Taiwan Today

Ching Chang Shan Jewelry Co. can stand as a typical example of Taiwan’s approximately 4,000 gold jewelry shops. It started out as a family business run by a husband-and-wife team, selling mostly pure gold jewelry, plus some jade, a little silver, and a few diamonds. The shop, located near a large market in a busy part of Sanchung city in Taipei county, targets a local clientele, especially the housewives who frequent the market. It can boast a good customer base and a decent history of profit since it first opened its doors twenty years ago.

Lin Shen-pin (林森平) inherited the business from his parents in 1985. “Sell­ing gold in Taiwan is like selling oyster noodles,” he says—an odd image on the face of it, but one that he is quick to ex­plain. Oyster noodles are always prepared in advance and kept hot. A typical cus­tomer is seated and served within seconds. He finishes his meal a few minutes later, wipes his mouth, pays, and goes. Believe it or not, Lin says, selling gold is just as easy and just as fast. “Traditionally, many customers regard buying gold as a way of saving,” he says. “When a housewife has some money left over from her household expenses, instead of putting it in the bank and taking a chance on inflation, she spends it on gold jewelry that will hold its value.”

Gold has also long been a popular gift in Taiwan. It can be given to both men and women, and will afford a teenager as much pleasure as a great grandmother. People buy gold to celebrate marriages, births, birthdays, Mother’s Day, Valentine’s Day, and anniversaries. Taiwanese are big consumers of gold. According to figures released by the Ministry of Finance’s De­partment of Statistics, since the restrictions on importing gold were relaxed in 1986, and free trade in the metal was established in 1992, gold imports have reached record highs: 363 tons were brought into the is­land in 1988, and annual imports have stayed at around 100 to 150 tons ever since. Before restrictions were eased, 20 to 50 tons was the norm. And according to the Geneva-based World Gold Council (WGC), which collates and publishes information about gold worldwide, sales in Taiwan reached a record high of 166 tons in 1992 and have hovered around 130 to 140 tons annually since then—a big leap from the pre-1986 figure of between 20 and 30 tons.

But despite the good news, many of those involved in the gold business fear that it may be on the way to becoming a sunset industry. “The bulk of our custom­ers are well over thirty,” Lin Shen-pin says. “We can’t seem to attract the younger gen­eration of consumers, which means it’s likely that the industry is going to die out along with its faithful customers. In my shop, young people buy 18-carat gold, diamonds, and sterling silver nowadays. They’re not interested in 24-carat gold engagement gifts, like their mothers were—ring, necklace, tie-pin, and so on. They say, and I quote, pure gold jewelry is just plain hillbilly, ugly, and out-of-date.”

Consumers have reason to complain. Traditional gold shops have always offered a limited variety of items. These range from wedding sets—necklace, two bracelets, rings, and earrings—and new­-born baby sets, through bangles engraved with phoenixes and dragons (formerly much favored as betrothal gifts), rings bearing the Chinese characters for happi­ness, gold-chip necklaces, and zodiac-ani­mal figurine pendants. Very few of these items are suitable to be worn with contem­porary fashions.

For many years, retailers used to com­plain that they didn’t get enough fashion­able designs from manufacturers, while manufacturers blamed retailers for lack of demand. The WGC’sTaiwan liaison office can claim to have studied the local market in depth, having conducted biannual sur­veys ever since it was set up in 1990. Man­ager Grace Yuan (袁承華) says that the traditional buying habits of the consumers who dominate the pure gold jewelry mar­ket were and still are one reason for neglect of product development. “They aren’t par­ticularly interested in special designs or delicate workmanship,” she says. “They don’t want to waste money on outward appearances. They usually buy gold as a gift and they believe that weight is what counts. So retailers tend to stick to the all­ time best-sellers, and manufacturers are hesitant to invest in product design or development.”

But WGC studies show that young consumers have not lost their love of gold. “They’ve got nothing against gold jewelry,” Yuan says. “It’s just that we’re dealing with a group of new consumers who are more fashion-conscious and have different tastes. They expect gold jewelry to be more than a keepsake that retains its value over the years. If this industry is to keep going, customer dissatisfaction with mainstream market products has got to be addressed, and the demand for fashionable designs must be met. It’s as simple as that.”

The WGC, an international organiza­tion funded by leading gold mining com­panies around the world, is determined to increase demand. “As regards Taiwan in particular, our mission is to devise promo­tions that will reach both consumers and jewelers,” Yuan says. The council first commissioned a series of TV commercials that set out to boost gold jewelry’s image as fashionable, a luxury item but one that could appeal to young consumers. It also tried to convince gold retailers and manu­facturers that they ought to be doing more to meet younger consumers’ expectations. It sponsored a couple of seminars on the industry’s potential, offering market infor­mation and bringing together people in the field. A further series of seminars on the importance of product development and studying current trends followed.

Next came organized co-production and co-promotion activities. Yuan recollects how in 1993 WGC staff toured the island, visiting jewelers and offering to do all the planning and coordination for the launch of a line of fashionable new products. The council also offered to put up 50 percent of the development and promo­tional costs. “We finally won support from manufacturers and developed six new designs,” Yuan says proudly. “We called it the Sunshine Bracelets Collection. And the twenty-odd retailers who sold that product line have seen a 20 to 30 percent growth in sales. Overall market turnover amounted to US$235 million within the first month, compared to the norm of US$181 million. And that did something to bolster confidence with a lot of people in the industry. They no longer talked about switching to diamonds, and even jewelers who hadn’t dealt in pure gold before were trying to get in on the act.”

