Dreaming and Reinventing The Future:: Charting The Next Steps For Chow Tai Fook

Dreaming And
Reinventing The Future:

Charting The Next Steps
For Chow Tai Fook
Fahmi Hamzah │ Ryan Phoa │ Lee Chuan │ Chan Yi

Six Key Strengths Have Secured Your Market
Leadership In China
Market Share (in %)

1 12.6 4
Iconic & Broad
trusted brand product portfolio
9.0
2 7.1 5
Vertically Established
63.2 3.0
integrated 2.0
online presence
3.1
3 6
Extensive Chow Tai Fook Lao Feng Xiang Authentic
retail network Chow Tai Seng Luk Fook design/ quality
Chow Sang Sang Cartier
Others
With clear market leadership, all competitors pale in comparison to CTF

CTF’s Biggest Competitor Is Itself
Source(s): CICC Case, Bloomberg, Third Rock Analysis 2
Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

Six Key Strengths Have Secured Your Market
Leadership In China
Market Share (in %)

1 12.6 4
Iconic & Broad
trusted brand product portfolio
9.0
Implication
Implication
2 7.1 5
Vertically 3.0
Established
63.2
integrated 2.0 online presence
Looking forward to
3.1 2020…
3 6
Extensive Increasing
Chow Tai market
Fook penetration,
Lao Feng Xiang andAuthentic
retail network maintaining
Chow Tai Seng
market
Luk Fook
leadershipdesign/ quality
Chow Sang Sang Cartier
Others
With clear market leadership, all competitors pale in comparison to CTF

CTF’s Biggest Competitor Is Itself
Source(s): CICC Case, Bloomberg, Third Rock Analysis 3

Dreaming And Reinventing The Future
THREE HEADWINDS WILL

AFFECT CTF’S FUTURE…
1 2 3
Increasing Changing
Growing
discretionary customers’
e-tailing trend
income needs
…AND MORE NEEDS TO BE

DONE TO SECURE CTF’S FUTURE
Source(s): CICC Case, Euromonitor, McKinsey Global Institute, BCG Analysis, Third Rock Analysis 4

Implication
Determine where the
THREE HEADWINDS WILL
greatest opportunities lie
AFFECT CTF’S FUTURE…
1 Tailor
2 growth strategy to 3
Increasing capture opportunities
Changing by 2020 Growing
discretionary customers’
e-tailing trend
income needs
…AND MORE NEEDS TO BE

DONE TO SECURE CTF’S FUTURE
5

Determining Which Customer Group Delivers The
Biggest Opportunity
YOUNG MASS HIGH

LINE LUXURY END
WHO
18-25 YO, limited 26-39 YO, high Highly affluent

discretionary income discretionary income customers
PRICE Below HKD 2,000 HKD 2,000 – HKD 100,000 Above HKD 100,000
PLACE Mainly through Primarily through in- Through in-store channel

e-commerce channels store channel;
<10% of products are
sold through e-
commerce channels
Source(s): CICC Case, Company’s documents, Third Rock Analysis 6

Determining Which Customer Group Delivers The
Biggest Opportunity
YOUNG MASS HIGH

LINE LUXURY END
WHO
UNTAPPED
18-25 YO, limited 26-39 YO, high Highly affluent
CORE DIFFICULT TO
OPPORTUNITY
discretionary income discretionary income customers
COMPETENCY COMPETE
LIMITED EFFORTS
Below HKD 2,000 HKD 2,000 – HKD 100,000 Above
PRICE EXISTING NOTHKD 100,000
WELL-
TO CAPTURE
EFFORTS WILL POSITIONED AS A
FULL
WORK LUXURY BRAND
PLACE OPPORTUNITIES
Mainly through Primarily through in- Through in-store channel
e-commerce channels store channel;
<10% of products are
sold through e-
commerce channels
Source(s): CICC Case, Company’s documents, Third Rock Analysis 7

Growing Middle Class Will Deliver The Biggest
Opportunity In The Future
SHARE OF URBAN
HOUSEHOLDS, %
100% = 256 M 357 M
3% By 2020, a majority of CTF’s “Young

9% Affluent
14% Line” customers will move from Mass
middle class to Upper middle class
54% Upper middle class
54%
22% Mass middle class
29%
16% Poor …Is CTF’s positioned to capture the
hearts and minds of this customers?
2012 2022
Source(s): McKinsey Global Institute; Third Rock Analysis 8

More Needs To Be Done To Interact With The
Growing Middle Class
1 2 3
Marketing and Customer Membership
E-Commerce
Branding Programme
• Weak synergy • Missing integration of • Missing CRM for

between online/offline e-commerce strategy younger customers
interactions into overall corporate
strategy
Given the growing importance of e-commerce,

CTF Must Better Integrate E-Commerce Into Its Overall Sales Strategy
Source(s): CICC Case, Third Rock Analysis 9

More Needs To Be Done To Interact With The
Growing Middle Class
1 2 3
Marketing and Customer Membership
E-Commerce
Branding Programme
Key Issues
• Weak synergy •
Missing integration of • Missing CRM for
between online/offline e-commerce strategy younger customers
interactions1. How to strengthen your offering?
into overall corporate
strategy
2. How to bridge the gap between online
and offline consumption?
3. How to create lifetime loyalty?
Given the growing importance of e-commerce,
CTF Must Better Integrate E-Commerce Into Its Overall Sales Strategy
Source(s): CICC Case, Third Rock Analysis 10

CREATING A DREAM
Supporting the opportunity of the Middle Class with a unique offering
Identifying Prime Prospects From The Middle Class
Customers
What he (she) cares about

Looking to achieve status and recognition
Looking for fun and enjoyment
Looking to feel successful and fulfill
aspirations
Why he (she) will buy jewelry

Fulfill self-actualization
Who he (she) is Perceive it as an investment
18 - 25 years Act as a form of emotion/ gift-giving
Well positioned in Influenced by others
career
Might be How he (she) will buy jewelry
establishing a family Go for brands with strong heritage
Tech-savvy Look for value-for-money
Online purchases
Source(s): Euromonitor, McKinsey Global Institute, BCG Analysis, Third Rock Analysis 12

A Granular Analysis Of Customer Sentiments
Reveals Slight Differences Across Geographies
SIGNIFICANT More Westernized

TIER 1 PROPORTION OF Preference for
UPPER MIDDLE CLASS Semi-Precious Stones
FAIR More Westernized

