Monthly sales exceed 100 million! The "Huaqiangbei" of the gold industry rushes into Douyin and Xiaohongshu

Author | Guiqulai Editor | Ji Ran

On March 31, LAOPU GOLD released its annual performance announcement for the year ending December 31, 2024, which is also LAOPU GOLD's first annual report since its listing.

The financial report shows that in 2024, LAOPU GOLD's sales performance and net profit increased by 166% and 254% year-on-year, reaching 9.8 billion yuan (including tax) and 1.47 billion yuan, respectively.

On the day the financial report was released, LAOPU GOLD's stock rose by 1.67%, closing at HKD 729 per share. Since LAOPU GOLD's listing on June 28, 2024, its stock price has soared from the issue price of HKD 40.5 per share to a historical high of HKD 798 per share in less than 9 months, with a maximum increase ratio exceeding 18 times, creating an "epic increase."

Image source: Xueqiu

Formally established in 2016, LAOPU GOLD is the latest company among listed gold enterprises, but it has set several "bests" in the industry: In the first half of 2024, LAOPU GOLD's gross profit margin of 41.3% is the highest among existing listed gold companies; on March 28, LAOPU GOLD's market value of 1250.51 million HKD and PE of 137.22 are both the highest in the industry; as of the end of 2024, LAOPU GOLD has a total of 36 offline stores, with an average performance exceeding 300 million yuan per store. Frost & Sullivan stated that among all well-known jewelry brands (including international and domestic brands), LAOPU GOLD ranks TOP1 in average revenue and sales per square meter in individual shopping malls in mainland China.

Image source: Compiled based on public information

However, as a rising star in the industry, LAOPU GOLD's revenue, net profit, and number of stores still show a significant gap compared to its "predecessors" in the industry. In terms of the number of stores, LAOPU GOLD's 36 stores this year are not on the same scale as other gold companies, which often have thousands of stores. In terms of revenue and net profit, LAOPU GOLD's revenue of 9.8 billion yuan (including tax) is only 9.67% of Chow Tai Fook's 108.713 billion HKD revenue, and its net profit of 1.47 billion yuan is 24.26% of Chow Tai Fook's 6.499 billion HKD attributable profit.

Image source: Compiled based on public information Why can LAOPU GOLD achieve several "bests" despite its revenue and net profit not being as good as its "predecessors"? Is this a manipulation of capital means, or does it have a unique "operational metaphysics"? How does LAOPU GOLD forge its "alchemy"?

Why is LAOPU GOLD the end of gold?

To buy gold, one must find scalpers to cut in line, and this is happening at LAOPU.

At 6:30 AM in February this year, consumer Liu Na (pseudonym) arrived at the LAOPU GOLD store in Hangzhou Tower, where a long queue had already formed. Among the crowd waiting in line were not only young people but also many elderly individuals. Scalpers on-site claimed they could help cut in line for a number, with prices ranging from dozens to hundreds of yuan. According to the day's situation, with twenty to thirty people seeking scalpers to cut in line, scalpers could earn two to three thousand yuan a day.

Liu Na stated that from 2020 to 2023, the average selling price of LAOPU's pure gold products rose from 603 yuan/gram to 729 yuan/gram in 2023, while the average selling price of pure gold inlaid products increased from 769 yuan/gram to 1043 yuan/gram in 2023, with growth rates of 21% and 36% respectively. In March and September 2024, LAOPU GOLD raised prices twice, each time by about 10%.

However, even with LAOPU continuously raising prices, the selling prices of products like the Golden Dragon incense pouch pendant, Golden Mandarin Duck, and Rose Window necklace reached 110,000 yuan, 200,000 yuan, and 400,000 yuan respectively, with an average price per gram reaching 1500 yuan/g, significantly higher than the industry average of 800 yuan/g-900 yuan/g. Yet, store staff indicated that the transaction rate still exceeds 40%, and many products are already sold out.

Not only are offline stores bustling, but the Douyin #LAOPU GOLD topic has over 300 million views, the Xiaohongshu #LAOPU GOLD topic has nearly 500 million views, and there are over 100,000 notes on "LAOPU GOLD." Additionally, in the past year, the WeChat search index for LAOPU GOLD has seen exponential growth. According to the "2023 Hurun Top Quality Products - Brand Preference Report for China's High Net Worth Individuals," LAOPU GOLD is listed among the top ten jewelry brands favored by high net worth individuals, being one of only two Chinese jewelry brands on the list.

