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This article first appeared in the special edition of The State of Fashion: Watches and Jewellery, co-published by The Business of Fashion and McKinsey & Company. To learn more and download a copy of the report, click here.

The Chow Tai Fook Jewellery Group is among the world’s largest jewellers, with a market capitalisation of around HKD 151.2 billion ($19.5 billion), a valuation that puts it in the same league as Tiffany & Co at the time of the LVMH acquisition. Amid lacklustre performance in its home market of Hong Kong, Chow Tai Fook continues its expansion into mainland China, which has experienced a rapid recovery from the pandemic and provided the jeweller with the lion’s share of its core operating profit.

China is attractive to fine jewellers not only for its scale and resilience, but because it represents a bigger opportunity than other markets when converting consumers of unbranded jewellery to buy branded jewellery instead. Only 15 percent of the Chinese market is currently branded jewellery compared to 20 percent globally, a fact that has not gone unnoticed by Chow Tai Fook’s managing director Kent Wong Siu-Kee who has been ploughing money into third- and fourth-tier Chinese cities while upgrading top-tier mainland locations and expanding retail networks across Southeast and Northeast Asia.

BoF: Chow Tai Fook has had a stronghold in Asia for over 90 years, with a front row seat to the recent consolidation of the jewellery market. In the early years, how were you able to evolve from selling unbranded jewellery to selling your own brands?

Kent Wong Siu-Kee: I think we [were successful at transitioning from unbranded to branded jewellery] because we’ve leveraged our history. We have sophisticated brand values and pricing is also important, which [means] value for money. We’ve always stayed true to industry trade patterns too, like in 1956, when we were the first to use 999.9 gold purity in the Hong Kong market. Or in 1990, when we were the first company to apply a fixed price policy for jewellery sales, which changed market patterns. And in 2016, we launched our T Mark diamond that guarantees and assures that the diamond is natural, ethical, from a traceable source and from reputable mining companies. So, all these different kinds of instructive measures, as a whole, show [buyers of unbranded jewellery] that we’re a very reputable, reliable jeweller.

Consumer behaviour in mainland China, where the bulk of your business is located, is notably fragmented. Unlike some consumers in higher-tier cities, those in third- and fourth-tier cities where you’ve been aggressively opening boutiques are still keen to show their affluence through branded jewellery. But what’s your plan to capture those used to buying unbranded jewellery for less?

To penetrate lower-tier cities [and capture consumers of unbranded jewellery in those markets], we have to work with a good partner — one who understands local knowledge, local economic situations and local relationships. Ninety percent of our franchise partners are actually local jewellery operators who have [operated] their store in a lower-tier city for more than a decade. They already know their customers’ needs and have a very strong customer relationship with local people. We bring in our brand — our operation model and our management system, including the IT system — and they can also share in our CRM ecosystem.

Traditionally, Chow Tai Fook’s competitors have been local jewellery giants, big western jewellery and fashion brands and unbranded jewellery. But niche jewellery brands are now becoming more popular with some of your customers too. How are you fending off this new category of competitor?

Niche brands fulfil some needs for customers who are looking for something unusual, something to show their personal character. They provide another option, but to only a small group of customers. For the mass market, you still need to have a mass production or a mass operation kind of model. Because of changing customer behaviours, like digitalisation and mobilisation, you have to re-invest and upgrade your operative processes. That needs not only huge sums of money but talent too.

Globally, our research suggests that an increased focus on value for money will put pressure on the premium segment and luxury’s entry price point offer. Do you agree? How will you address this?

In the mass market, value for money is always the customer’s right and their biggest interest. But we must identify what is actually the meaning of “value for money.” It’s not the material’s value; we’re not focused on commodity value. But if we can provide more emotional and experiential value, I think that’s important. When a customer feels that your product is amazing, a one-of-a-kind, I think they believe it is still “value for money” and they’re willing to pay. That intangible value is also important. So, we have to not only give the right product, authenticity and top quality, but also give something that the customer believes fulfils that emotional need.

In 2018, you enhanced your T Mark diamond authentication service with blockchain technology to provide digital diamond grading reports. Why was this important to offer and what other technologies do you envision changing the market?

By using blockchain to guarantee the product was traceable and ethical, we built customer confidence. AI is another area which we can use on, say, a mobile purchase app, to analyse a customer’s behaviour and preferences, and counter-suggest other suitable products. But there are also AI tools that act like smart assistants for sales. The salesperson provides an emotional kind of service, while an AI assistant provides a smart, automated kind of product offering. Cloud computing and big data will also help us more precisely understand customers, so we can be more agile in adjusting our product offering to different clients. We’ve also just launched a partnership with a Hong Kong start-up called Goldway Technology to provide AI diamond grading. So rather than a trained gemologist grading colour and clarity, we will be able to use machine learning to grade colour and clarity in a much more scientific way.

This interview has been edited and condensed.