TIER 2 PROPORTION OF
MASS MIDDLE CLASS Slight Preference for Zu Jin
SIGNIFICANT Less Westernized

MASS MIDDLE CLASS Strong Preference
for Zu Jin
SIGNIFICANT Jewelry Purchases are
TIER 4 PROPORTION OF perceived as Investment
MASS MIDDLE CLASS Opportunities


EXISTING OFFERINGS ARE
WORKING FOR THESE CITIES
FAIR More Westernized
MASS MIDDLE CLASS Slight Preference for Zu Jin

CUSTOMERS ASPIRE TO HAVE
Strong Preference
MASS MIDDLE CLASS
A TASTE OF SUCCESS…
for Zu Jin
SIGNIFICANTNEED TO STRENGTHEN OFFERING
Jewelry Purchases are
TIER 4 PROPORTION TO
OFCATER TO CUSTOMERS’ NEEDS
perceived as an Investment
MASS MIDDLE CLASS Opportunity


EXISTING OFFERINGS ARE
FAIR
IMPLICATION
WORKING FOR THESE CITIES
More Westernized
The Unique
MASS Middle
MIDDLE CLASSClassSlight
In Tier 3 & 4 for Zu Jin
Preference
Cities Presents An Opportunity For CTF
To Strengthen Its Offering:
CUSTOMERS ASPIRE TO HAVE
Strong Preference
MASS MIDDLE CLASS
ENHANCED ONLINE-OFFLINE
A TASTE OF SUCCESS…
for Zu Jin
EXPERIENCE
SIGNIFICANTNEED TO STRENGTHEN OFFERING
Jewelry Purchases are
TIER 4 PROPORTION TO
OFCATER TO CUSTOMERS’ NEEDS
perceived as an Investment
MASS MIDDLE CLASS Opportunity

DELIVERING A DREAM
Capturing synergies across the online and offline sales channels
A Three-Step Process To Bridging The Online-Offline
Gap
1 HEAD Engaging HEAD to

understand what
customers want
2 HEART Engaging HEART to

build emotional
resonance with customers
3 HAND Engaging HAND to

reach out to customers

Bridging The Online-Offline Gap
HEAD • CTF eShop holds only 17% of online

visits
• Lack of control over the e-commerce
experience
• Offers the full CTF experience

• Potential to bring youth market to the
stores to capture mindshare as they
transition into the mass luxury
market
Source(s): L2 Digital IQ Index Report, CNZZ, Tmall, WeChat and 360Buy 21

Bridging The Online-Offline Gap
HEAD • CTF eShop holds only 17% of online

visits
• Lack of control over the e-commerce
experience
Bridging the CUSTOMERS

MUST BE CUSTOMERS CUSTOMERS
online-
MOTIVATED TO WANT TO FEEL WANT TO FEEL
offline VISIT THE PAMPERED VALUED
experience STORES
• Offers the full CTF experience

• Potential to bring youth market to the
stores to capture mindshare as they
transition into the mass luxury
market
Source(s): L2 Digital IQ Index Report, CNZZ, Tmall, WeChat and 360Buy 22

Revamped E-Commerce Page Must Fuel Customers’
Motivation To Visit The Stores
HEART The process of buying jewelery is an experience in itself.

Important To Enhance Online Touch-points
23


VIRTUAL STORE TOUR

ENTICES CUSTOMERS TO
VISIT ON-SITE
24


VIRTUAL STORE TOUR

VISIT ON-SITE
PERSONALISED
SERVICE TO PROVIDE
STYLE ADVICE (IN-STORE)
25


VIRTUAL STORE TOUR

VISIT ON-SITE
PERSONALISED VIRTUAL SALESMAN

SERVICE TO PROVIDE TO PROVIDE REAL-TIME
STYLE ADVICE (IN-STORE) CUSTOMER SERVICE
26


TAKEAWAY
VIRTUAL STORE TOURGoing above and beyond,

ENTICES CUSTOMERS
our TO
e-commerce site is not just for
VISIT ON-SITE
information…it is an experience
PERSONALISED VIRTUAL SALESMAN

SERVICE TO PROVIDE TO PROVIDE REAL-TIME
STYLE ADVICE (IN-STORE) CUSTOMER SERVICE
27

Reaching Out To Customers In A Unique Manner
HAND
• Leverage on existing Membership Card system
• Offered at early stage of consumer life
• To cultivate brand loyalty and to build
consumer lifetime value
YOUNG
MEMBERSHIP
PROGRAMME
AUGMENTED
REALITY:
吉祥柜
Fortune Chest
Source(s): Third Rock Consulting 28

HAND
• Leverage on existing Membership Card system
• Offered at early stage of consumer life
• To cultivate brand loyalty and to build
consumer lifetime value
YOUNG
MEMBERSHIP IMPACT GENERATED
PROGRAMME
ATTRACT
BENEFITS FOR
CUSTOMERS TO
CUSTOMERS
E-STORE
AUGMENTED
REALITY:
吉祥柜
Fortune Chest DATA MINING
OPPORTUNITIES
Source(s): Third Rock Consulting 29

HAND Chinese More than 50% More willing to

consumers are of digital use
addicted to shoppers smartphone to
smartphones - browse via make
低头族 mobile purchases
YOUNG
MEMBERSHIP
PROGRAMME
AUGMENTED
REALITY:
吉祥柜
Fortune Chest
Source(s): Euromonitor, McKinsey Global Institute, Third Rock Consulting 30


低头族 mobile purchases
YOUNG
MEMBERSHIP
PROGRAMME
• Unique twist to current
daily QR code promotion
• Using Augmented Reality
AUGMENTED
to reveals the special
REALITY: promotional item for
吉祥柜 different individuals
Fortune Chest


低头族 TAKEAWAY
mobile purchases
YOUNG
MEMBERSHIP
Engage tech-savvy consumers on the
PROGRAMME
mobile platform to bring• them
Uniqueinto
twist to current
physical stores, and generate buzz
daily QR code promotion
• Using Augmented Reality
AUGMENTED
to reveals the special
REALITY: promotional item for
吉祥柜 different individuals
Fortune Chest

A LIFETIME OF DREAMS
Capturing Customer Lifetime Value with repeated purchases
Three Paths To Capture Customer Lifetime Value
PROVIDING THE ULTIMATE IN-STORE

INDULGENCE IN TIER 3 & 4 CITIES
1 2 3
Multi-sensory Personalised
Location
journey service
• Located in • Create a unique in- • Staff trained to

departmental store experience understand needs
stores by involving all of locals in Tier 3
senses & 4 cities
• Well-positioned
to fit the image of • Include scent,
aspiration sound and even
taste
34

Three Paths To Capture Customer Lifetime Value
PROVIDING THE ULTIMATE IN-STORE

INDULGENCE IN TIER 3 & 4 CITIES
1 2 3
Multi-sensory Personalised
Location
journey service
Consumers are able associate CTF with big dreams.