Image source: Douyin, Xiaohongshu, WeChat

It should be noted that the buyback price of LAOPU GOLD products is only 75% of the original selling price, far lower than the value retention rate of investment gold bars; moreover, LAOPU's gold jewelry prices are also significantly higher than those of its peers. Logically, purchasing LAOPU GOLD jewelry for investment is not a "wise" choice. But why is LAOPU still crazily pursued by consumers?

Taking Liu Na as an example, she likes LAOPU GOLD because the flying dragon, golden dragon and phoenix, everlasting good fortune, wheat stalk Pixiu, and longevity lock jewelry not only embody her longing for a beautiful life but also convey an Eastern worldview. More importantly, LAOPU's gold jewelry is truly stunning, and wearing these pieces can uplift her mood and alleviate the stress brought by work and life Image source: LAOPU GOLD official website

With the same craftsmanship in gold jewelry, LAOPU GOLD's pure handmade creations are not only more exquisite than those of other brands but also more beautiful than those produced by industrial molds. It can be said that in terms of aesthetic value and cultural appreciation, LAOPU's gold jewelry far exceeds that available in the market. This is both the reason why affluent women stay up late to queue for LAOPU GOLD and why it is referred to in the industry as "the end of gold is LAOPU."

As Liu Na mentioned, many netizens in the Douyin comment section stated: the same rose window, LAOPU GOLD does it particularly finely; the fineness of the handcrafted koi lock from other stores is vastly different from that of LAOPU GOLD. After purchasing LAOPU GOLD's diamond gourd, they found other brands' gold jewelry unsatisfactory and subsequently bought LAOPU's safety bell and ruby ring.

Image source: Douyin

In other words, the aesthetic value that LAOPU GOLD brings to consumers is both the foundation supporting its high premium and the reason consumers are frantically purchasing it, which aligns with the World Gold Council's release that gold is shifting towards personal wear, enjoyment, and aesthetic needs.

Image source: World Gold Council

While the industry generally adopts a sales model based on gold weight + craftsmanship fees, and continuously expands scale effects through aggressive store openings, why has LAOPU GOLD found this differentiated competitive route?

In the 1990s, LAOPU GOLD's founder Xu Gaoming established the Golden Treasure Company after leaving the Livestock and Aquatic Products Bureau in Yueyang, Hunan, focusing on gold jewelry, cultural products, antiques, tourism, and related businesses. Later, based on the need to streamline operations, LAOPU GOLD was born in 2009, independent from Golden Treasure Company, while completing business adjustments. With years of hard work and accumulation in the industry, Xu Gaoming positioned LAOPU GOLD on ancient craftsmanship rather than treating it as a mass-market brand.

As the lead investor in LAOPU GOLD's only round of financing before its IPO, Heiyi Capital's founder and managing partner Zhang Peiyuan stated in a media interview, "My deepest impression of Mr. Xu is that his user insight ability and strategic determination are very strong. He wants to create a classic, timeless high-end brand in the gold category using ancient gold craftsmanship."

Over the years, LAOPU GOLD has formed six core self-developed processes centered around ancient gold craftsmanship. Among them, the filigree inlay technique was included in the national intangible cultural heritage list as early as 2008. Taking the "one piece" technique used in LAOPU GOLD's gold kettle as an example, this technique is a special form of the Tang Dynasty hammering process, where the kettle body, bottom, and spout are all made from a single piece of gold or silver, with no welding involved This retains the natural handmade texture while embodying a cultural atmosphere and artistic aesthetics. The gold bowl with mandarin duck lotus petal patterns, currently housed in the Shaanxi History Museum, is made using this technique.

Image source: LAOPU GOLD official website

However, when crafting intricate parts such as the spout and handle, it is necessary to precisely control the material's extensibility to avoid cracks or breakage, while also ensuring uniform thickness to maintain the strength and beauty of the entire object. This requires a high level of skill from the craftsmen in understanding the material properties. Moreover, if a mistake occurs in the middle, it is difficult to correct, often necessitating the entire object to be remelted and remade, which not only wastes a significant amount of the craftsman's time and consumes a lot of gold material but also places immense psychological pressure on the craftsmen.

Image source: LAOPU GOLD official website

So how does LAOPU GOLD solve this problem?

