Stable macroeconomic

conditions Brand awareness Niche labor skills Product differentiation

Traditional Service Economy(Wholesale & Retail) Rely on labor New technology Improve staff training

Shanghai Yuyuan Tourist Mart

Shanghai Laofengxiang Co.

Beijing Caishikou Department Store

Chow Tai Fook

Investment Economy(Information, Communications, Finance) Superior debt management Stable macroeconomic

environment Sound investment planCapital Intensity

China National gold


• Brand Reputation• Vertically Integrated

Process

STRENGHTS

• New Competitors• Rising Gold Prices• Government Austerity

Measures

THREATS• Brick and Mortar

Preference• Difficult to change rapidly

WEAKNESSES

• Expanded E-tail platform• Increased Youth Purchasing

Power

OPPORTUNITIES


SWOT- CHANGE FORMAT

40

OpportunitiesStrengthsWeaknesses Threats

Largest market share

Vertically integrated

Distribution network

Brand recognition

Brick and mortar preference

Rapid change presents

challenges

China’s slowing GDP

Gold price volatility

Increasing competitiong

Changing consumer habits

Increasing middle class

E-commercce


Competitor notes• Shanghai Laofengxiang Co., Ltd.

– To rapidly increase company operating scale, Laofengxiang has attached growing emphasis to its wholesale business, which negatively affected company profit margins to a certain extent.

– Marketing channels have become more diversified, including regional general agencies, general distributors, designated distributors, Image Shop and franchise stores. In 2012, Laofengxiang's sales revenue amounted to $4.0 billion, up 21.0% from 2011.

• Shanghai Yuyuan Tourist Mart Co., Ltd.– The rapid expansion of sales networks led to strong growth in gold sales. (Yayi Gold and Old Temple Gold) – Yuyuan Mart revenue totaled $3.2 billion, with gold product sales accounting for 89.0% of total revenue.

• Beijing Caishikou Department Store– Caibai is a jewelry retailer with strong indigenous features. Apart from a branch store established in Baotou,

Inner Mongolia, the other five chain stores of Caibai are located in downtown Beijing and suburban areas. Its sales network coverage is much narrower than other large-scale jewelry retailers such as Chow Tai Fook and Laofengxiang.

– highly competitive in the Jewelry Store industry in China in terms of single-store sales revenue, Platinum sales of the company increased sharply in recent years after its cooperation with Platinum Guild International.

– sales of platinum, diamonds, and gemstone jewelry have increased strongly in recent years.• China National gold

– Strong company retail sales growth was accompanied by the rapid expansion of its sales network. In 2009, brand operational centers were established to supply local markets and to promote brand awareness. By the end of 2012, CHNGOLD had over 400 stores and 20 brand operational centers.

Marriage Distribution??

30%

70%

1st Qtr 2nd Qtr

70%

15%

10%5%

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Your introductory text here

80 14%

10%

1st Qtr

2nd Qtr

3rd Qtr

Category 2014 2012

Text in here 1,296,113 1,200,000

Text in here 60000 400,000

Text in here 1,296,113 1,200,000

Text in here 100,000 200,000

Category 2014 2012

Text in here 1,296,113 1,200,000

Text in here 446,735 400,000

Text in here 1,296,113 1,200,000

Text in here 100,000 200,000

Your text here Your text here


E-commerce

Music

Travel

DatingNews apps

Online videos

Connected tv

Feasability Profitability

Not effective at transactional activities

Netflix partnership

Partnership with Spotify: Large market share still to be targeted Attracts a fifth of the interested public Just earns US$0.8 per month per user

Fairly new partnership with TripAdvisor: Ranks as the 8th most used

Facebook app (23,7 million MAUs)


Wiebo

Email

SMSOn-line Payment

02040

Series 1Series 2


Sales

MainlandGoldOther Materials


TimeframeXXXXXXX

Time

Number of features released at any given time(the wider the more features)

Newsfeed launches & updates

2006

Text & video upload from mobilesPlatform for developersFacebook pages First targeted ads

2007

Like button for postsNetflix integrationData transfer to TweetDeckIncreased photos capacityInbox folders developmentXbox Live Experience

2009

Chat iPhone applicationMicrosoft Live Search

2008

Chat integrated into desktop Use of o.facebook.comLike button for commentsPrivacy controls on mobilesData integrated to BingSkype, TripAdvisor, Scribd

2010

New photo uploaderTagger inferfaceFacebook integration in AndroidGroups’ features improvementFacebook for iPadMessenger application on mobiles

2011






Critical Success Factors

Establishment of brand names

Extensive distribution network

Integrated operations

Effective inventory management


Force Field


The Perfect One

Exclusive online photo albums

Engagement & Wedding Jewelry

Event Resources

Savoring the moment

MenBridesmaids

Wedding planning checklistStrategic partnershipsOnline registry


The Perfect One

Focus is on bride

MenBridesmaidsFamily

Wedding planning checklistStrategic partnershipsOnline registry

Exclusive online photo albums

Wedding Party Ceremony Eternal

Moment


Sales

1st Qtr2nd Qtr3rd Qtr4th Qtr





Data & Analytics

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