Being Able To Purchase CTF Will Be A Dream Itself.
35

Introducing A New Product That Will Allow You To
Grow Further With The Customer
WHO ARE OUR

CUSTOMERS?
1
Young customers who
Customers have a
just started working
long journey ahead.
2 CTF can use this opportunity to

‘Starting small,
introduce a product that “grows”
dreaming big.’
along side with the customer.
3
Confident of their
SINCERITY . ENTERNITY
growth potential
Source(s): Euromonitor, Bain Analysis, Third Rock Analysis 36

The Dreams Charms Collection:
“Celebrating Moments With You.”
37

Creating A Bracelet That “Grows” With The
Customer
Begin with a Collection of

1 basic bracelet charms to 2
chain signify events
Zu Jin Variety of Charms
Low Cost Variable Cost
Purchase charms
Perfect for a small
as you reach your
start
dreams
38

Creating A Customer Lifetime Value Roadmap
1 2
GRADUATION JOB PROMOTIONS
CTF’s eternity is
reinforced and
perpetuated
4 3
FIRST CHILD GETTING MARRIED
39

FINANCIALS
Capturing Our Dream With Big Financial Returns
Maintaining Market Leadership in 2020
CTF Revenue
160
140
120 16.9 17.6 18.3
16.2
15.6 3.1 3.2
HKD ‘bn
100 1.8 1.8

15.0
80 14.4 1.1
1.1
60 1.1 113.1 114.7
104.4 110.1
40 83.3 94.1
73.0
20
0
2014 2015 2016 2017 2018 2019 2020
Base Delivering A Dream Lifetime of Dreams
Targeting the 18-25YA consumers CTF’s market share in China

can increase revenue by 20% increases by 3.3% to 13.1%
41

Delivering The Dream Of Integrating E-Commerce
With Your Brick-And-Mortar Strategy
E-Tailing c.9mm customers buying online
HKD3.2bn
incremental
E-Commerce revenue
(18.2% of online
revenue)
If 25% are successfully attracted to
CTF stores by 2020:
Brick & Mortar
• Incremental purchases
• Repeat purchases
• Upgraded purchases
42

Customer Life Value Analysis of CTF’s Young
Consumer
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Age 21 22 23 24 25 26 27 28 29 30
Purchase Trinket Trinket
Price 2,000 2,000
300
258.3
250
200
HKD
150
100
50 32.8
0
Current [Dream]
43

Customer Life Value Analysis of CTF’s Young
Consumer
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Age 21 22 23 24 25 26 27 28 29 30
Purchase Trinket Trinket Reward – Reward – Wedding Baby

graduation promotion ring gift
Price 2,000 2,000 6,000 7,000 15,000 3,000
300 273.7
250
200 NPV of NPV of
HKD3.2bn HKD10.3bn
HKD
150
from repeat from young
100 occasion consumers
50 32.8 purchase trading up
0
Current [Dream]
44

Sensitivity Analysis
NPV
200
174.3
147.4
150 131.7
HKD ‘bn
100
50
0
Worst Base Best
Stock Price
(Upside) HKD13.32 (+9%) HKD14.90 (+22%) HKD17.58 (+44%)
Conversion (E-tailing to
E-commerce, OTO, -10% - +5%
incremental purchase )
Market share among
young mass middle -50% - +20%
Incremental CLV -10% - +5%
Incremental purchase
when trading up -10% - +5%
45

Implementation
2013 2014 2015 2016 2017 2018 2019 2020

Young Membership Program
Deliver a Mobile App App Campaign

Continuous Cycle for new promotions
design Launch
Dream
Web Web
Web Maintenance and Improvements
designing Rollout
Increase in B&M 1.1bn 1.8bn 3.2bn
store sales
Designing in- Pilot testing on Phased roll-out to Phased roll-out to

store selected tier 3&4 other tier 3&4 other tier 1&2
shops shops shops
A Lifetime experience
of Dreams Designing the

‘Dreams’ Region wide product launch
collection
Sales from
15.6bn 16.9bn 18.3 bn
‘Dreams’
46

PRESENT 2020
TACKLE INCOMING
HEADWINDS
Market Leader Increased

Market
Penetration,
and Maintain
Market
Leadership
47
STEP 1
TACKLE INCOMING
HEADWINDS
PRESENT Changing consumer 2020

demographics
Increasing discretionary
income
Market Leader Increased
Market
E-tailing trend Penetration,
and Maintain
Capture a NEW DREAM Market
Leadership
48
STEP 2
CREATE A DREAM THAT
CUSTOMERS TRULY WANT
PRESENT 2020
Strengthened our
offering for the target
customer group with the
Market Leader
greatest potential moving Increased
forward – Market
rising middle class Penetration,
and Maintain
Market
Leadership
49
STEP 3
DELIVER THE DREAM
THAT CUSTOMERS DESIRE
PRESENT 2020
Bridged the gap between

Market Leader
the online-offline sales Increased
Market
Penetration,
and Maintain
Market
Leadership
50
STEP 4
CAPTURING CTF’S
LIFETIME OF DREAMS
PRESENT 2020
Created Customer
Lifetime Value by
building a strong offline
Market Leader experience and a new Increased
Market
product offering Penetration,
and Maintain
Market
Leadership
51
Dreaming And
Reinventing The Future:
Charting The Next Steps
For Chow Tai Fook
Fahmi Hamzah │ Ryan Phoa │ Lee Chuan │ Chan Yi

