CITIC SEC: WeChat small stores enter the game, gold and jewelry may accelerate the process of going online.

CITIC SEC released a research report stating that the proportion of onlineization in the jewelry industry is relatively low, and high e-commerce fees may be limiting factors. Currently, the infrastructure for onlineization in the jewelry industry is gradually improving, and brands have been actively joining the "preparation." The entry of WeChat mini stores may improve the traffic environment, accelerate the onlineization process of jewelry, and the Spring Festival sales of WeChat gifts may become an "ignition" opportunity. Gold jewelry targets with low unit prices (targeting low unit prices or reaching more long-tail users), flexible supply chain, strong design capabilities (able to achieve "quick response" with flexible supply chain matching and strong design capabilities are expected to seize more trend and dividend opportunities), and high online penetration (targets with high online penetration are expected to be more sensitive to changes in online channels and show greater performance elasticity) are expected to benefit first, and it is recommended to continue to pay attention to the onlineization process of gold jewelry brands. CITIC SEC's main points are as follows: The current proportion of onlineization in the jewelry industry is still low, with great room for improvement. According to Euromonitor, from 2016 to 2023, the online sales of gold jewelry in China increased from 28.2 billion yuan to 85.8 billion yuan, with a CAGR of 17.2%. China National Gold Group Gold Jewellery's online market share increased from 4.6% in 2016 to 10.2% in 2023, achieving rapid growth. The penetration rate of China's jewelry industry is low, with online market share only at 10%, far below the onlineization levels of other major developed countries (in 2023, online jewelry market share in the United States/Japan/global/South Korea/France was 33%/18%/15%/13%/13%), indicating broad room for growth. The infrastructure for onlineization in the jewelry industry is gradually improving, and brands are actively joining the "preparation." 1. The online channels in terms of product display, distribution, and returns are increasingly complete: some brands support innovative technologies such as AR try-on to promote online ordering by consumers. 2. The online rate of most gold jewelry brands has exceeded the industry average: in 2023, the online channel revenue as a percentage of total revenue for Mclon Jewellery, Beijing Caishikou Department Store Co., Ltd., Guangdong CHJ Industry, LUK FOOK HOLD, Chow Tai Seng Jewellery, CHOW SANG SANG, LAOPU GOLD, DR Corporation, China National Gold Group Gold Jewellery, CHOW TAI FOOK, Shanghai Yuyuan Tourist Mart were 48%/18%/18%/17%/15%/12%/11%/10%/8%/5%/3%. 3. Gold jewelry brands are bolstering their online business teams, systems, and supply chain preparations: according to Mclon Jewellery's 2023 annual report, the company established an online business unit, set up independent R&D, supply chain, content promotion, and channel teams to adapt to quick iteration of online operational capabilities. According to Guangdong CHJ Industry's 2023 annual report, the company's various brands focus on subdivided scene track for series product development and content creation, combine industry content dissemination trends, optimize live streaming sales teams, deepen live streams on various platforms, continuously close the loop of traffic from public to private domains, use multi-frequency creative live streams to improve sales conversion, and promote the coordinated development of Wuxi Online Offline Communication Information Technology Co., Ltd. High e-commerce fees may be a limiting factor for the onlineization of jewelry, and the entry of WeChat mini stores may improve the traffic environment, accelerate the onlineization process of jewelry, and the Spring Festival sales of WeChat gifts may become an "ignition" opportunity. High e-commerce fees are an important factor inhibiting the development of onlineization in the jewelry industry, and WeChat mini stores offer a more competitive e-commerce platform with lower fee levels for gold jewelry brands. Gold jewelry has the characteristics of light weight, low unit prices, and good cost performance, with strong gift properties, which are suitable for the gift-giving scene during the Spring Festival. It may explode the WeChat mini store channel through WeChat gifts, accelerating the onlineization process. Risk factors: Intensified market competition risk; Federal Reserve monetary policy risk; Sharp fluctuations in gold prices affecting demand; Risks of online impact on traditional sales models; Risks of outsourcing production.