Gold + Luxury Goods, LAOPU GOLD's "Alchemy"

Professor Lv Pintian from the China Academy of Art states that the value of handmade goods has been diminished in the era of mechanical reproduction, and the "temperature" of traditional craftsmanship needs to be redefined through emotional marketing.

A survey by Kyoto Institute of Technology shows that there are fewer than 200 artisans in Japan who master the "Maki-e" technique, and young apprentices are deterred by the long 10-year learning period. In other words, how traditional craftsmanship can be combined with modern consumer aesthetics during the inheritance process, and the contradiction between small-batch production and large-scale industrial mass production, is a common issue faced by the global market.

In response to the above issues, LAOPU collaborates with the fifth-generation inheritor of the Beijing Qing Palace Manufacturing Bureau to create pure handmade flower wire inlays, requiring designer candidates to possess excellent artistic skills and traditional cultural knowledge, as well as mastery of traditional aesthetics.

Additionally, LAOPU, which insists on creating original Chinese cultural designs, is continuously exploring the changes in the aesthetics and consumption market of today's youth.

For example, from 2023 to the present, emotional consumption has continued to dominate the domestic market. LAOPU GOLD has launched a hand-cranked prayer wheel using ancient techniques, where each turn of the prayer wheel represents a prayer, creating an interactive experience that fosters a close connection between people and products. The twelve zodiac guardian deity pendants meet the diverse emotional needs of today's youth, including spiritual support and comfort, cultural identity and belonging, personalized and unique expression, emotional companionship and security, as well as social interaction and topicality.

Daniel Langer, one of the global luxury opinion leaders, has repeatedly emphasized that in the luxury goods industry, brand stories are far more important than the products themselves. For instance, Lincoln, among luxury cars, has been the preferred vehicle of the White House since Roosevelt, witnessing and participating in many significant historical moments in the United States, becoming synonymous with "American luxury" in people's minds Looking deeper, the confidence in underlying culture is the key to supporting the stories of luxury brands. For example, Hermès relies on the aesthetic and handicraft traditions of the French nobility since the 18th century, Chanel is built on the embodiment of the early 20th-century feminist wave in Europe, Rolex is based on the myth of precision manufacturing after the Swiss Industrial Revolution, and Van Cleef & Arpels transforms jewelry into lucky charms based on the European nobility's fascination with mysticism and natural symbols.

Similarly, from Suzhou embroidery, one of China's four famous embroideries, to Yunji Fengyu fans, from Spring and Autumn crystal necklaces to gold step-shakes and gold necklaces from the Wei and Jin dynasties, and then to the exquisite gold ornaments displayed in museums from the Liao dynasty. Many netizens have exclaimed that the concubines in film and television dramas are not competing for the emperor's favor, but for the rights and ownership of these luxury goods. China has never lacked luxury goods, and if it truly becomes luxurious, probably not many people can afford it.

Image source: Douyin

Inheriting ancient craftsmanship, insisting on original designs based on Chinese culture, and continuously meeting the current young people's demand for gold, LAOPU GOLD, while continuously building cultural confidence among the Chinese people, is also the foundation supporting its luxury positioning. Regarding the luxury goods route, LAOPU GOLD's offline stores are mostly concentrated in well-known commercial centers like SKP and MixC, which have strict admission requirements.

LAOPU GOLD once pointed out, "The location of our high-end stores naturally filters out a group of high-end consumer traffic that matches our brand positioning."

As Liu Na said, do you think many people are queuing for hours in front of LAOPU GOLD stores just to wait in line? What everyone is queuing for is self-identity recognition and self-identity display, which is the same as queuing in front of Hermès and LV stores back in the day.

Daniel Langer pointed out that shifting attention to low-priced products or increasing promotional frequency is essentially self-destructive; lowering prices and frequent promotions are among the fastest ways to destroy brand equity. Discounts in the high-end and luxury goods industry are a growth trap. They may stimulate sales, but the effect is often short-lived and can severely undermine trust in the brand.

However, this does not seem to fully explain the reasons behind LAOPU GOLD's continuous price increases and product sellouts. From a broader industry perspective, gold investment is also showing irrational behavior.

Is the rise in LAOPU GOLD's stock price rational?

In 2024, the international gold price opened at USD 2066 per ounce at the beginning of the year and closed at USD 2624 per ounce after fluctuations. The overall increase in international gold prices is about 27.19%, with a maximum increase of 40.5%, continuously breaking historical records 40 times within the year.