2. Six Key Strengths Have Secure Your Market Leadership In China Backup
4. Dreaming and Reinventing The Future 54. Buying stage
6. Determining which customer group delivers the biggest opportunity 56. Timeline
8. Growing middle class will deliver the biggest opportunity in the future 57. Current efforts must be enhanced to capture full potential of MC
Creating a dream 58. MC spending power
9. More needs to be done to interact with the growing middle class 59. Unrivalled competitive strenghts
12. Identifying prime prospects from the middle class customers 60. PRC nominal GDP by city tier
13. A granular analysis of customer sentiments reveals slight difference across 61. Sales of consumer goods in the PRC
geographies 62. Price evolution of gold
Delivering a dream 63. Price evolution of platinum
20. A three step process to bridging the online-offline gap 64. Price evolution of diamond
23. Revamped E-commerce page must fuel customers’ motivation to visit the 65. PRC Jewelery market
stores 66. Retail value by city tier
28. Reaching out to customers in a unique manner 67. Retail value by price range
A lifetime of dreams 68, breakdown by retail channels
34. Three paths to capture customer lifetime value 69. POS operatyion model
36. Introducing a new product that will allow you to grow further with the 70. Retail sales in HK and macau
customer 71. Chinese Tourists to HK
37. The dreams charms collection: “celebrating moments with you.” 72. Per captia consumption of jewelery
38. Creating a bracelet that “grows” with the customer 73. Brand positioning in PRC **
39. Customer lifetime value 74. Jewwelery market by retail value
Financials 75. PRC unaided brand awareness
41. Maintaining market leadership 76. Encouraging repeated sales
42. Integrating e-commerce with B&M 77. No need to attract consumers to e-tailers
44. CLV young customer 78. Consumers reaction to new online platform
45. Sensitivity 79. Pricing of dreams collection
46. Implementation 81. T3 and T4 consumer spending habits (impact of anti-corruption laws)
92. Income statement base 82. Risk mitigation (Counterfeit)
93. Income statement dreams 83. Risk mitigation (Deliver a dream)
94. DCF valuation base 84. Risk and mitiagtion (a lifetime of dreams)
95. DCF valuation dreams 85. Marketing campaign to increase jewelery owenership
96. POS stores in China 87. Existing e- commerce measures are insufficient
97. CLV analysis 88. Youth Membership
98. Chinese household assumptions 89. Augmented Reality
99. Delivering a dream revenue 90. Mobile netizens
100. A lifetime of dreams and trading up 91. WACC analysis
101. A lifetime of dreams occasions 92. Income statement base
102. Total costs 93. Income statement dreams
94. DCF valuation base
95. DCF valuation dreams
96. POS stores in China
97. CLV analysis
98. Chinese household assumptions
99. Delivering a dream revenue
100. A lifetime of dreams and trading up
101. A lifetime of dreams occasions
102. Total costs 53
OBJECTIVE
KEY ISSUES
RECO 1
RECO 2
RECO 3
54
Overcoming Barriers At Each Buying Stage
Customer Awareness
Recognizing the CTF brand
Brand Awareness
Brand Consideration
Detailed knowledge of CTF’s products
Brand Preference
Identifying with CTF’s spirit
Purchase Intention
Convenience and motivation to purchase
Purchase
Customer Loyalty
Post-sales support & value-added benefit
Customer Advocacy
55
Overcoming Barriers At Each Buying Stage
Customer Awareness ABOVE-THE-LINE

Recognizing the CTF brand
Brand Awareness MARKETING
Brand Consideration
Detailed knowledge of CTF’s products
Brand Preference
BELOW-THE-LINE
Identifying with CTF’s spirit
Purchase Intention
MARKETING
Convenience and motivation to purchase
Purchase
Customer Loyalty CUSTOMER RELATIONSHIP

Post-sales support & value-added benefit
Customer Advocacy MANAGEMENT
56
• Your strengths have secured your current leadership…
The Past 2011 2014 2020
Game-changer: Listed on the Achieve 2,000 Increased market

pioneered 999.9 Hong Kong POS across China penetration,
gold, transparent Exchange maintain market
pricing, and leadership
membership
service
57
Current Efforts Can Be Enhanced To Capture The
Full Potential Of The Middle Class
SHARE OF MIDDLE CLASS – FOCUS ON TIER 2, 3, & 4 CITIES TO

BY TYPE OF CITY, % MAXIMISE VALUE CREATION
Tier 1
16% More consumers will purchase
40%
45% Tier 2
43%
31% Need to trade-up

Tier 3
15%
8% Tier 4
3%
2012 2022
Growing Middle Class Will Deliver The Biggest
Opportunity In The Future
ONLINE CONSUMPTION PER WALLET SHARE DIRECTED TO E-

ONLINE SHOPPER, RMB COMMERCE, %
Tier 1 6,819 18
Tier 2 4,922 17
Tier 3 4,624 21
Tier 4 4,467 27

PRC’s nominal GDP by city tier
Source(s): Frost & Sullivan Report 60

Retail sales of consumer goods in the
PRC

Price evolution of gold commodity

Price evolution of platinum commodity

Price evolution of polished diamond

Retail value of jewellery market in PRC

Retail value breakdown by city tier

Retail value – breakdown by price range

PRC’s jewellery sales breakdown by retail
channels

PRC jewellery POS by operation model

Retail sales of consumer goods in Hong
Kong and Macau

Chinese Tourists to HK

Per capita consumption of jewellery

CTF brand positioning in the PRC

Jewellery market share by retail value in
the PRC

The PRC: Unaided Brand Awareness

Increase same store sales and encourage
repeat purchases
Source(s): Chow Tai Fook Prospectus 76

No need to attract consumers to e-tailers
Strategy is to increase sales through eShop, not e-tailers
Current trends are already in favour of e-tailers
Chow Tai Fook is already the top of mind recall brand
Consumers will naturally search for CTF in e-tailers, thus there is

no need for the additional marketing efforts
77

How will our stakeholders feel about the
new online platform
e-tailing consumers e-tailer partners current clients

• Will not feel alienated • Will not feel alienated • Existing clients are
as they mainly use e- as they have a huge generally focused on
tailers for info base of products. the in-store
searching and experience
comparing
• Furthermore, CTF are • They would be happy
• Will be happy to not withdrawing from to see how the online
convert to CTFeshop e-tailers store experience
due to the benefits of becoming more
membership realistic
Our stakeholders will react positively to the introduction of the

new and improved online experience
78

Pricing of ‘Dreams’ Collection
Reference pricing from existing Zu Jin chain
Basic ‘Dreams’ bracelet will be priced similarly, targeted at the

mass luxury.
79

Pricing of ‘Dreams’ Collection
Pricing may range from Zu Jin to higher end charms
The wide variety of pricing appeals to the mass luxury as it also

allows consumers a greater choice.
80

T3/4 Consumer spending habits
Decrease in consumption due to anti-corruption laws
T3/4 Consumer spending habits
Young population choices, i.e. cutesy, trendy jewellery