The World Gold Council has thus done something to alter the industry’s mindset. But the real catalyst for change turned out to be competition from foreign chain stores entering the Taiwan market, with Just Gold Co. leading the charge.

This Hong Kong-based chain came to Taiwan in 1994. Since then it has opened twelve retail outlets islandwide, a figure that includes both independent shops and sales counters in department stores. It has already established a database of 85,000 customers, including 6,000 “VIPs” who have spent at least US$365 and who be­tween them account for approximately 30 percent of the Taiwan operation’s monthly sales. In its first fiscal year the company posted a turnover of US$9.1 million, a figure that rose to $24.6 million in the following year. Given that the normal monthly market turnover is $181 million, generated by approximately 4,000 gold shops, the newcomer managed to outper­form the competition in its first year.

Irene Hsieh (謝淑英), general man­ager of Just Gold (Taiwan), thinks that her company has positioned itself about right. “If there was one thing that smoothed our entry into the market here,” she says, “it was that we never tried to steal traditional customers. Instead, we targeted young people in the twenty to thirty-nine age group, a sector that previously didn’t buy gold jewelry. Now it turns out that 87 per­cent of our customers are clustered in that age range.”

Of course, selling to young consum­ers requires a different approach. The decor of Just Gold’s chain of shops is particularly striking. Rich, dark woods and a purple paint design give the interiors a fashion-boutique feeling. Items for sale are exhibited in wall-mounted display cases, a long way from the traditional jewelers’ staid arrangement of two long glass counters flanking a central aisle.

Just Gold also deliberately set out to differentiate its products from those on sale in local shops. All items are imported from the company’s Hong Kong head­quarters, and each store refreshes its stock once a week. Much of the trendiest jewelry is designed to a particular theme, such as the environmental wildlife collection, and the Disney cartoon character collection. Fashion-conscious women can complement their summer wardrobes with such items as the Seafood bracelet, adorned with a sea horse, an octopus, and other water creatures, or perhaps a Fair Lady chain, with its miniature high-heeled shoe and perfume bottle charms, to enhance their femininity.

Just Gold uses only the most up-to­-date strategies to promote its products. It has its own TV commercials—something previously unheard of among Taiwan’s gold retailers. Hsieh says that the commercials are meant to convey subtle messages: Buy gold for design rather than by weight; buy for fashion rather than as a keepsake; and buy for pleasure, not in order to save. “But our main promotional strategy is brand name recognition,” she says. “We aim to sell our brand to consumers.”

The company paid over US$100,000 to hire the Hong Kong-based Faye Wong, “pop princess of cool,” to model its Faye Collection in TV ads. According to Hsieh, this commercial was intended to “build up our brand image as suiting an independent­-minded woman with well-defined tastes, strong self-awareness, and a down-to­-earth attitude.”

In these and other aspects, Just Gold has shown local businesses the way to go. Impressed by the company’s track record, in 1993 Lin Shen-pin of Ching Chang Shan and nineteen other second-genera­tion jewelry-shop owners got together to found the Good Gold Jewelers’ Associa­tion. Lin is its secretary-general. “Just Gold’s chain-store operation and forceful ad promotions were inspirational,” he says. The association is a registered whole­saler, and it buys mainly from Hong Kong and Singapore. Apart from publishing its own catalogs, the association also regularly promotes members’ stores through magazine advertisements.

When Just Gold came to Taiwan, bringing with it a good measure of Hong Kong know-how, it immediately gripped the imaginations of younger consumers. Local gold shops responded to the challenge by starting to adapt. Shop renovation was the most visible change. Many storeowners tore down the forbidding iron grilles that used to seal customers off from both salesper­sons and stock. Out went the old-fashioned red velvet cases. In came special display windows by the entrance, with regularly rotated stock on show, and new glass counters containing special sections for high-profile items and promotional offers Lin renovated his own shop in 1994. “We settled for something midway between the traditional and the trendy,” he says. “We had to compromise because we needed to hang on to our old customers as well as attract younger ones.”

Besides shop renovation, local retail­ers have embarked upon some interesting promotional activities. “Taiwan had no chain stores selling gold until recently, and the market is extremely fragmented,” Lin comments. “Single-store and community-­oriented shops are fairly conservative when it comes to investing in advertising. But yes, people have started to take promotion going on—posters advertising special Mother’s Day offers, sending calendars and promotional direct mailings to customers, and putting ads in magazines and newspapers.”

But by far the greatest change has been in product range. Apart from traditional styles, which are still in demand, local shops now offer a diverse selection of contemporary designs. Several jewelry manufacturers have developed separate lines devoted to contemporary gold jewelry production. And one shop, Golden Life Gold Jewelry Co., which was set up in 1995 and has rapidly proliferated into a chain with six outlets in major department stores, has even initiated its own product development. It has a design department and a dedicated production line provided by one of the main shareholders, himself a leading manufacturer.

“What we’ve learned along the road is that design sells,” says Steven Hu (胡世衛), Golden Life’s general manager. “The WGC said so, and Just Gold proved it. That’s why we insisted on bringing together our design department and a research and brainstorming group to focus on product development.” The design department includes four designers and five casting craftsmen, whereas the research group responsible for design themes con­sists of designers, marketing planners from headquarters, and retail staff.

Golden Life, like Just Gold, is trying to build up a brand name by offering contemporary designs. “But we hope to offer something different from the foreign companies that sell the same designs in all their markets,” Hu says. “We want something that's more in tune with local tastes and bet­ter adapted to the local consumer's lifestyle. We believe we're more likely to come up with our own unique brand by working with our own culture and interacting with our consumers. Brand is far more valuable than the product itself, and its value accumulates with time. Establishing brand status—that's the way of the future for gold jewelers."