At the time of rising gold prices, the stock prices of several gold companies did not rise in sync with gold prices. The decline ratio between the highest and lowest points of the stock prices of Lao Feng Xiang, Zhou Da Sheng, Zhou Sheng Sheng, and Chow Tai Fook was all over 40%.

Image source: Based on public information 整理 There has even been a situation where the higher the increase in gold prices, the faster the stock prices of several gold companies fell. In the second half of that year, the gold price in the London market continuously broke through the three major thresholds of USD 2,500/ounce to USD 2,700/ounce, while the gold price in the New York market once broke through the USD 2,800/ounce mark.

The lowest stock prices of several gold companies that year also appeared in the second half, with Chao Hong Ji appearing in July, Lao Feng Xiang, Zhou Da Sheng, and Liu Fu Group appearing in August, and Chow Tai Fook and Chow Sang Sang appearing in September and October, respectively. As gold prices continued to rise at the beginning of 2025, Yulong Co., a gold concept stock with a market value of 10 billion in A-shares, announced that due to poor operating conditions and continuous deterioration of cash flow, it chose to suspend trading.

Image source: Yulong Co. announcement

However, from 2016 to the first half of 2019, it was a relatively stable period for gold prices, during which Chow Tai Fook's stock price increased by over 100%. Although Lao Feng Xiang's stock price fluctuated, it still showed an overall upward trend. The divergence between gold prices and the stock prices of gold companies appears to be due to the profitability from processing fees and the expansion of store numbers through a franchise model, which makes the scale of profitability difficult to establish.

Image source: Gold Price Inquiry Network Image source: Xueqiu (Chow Tai Fook stock price) Image source: Xueqiu (Lao Feng Xiang stock price)

On one hand, the contradiction between the suppression of terminal consumer demand due to rising gold prices and the increased procurement costs for franchisees not only reduces the profitability of gold companies per store but also exacerbates the inventory increase and financial risks due to supply-demand imbalances. In Q3 2024, Chow Tai Fook's retail value decreased by 21% year-on-year. Following the closure of 180 stores in the first half of that year, the company continued to shut down 145 jewelry retail points in that quarter.

On the other hand, the rise in gold prices in 2024 was due to intensified geopolitical conflicts and expectations of interest rate cuts by the Federal Reserve, but the secondary market pays more attention to corporate profit expectations. Due to concerns about future increases in gold prices, the PE ratio of gold companies is expected to be compressed in advance. For example, Lao Feng Xiang's PE ratio was compressed from 19.53 to 10.51 that year Looking deeper, the rise in gold prices can easily trap gold companies in a vicious cycle. That is: maintaining channel scale requires keeping franchisee profits, while coping with fluctuations in gold prices necessitates compressing channel costs; expanding market share relies on price competition, but the price-sensitive customer group is precisely the weakest link in terms of profit. This structural contradiction explodes under the continuous rise in gold prices, forcing the industry into a stage of "destructive restructuring."

Behind the rise in LAOPU's stock price coinciding with the increase in gold prices, LAOPU is essentially taking another route: targeting consumers with strong purchasing power, a fondness for Chinese culture, and higher demands for product quality. By adhering to Chinese cultural heritage and non-heritage craftsmanship, LAOPU aims to provide deeper emotional premiums for products while bringing consumers aesthetic and cultural appreciation values, thereby building brand value as a high-end gold jewelry.

Dr. Daniel Langer points out that the core of luxury goods lies in creating attraction and extremely high customer value. However, with the intense competition in the luxury goods industry and the ongoing changes in the consumption psychology of Generation Z, the 4P model is no longer applicable to the luxury market. Instead, the 4E model—Emotion, Experience, Engagement, and Exclusivity—takes its place. The 4E model is better suited to help brands establish lasting connections with customers in a complex and increasingly noisy reality, representing the future of the luxury goods industry. In simple terms, the key to the 4E model is "emotional premium."

In other words, the continuous rise in LAOPU's stock price is more about the "emotional premium" part, which is related to the current domestic consumption market being dominated by emotional consumption. However, as more and more gold companies begin to replicate LAOPU's route, can LAOPU's differentiated path still be maintained? Can its stock price continue to sustain high growth? These questions will likely require time to verify one by one.

This article is reproduced from Value Planet (ID: ValuePlanet) with authorization. Copyright belongs to Value Planet, and translation or reproduction without permission is prohibited.

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