Average spend per visit = HKD600
Average visit per year = once per 2/3 months
81

Risk & Mitigation (Deliver a Dream)
Online fraud, counterfeit, transaction security
Ensuring safety in online transactions
Use of third party Cash on Delivery Money back

payment systems choice guarantee by CTF
• Ensures that • Consumers are able to • Quality assurance by
transactions are reject the goods upon credible and
secure inspection established brand
Consumers can trust CTF due to its credible brand as well as

trusted payment system partners.
82

Risk & Mitigation (Deliver a Dream)
RISK MITIGATION CONTINGENCY
Enhance marketing
Low adoption/interest Leverage on festivals to
efforts to boost
for mobile application introduce mobile application
awareness
Enhance marketing
Resilient to switching Integrate mobile application
efforts to communicate
from e-tailer with e-tailer
membership card benefits
Improve virtual
Virtual experience not Increase promotional efforts
experience through
effective in linking O2O to link O2O
further market research
83

Risk & Mitigation (A Lifetime of Dreams)
RISK MITIGATION CONTINGENCY
Enhance marketing Leverage on festivals to

Low uptake of
efforts to boost introduce ‘Dreams’
‘Dreams’collection
awareness collection
Communicate use of
Not enough professional Increase pay to incentivize
appointment systems to
staff in stores staff to join
better gauge demand
‘Dreams’ collection not Enhance marketing

Change material to increase
passed down through efforts to communicate
perceived value
generations value for money
84

Marketing Campaign to increase jewellery
ownership in PRC
Objective: Increase consumer awareness
Involve the
Ride on Internet
collective
trends
community
Chow Tai Fook online voting system for

upcoming new designs
85

Marketing Campaign to increase jewellery
ownership in PRC
Objective: Increase consumer spend
Chow Tai Fook online voting system for

upcoming new designs
Voting ensures Increase

Offer prize for a
that design will be consumer
lucky voter to
popular amongst awareness of
entice traffic
consumers jewellery need
Increase consumer spend
86

Existing measures
Why existing measures are insufficient
E-marketplace In-house CTF eShop Physical Outlet
Limited edition
Daily QR code
Current items only on
promotion
eShop
Mainly price
Limitations Not sustainable
promotion
Proposed
Virtual eShop Experience | Fortune Chest
Additions 87
How does youth loyalty card program
work?
HK$30,000 Cut off limit for Pre-member

Young Line items >HK$2,000
Difficult for such consumers to reach
HK$30,000
However, there is potential to grow these consumers to

consume our pricier mass luxury segment in the long term
Setting a lower cap – e.g. HK$10,000 – to

attract Young Line items consumers
Discounts and updates on Young Line items 88
Augmented reality
Body Shop tried AR Effectively

in 2012 – great generated buzz
success marketing
Fun factor that
attracted young tech
savvy individuals
Bridging the Online

Encourage app
and Offline
download
experience
Encourage user
account creation
89
China’s mobile netizens
Chinese consumers More than 50% of More willing to use

are addicted to digital shoppers smartphone to make
smartphones - 低头族 browse via mobile purchases
Tier 1-2
• Smartphone penetration more than 50%
Mobile Netizens
• Mobile netizens in tier 3-4 cities – around 163 million

Tier 3-4 • 70% aged below 24
Mobile Netizens • Strong urge to buy smart phones
• 39.4% either searched or purchased products via
mobile phone
Source(s): BNP Paribas Group Report 90

WACC Analysis
WACC Analysis
Beta Beta Debt Mkt Cap D/E Tax Unlevered beta
HK Luk Fook 1.86 0 15.85 0 17% 1.86
HK Chow Sang Sang 1.26 1.902 16.25 0.11705 19% 1.15096
China Lao Feng Xiang 0.68 2.703 11.72 0.23063 26% 0.58038
INTL Tiffany & Co 1.78 0.959 10.17 0.0943 35% 1.6777

INTL Blue Nile 1.45 0.69 513.94 0.00134 35% 1.44874
Median 0.117 1.15096

Average 0.50618 1.19711
Beta 1.20
D/E 11.7%
Tax 20.0%
Risk Premium 6.18%
10Y Govt Bond 2.03%
Cost of debt 2.0%
Levered beta 1.31
Cost of equity 10.1%
WACC 9.3%
Source(s): 91
Income Statement (Base)
Income Statement (Base) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Revenue 18,410.9 22,933.6 35,042.5 56,571.1 57,433.9 73,049.0 83,311.0 94,145.0 104,432.3 110,138.0 113,146.7 114,692.2
% growth 24.6% 52.8% 61.4% 1.5% 21.9% 10.9% 5.5% 2.7% 1.4%
Cost of Goods Sold (13,084.9) (16,378.6) (25,114.9) (40,123.2) (41,150.8) (53,017.0) (60,213.0) (69,394.0) (76,083.1) (80,239.9) (82,431.9) (83,557.8)
Gross Profit 5,326.0 6,555.0 9,927.6 16,447.9 16,283.1 20,032.0 23,098.0 24,751.0 28,349.2 29,898.1 30,714.8 31,134.3
Gross Profit Margin 28.9% 28.6% 28.3% 29.1% 28.4% 27.4% 27.7% 26.3% 27.1% 27.1% 27.1% 27.1%
Profit before taxation 2,223.5 2,718.6 4,619.3 8,165.9 7,095.0 8,907.0 10,357.0 12,110.0 13,049.9 13,762.9 14,138.8 14,332.0
12.1% 11.9% 13.2% 14.4% 12.4% 12.2% 12.4% 12.9% 12.5% 12.5% 12.5% 12.5%
Taxation (309.1) (511.8) (947.3) (1,595.0) (1,416.6) (1,823.0) (2,171.0) (2,509.5) (2,704.3) (2,852.0) (2,929.9) (2,969.9)
14% 19% 21% 20% 20% 20% 21% 21% 21% 21% 21% 21%
Profit for the year 1,914.4 2,206.8 3,672.0 6,570.9 5,678.4 7,084.0 8,186.0 9,600.5 10,345.6 10,910.9 11,208.9 11,362.0
Profit to NCI 17.7 68.2 134.9 230.3 173.1 216.0 251.0 292.5 315.2 332.4 341.5 346.2
% NCI 1% 3% 4% 4% 3% 3% 3% 3% 3% 3% 3% 3%
Profit to shareholders 1,896.7 2,138.6 3,537.1 6,340.6 5,505.3 6,868.0 7,935.0 9,308.0 10,030.4 10,578.4 10,867.4 11,015.8
# of shares 8,946.7 8,948.1 8,954.7 9,259.8 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0
EPS 0.21 0.24 0.40 0.68 0.55 0.69 0.79 0.93 1.00 1.06 1.09 1.10
Source(s): 92
Income Statement (Dreams)
Income Statement (Dreams) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total Revenue 88,545.6 99,366.5 110,821.0 122,431.6 128,827.0 133,835.8 136,204.6
Base Revenue 18,410.9 22,933.6 35,042.5 56,571.1 57,433.9 73,049.0 83,311.0 94,145.0 104,432.3 110,138.0 113,146.7 114,692.2
Delivering A Dream 1,080.9 1,054.3 1,065.7 1,755.0 1,785.0 3,098.6 3,207.6
A Lifetime Of Dreams 14,415.8 15,001.2 15,610.4 16,244.3 16,904.0 17,590.4 18,304.8
Trading Up 14,166.5 14,741.8 15,340.4 15,963.4 16,611.7 17,286.3 17,988.3
Occasion Purchase 249.3 259.4 269.9 280.9 292.3 304.2 316.5
Total Incremental 15,496.6 16,055.5 16,676.0 17,999.3 18,688.9 20,689.1 21,512.4
Cost of Goods Sold (13,084.9) (16,378.6) (25,114.9) (40,123.2) (41,150.8) (48,767.4) (55,761.6) (65,009.8) (71,197.0) (75,166.6) (76,815.7) (77,718.1)
Gross Profit 5,326.0 6,555.0 9,927.6 16,447.9 16,283.1 24,281.6 27,549.4 29,135.2 33,235.3 34,971.4 36,331.1 36,974.1
Base Gross Profit 20,032.0 23,098.0 24,751.0 28,349.2 29,898.1 30,714.8 31,134.3
Incremental Gross Profit 4,249.6 4,451.4 4,384.2 4,886.1 5,073.3 5,616.3 5,839.8
Gross Profit Margin 28.9% 28.6% 28.3% 29.1% 28.4% 27.4% 27.7% 26.3% 27.1% 27.1% 27.1% 27.1%
Profit before taxation 2,223.5 2,718.6 4,619.3 8,165.9 7,095.0 10,796.5 12,353.0 14,255.1 15,299.1 16,098.2 16,724.1 17,020.1
Base PBT 8,907.0 10,357.0 12,110.0 13,049.9 13,762.9 14,138.8 14,332.0
Incremental PBT 1,889.5 1,996.0 2,145.1 2,249.2 2,335.4 2,585.3 2,688.2
12.1% 11.9% 13.2% 14.4% 12.4% 12.2% 12.4% 12.9% 12.5% 12.5% 12.5% 12.5%
Taxation (309.1) (511.8) (947.3) (1,595.0) (1,416.6) (2,209.7) (2,589.4) (2,954.0) (3,170.4) (3,336.0) (3,465.7) (3,527.0)
14% 19% 21% 20% 20% 20% 21% 21% 21% 21% 21% 21%
Profit for the year 1,914.4 2,206.8 3,672.0 6,570.9 5,678.4 8,586.8 9,763.6 11,301.0 12,128.7 12,762.3 13,258.5 13,493.1
Profit to NCI 17.7 68.2 134.9 230.3 173.1 261.8 299.4 344.3 369.5 388.8 403.9 411.1
% NCI 1% 3% 4% 4% 3% 3% 3% 3% 3% 3% 3% 3%
Profit to shareholders 1,896.7 2,138.6 3,537.1 6,340.6 5,505.3 8,325.0 9,464.2 10,956.7 11,759.2 12,373.4 12,854.5 13,082.0
# of shares 8,946.7 8,948.1 8,954.7 9,259.8 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0
EPS 0.21 0.24 0.40 0.68 0.55 0.83 0.95 1.10 1.18 1.24 1.29 1.31
Source(s): 93
DCF Valuation (Base)
DCF Valuation (Base) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Operating profit (EBIT) 2,292.0 2,703.6 4,651.7 8,440.1 7,316.7 8,956.5 10,490.0 12,301.5 13,199.9 13,921.0 14,301.3 14,496.7
Operating Profit Margin 12.4% 11.8% 13.3% 14.9% 12.7% 12.3% 12.6% 13.1% 12.6% 12.6% 12.6% 12.6%
Depreciation 160.5 225.8 246.8 390.5 494.7 595.0 645.0 654.5 848.5 1,018.1 1,167.9 1,415.4
22% 27% 21% 23% 23% 23% 27% 22% 24% 24% 23% 24%
Capex 405.7 355.0 540.6 749.2 1,061.8 1,160.0 870.0 980.0 1,347.8 1,499.4 1,775.2 2,161.2
57% 43% 46% 44% 49% 45% 36% 33% 38% 36% 36% 36%
Change in NWC 1,759.5 7,875.0 14,900.3 (3,645.7) 9,529.5 6,041.0 6,523.5 (1,054.1) 2,763.1 1,457.0 748.4
FCFF 814.9 (3,517.1) (6,818.9) 10,395.3 (1,138.0) 4,224.0 5,452.5 13,754.7 10,676.6 12,237.0 13,002.4
WACC 9%
Discount factor 0.96 0.88 0.81 0.74 0.68 0.62 0.57
Terminal growth rate 1%
Terminal value 148,998.3
Discounted FCFF (1,096.5) 3,724.6 4,401.5 10,155.5 7,214.1 7,567.0 91,655.0
EV 123,621.2
% terminal value 68%
Net debt (2,469.1)

NCI 935.2
Mkt cap 125,155.1
Implied share price 12.52
Current mkt cap 122,400.0
Current share price 12.24
% upside 2%
EV/EBITDA 15.8 12.9 11.1 9.5 8.8 8.3 8.0 7.8

P/E 22.7 18.2 15.8 13.4 12.5 11.8 11.5 11.4
Source(s): 94
DCF Valuation (Dreams)
DCF Valuation (Dreams) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Operating profit (EBIT) 2,292.0 2,703.6 4,651.7 8,440.1 7,316.7 10,856.5 12,511.6 14,480.5 15,474.9 16,283.2 16,916.3 17,215.7
Operating Profit Margin 12.4% 11.8% 13.3% 14.9% 12.7% 12.3% 12.6% 13.1% 12.6% 12.6% 12.6% 12.6%
Depreciation 160.5 225.8 246.8 390.5 494.7 595.0 645.0 654.5 848.5 1,018.1 1,167.9 1,415.4
22% 27% 21% 23% 23% 23% 27% 22% 24% 24% 23% 24%
Capex 405.7 355.0 540.6 749.2 1,061.8 1,160.0 870.0 980.0 1,347.8 1,499.4 1,775.2 2,161.2
57% 43% 46% 44% 49% 45% 36% 33% 38% 36% 36% 36%
Change in NWC 1,759.5 7,875.0 14,900.3 (3,645.7) 9,529.5 6,041.0 6,523.5 (327.5) 2,850.6 1,236.9 668.6
FCFF 814.9 (3,517.1) (6,818.9) 10,395.3 762.0 6,245.6 7,631.5 15,303.1 12,951.3 15,072.1 15,801.4
WACC 9%
Discount factor 0.96 0.88 0.81 0.74 0.68 0.62 0.57
Terminal growth rate 1%
Terminal value 181,072.1
Discounted FCFF 734.2 5,507.2 6,160.5 11,298.8 8,751.1 9,320.1 111,385.0
EV 147,432.6
% terminal value 69%
Net debt (2,469.1)

NCI 935.2
Mkt cap 148,966.5
Implied share price 14.90
Current mkt cap 122,400.0
Current share price 12.24
% upside 22%
Source(s): 95
POS Stores in China
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
POS 1,358.0 1,627.0 1,836.0 2,000.0 2,200.0 2,400.0 2,601.0 2,792.0 2,970.0 3,129.0
New stores 269.0 209.0 164.0 200.0 200.0 201.0 191.0 178.0 159.0
China 1,206 1,448 1,640 1,789 1,971 2,153 2,336 2,510 2,672 2,817
Tier I 188 207 227 240 256 272 288 303 318 330
19 20 13 16 16 16 15 14 13
% breakdown 16% 14% 14% 13% 13% 13% 12% 12% 12% 12%
Tier II 611 726 786 835 895 955 1,016 1,073 1,126 1,174
115 60 49 60 60 60 57 53 48
% breakdown 51% 50% 48% 47% 45% 44% 43% 43% 42% 42%
Tier III 407 515 627 714 820 926 1,032 1,134 1,228 1,312
108 112 87 106 106 107 101 94 84
% breakdown 34% 36% 38% 40% 42% 43% 44% 45% 46% 47%
HK/Macau/Others 81 93 103 111 121 131 141 151 160 168
12 10 8 10 10 10 10 9 8
Watch 71 86 93 100 108 116 124 131 138 145
15 7 7 8 8 8 8 7 6
Source(s): 96
CLV Analysis
CLV Analysis
1 2 3 4 5 6 7 8 9 10
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
E.g. 21 22 23 24 25 26 27 28 29 30
Item Trinket Trinket
HKD 2000 2000
Margin 12.50%
Retention rate 7.5% (given 15% for HK members, 22% for China members)
Discount rate 9.3%
PV (current) 17.1593 15.70355

CLV 32.86285
1 2 3 4 5 6 7 8 9 10
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
E.g. 21 22 23 24 25 26 27 28 29 30
Item Trinket Trinket Graduation Promotion Marriage Child
HKD 2,000 2,000 6,000 7,000 15,000 3,000
Margin 12.50%
Retention rate 10.0% (given 15% for HK members, 22% for China members)
Discount rate 9.3%
PV (current) 22.87906 20.93806 57.4852 56.16934 100.80662 15.453036

CLV 273.7313
Increase 8.33 x
Source(s): 97
Chinese Households Assumptions
Chinese Households 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total 256 266 277 288 300 312 325 338 352
Affluent 7.68 7.99 8.32 8.65 9.01 9.37 9.75 10.15 10.56
% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Upper middle 35.84 37.30 38.81 40.39 42.03 43.73 45.51 47.36 49.28
% 14% 14% 14% 14% 14% 14% 14% 14% 14%
Mass middle 138.24 143.85 149.70 155.77 162.10 168.68 175.53 182.66 190.08
% 54% 54% 54% 54% 54% 54% 54% 54% 54%
Poor 74.24 77.25 80.39 83.66 87.05 90.59 94.27 98.10 102.08
% 29% 29% 29% 29% 29% 29% 29% 29% 29%
Middle class households - geog breakdown

174 181 189 196 204 212 221 230 239
Tier 1 69.63 72.46 68.80 65.33 62.03 58.89 55.92 53.10 50.41
40% 40% 36% 33% 30% 28% 25% 23% 21%
Tier 2 74.85 77.89 81.43 85.12 88.98 93.02 97.23 101.64 106.25
43% 43% 43% 43% 44% 44% 44% 44% 44%
Tier 3 26.11 27.17 30.40 34.02 38.07 42.60 47.67 53.34 59.68
15% 15% 16% 17% 19% 20% 22% 23% 25%
Tier 4 5.22 5.43 6.24 7.16 8.22 9.43 10.83 12.43 14.27
3% 3% 3% 4% 4% 4% 5% 5% 6%
Source(s): 98
Delivering A Dream – Revenue
Delivering A Dream (Results) 2014 2015 2016 2017 2018 2019 2020
Daily traffic ('000) 93.5 122.21 178.61 261.03 381.49 557.53 814.81
Annual traffic (mm) 34.1 44.6 65.2 95.3 139.2 203.5 297.4
15% 31% 46% 46% 46% 46% 46%
Customers purchasing daily 2,804 3,666 5,358 7,831 11,445 16,726 24,444
Annual customers (mm) 1.02 1.34 1.96 2.86 4.18 6.10 8.92
Annual online purchase 2,046.76 2,676.44 3,911.52 5,716.54 8,354.53 12,209.84 17,844.25
New online customers annually 1.02 0.31 0.62 0.90 1.32 1.93 2.82
E-tailing to e-commerce conversion 50% 50% 50% 60% 60% 70% 70%
Online-offline conversion 25% 25% 25% 30% 30% 35% 35%
Incremental purchase (up-sell/cross-sell) 2,000 2,000 2,000 2,000 2,000 2,000 2,000
Chance of incremental purchase 15% 15% 15% 20% 20% 25% 25%
Chance of subsequent purchase 15% 15% 15% 20% 20% 25% 25%
Price of upgraded purchase 15,000 15,000 15,000 20,000 20,000 30,000 30,000
% of upgraders 30% 30% 30% 30% 30% 30% 30%
Price of repeat purchase 3,500 3,500 3,500 3,500 3,500 3,500 3,500
% of repeat purchasers 70% 70% 70% 70% 70% 70% 70%
Incremental revenue from brick and mortar 1,080.88 1,054.31 1,065.66 1,754.98 1,784.97 3,098.64 3,207.61
Incremental over online sales 52.8% 39.4% 27.2% 30.7% 21.4% 25.4% 18.0%
EBIT margin 12.3% 12.6% 13.1% 12.6% 12.6% 12.6% 12.6%

EBIT 131.54 132.75 139.24 221.82 225.61 391.66 405.43
WACC 9%
Discount factor 0.96 0.88 0.81 0.74 0.68 0.62 0.57
Discounted FCFF 126.75 117.06 112.40 163.78 152.44 242.19 229.38

Sum 1,144.00
Source(s): 99
A Lifetime of Dreams (Trading Up)
A Lifetime of Dreams (Results) 2014 2015 2016 2017 2018 2019 2020
Mass and upper middle in tiers 2-4 242 252 262 273 284 295 307
Mkt share 10% 10% 10% 10% 10% 10% 10%
Young customers who trade up 7.3 7.6 7.9 8.2 8.5 8.9 9.2
New customers 0.3 0.3 0.3 0.3 0.3 0.3 0.4
Incremental purchase when trading up 50,000.0 50,000.0 50,000.0 50,000.0 50,000.0 50,000.0 50,000.0
Incremental revenue from trading up 14,166.5 14,741.8 15,340.4 15,963.4 16,611.7 17,286.3 17,988.3
EBIT margin 12.3% 12.6% 13.1% 12.6% 12.6% 12.6% 12.6%

EBIT 1,713.50 1,830.42 1,975.88 1,986.59 2,067.36 2,152.47 2,241.89
WACC 9%
Discount factor 0.96 0.88 0.81 0.74 0.68 0.62 0.57
Discounted FCFF 1,650.99 1,614.02 1,595.02 1,466.75 1,396.90 1,331.02 1,268.39

Sum 10,323
Source(s): 100
A Lifetime of Dreams (Occasions)
A Lifetime of Dreams (Results) 2014 2015 2016 2017 2018 2019 2020
Mass and upper middle in tiers 2-4 106 114 122 131 140 151 162
Mkt share 10% 10% 10% 10% 10% 10% 10%
Young customers 10.6 11.4 12.2 13.1 14.0 15.1 16.2
New customers 10.6 0.7 0.8 0.9 1.0 1.1 1.2
Incremental CLV of new customers 2,559.5 178.5 194.4 212.0 231.5 253.2 277.3
Expected revenue per customer per year 24.1 24.1 24.1 24.1 24.1 24.1 24.1
Expected incremental revenue from repeat occasion purchase 256.0 273.8 293.2 314.4 337.6 362.9 390.6
Sum 3,906
Source(s): 101
Total Costs
A Lifetime of Dreams (Costs) 2014 2015 2016 2017 2018 2019 2020
Scent development (Scentair) 0.5 0 0 0 0 0 0
Scent (distribution/usage) 1.2 1.3 1.4 1.6 1.7 1.8 1.9
# of shops 2,000.0 2,200.0 2,400.0 2,601.0 2,792.0 2,970.0 3,129.0
Cost per shop (distribution, usage) (HKD) 600.0 600.0 600.0 600.0 600.0 600.0 600.0
Chocolate 17.75 20.16 22.56 24.68 25.45 25.23 24.21
# of customers in shops 1,775,056 2,015,864 2,255,837 2,467,894 2,544,587 2,523,422 2,421,199
Cost per customer (HKD) 10 10 10 10 10 10 10
Music 0 0 0 0 0 0 0
Training (tier 3, 4) 2.00 2.30 2.59 2.89 3.17 3.44 3.67
# of tier 3, 4 shops/storefronts 714 820 926 1,032 1,134 1,228 1,312
# of employees per shop (greeters) 3.5 3.5 3.5 3.5 3.5 3.5 3.5
Cost per employee (HKD) 800 800 800 800 800 800 800
Development of bracelet design 2.00 2.00 2.00 2.00 2.00 2.00 2.00
Delivering A Dream (Costs) 2014 2015 2016 2017 2018 2019 2020
Website design 6.0 0 0 0 0 0 0
Augmented reality 1.0 0 0 0 0 0 0
Wechat 1.0 0 0 0 0 0 0
TOTAL COSTS 213.5
Source(s): 102

Dreaming and Reinventing The Future:: Charting The Next Steps For Chow Tai Fook

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Dreaming And

Reinventing The Future:

Fahmi Hamzah │ Ryan Phoa │ Lee Chuan │ Chan Yi

Market Share (in %)

With clear market leadership, all competitors pale in comparison to CTF

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

Market Share (in %)

With clear market leadership, all competitors pale in comparison to CTF

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

THREE HEADWINDS WILL

…AND MORE NEEDS TO BE

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

…AND MORE NEEDS TO BE

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

YOUNG MASS HIGH

18-25 YO, limited 26-39 YO, high Highly affluent

PLACE Mainly through Primarily through in- Through in-store channel

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

YOUNG MASS HIGH

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

100% = 256 M 357 M

3% By 2020, a majority of CTF’s “Young

54% Upper middle class

22% Mass middle class

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

• Weak synergy • Missing integration of • Missing CRM for

Given the growing importance of e-commerce,

Source(s): CICC Case, Third Rock Analysis 9

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

Source(s): CICC Case, Third Rock Analysis 10

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

What he (she) cares about

Why he (she) will buy jewelry

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

SIGNIFICANT More Westernized

FAIR More Westernized

SIGNIFICANT Less Westernized

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

SIGNIFICANT More Westernized

SIGNIFICANT Less Westernized

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

SIGNIFICANT More Westernized

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

1 HEAD Engaging HEAD to

2 HEART Engaging HEART to

3 HAND Engaging HAND to

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

HEAD • CTF eShop holds only 17% of online

• Offers the full CTF experience

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

HEAD • CTF eShop holds only 17% of online

Bridging the CUSTOMERS

• Offers the full CTF experience

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

HEART The process of buying jewelery is an experience in itself.

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

HEART The process of buying jewelery is an experience in itself.

VIRTUAL STORE TOUR

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

HEART The process of buying jewelery is an experience in itself.

VIRTUAL STORE TOUR

Analysis Create a Dream Deliver a Dream A Lifetime of Dreams Financials

HEART The process of buying jewelery is an experience in itself.