Navigating in the Tsunami: Brand strategy in the Chinese Luxury Market

Presentation at CU MBA class, byErwin Huang, Deputy Chairman,

4th Mar 2010

Strictly Private & Confidential

1. Vision

2. Tools for Navigating the Tsunami

3. Changes and Reflections

Agenda

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Corporate Mission

• Be the Leading Branded Luxury Retailer for the Chinese people– most innovative, efficient & profitable

• “Local Jeweller with a Global Touch”

Which Industry?

1st Generation HK Manufacturing Entrepreneur

Modern Retailer for Chinese

Low Cost High Value

Skill and Knowhow in Production Design, Fashionable Branding

Mass, Economy of Scale Targeted, Economy of Scope

Vertically Integrated Manufacturer Quick Response Efficient Retailer

Traditional Apprentices System Re-engineered Corp Governance

Trusted Brand name Trusted Brand name

Believe in Service, go the extra step Believe in Service, go the extra step

Long term loyal customer Long term loyal customer

Care and Love for the Customer Care and Love for the Customer

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Market and Brand Positioning

• Largest Luxury Market in the world• Segmentation • Competitor positioning• TSL, positioning

– Focus on the mid-top market– High margin, High Value– Selective market and cities– Develop new brand: TSL:SAXX– Wedding Expert– Pt and Diamond Expert (the “White” jewellry)

Franchise vs Self Own

• vs competitor’s 800+ Franchise stores in China• TSL ~150 stores, all self owned• Vision, “not to be the biggest”

Modern Management tools

• SAP: ERP “Live Enterprise”• Retailing KPI’s• Service/Value Focus• CRM

Focus on Service

• Buy in HK, service in your home city• Knowledge sharing

– Wedding fiesta– Parties teaching how to buy jewellery– Actively share with customer on how to value luxury

products• Retail Management Assoc Service award• >$10,000 per staff investment in training• Empower frontline •

Customer Centric Biz model

• Customer Life Cycle Model• “the young shanghai girl story”• Grow together• Walk together• Biz model built around the customer growth• KPI’s

– Acquisition, conversion, APRU/period– Telco business model

Media Management

• Media Management– In 08, TSL is on 30+

frontpage bad news– All Baidu, Google

search results– No coverage is best

PR during that period• Search recently..

Changing Industry Practice

• Look into processes of the Tourist Industry and ask “Why Not?”

• Work with the Gov (HK, PRC) and NGO’s– TB, TIC, Customs Dept, Legco, – Business Associations

• Introduce “Best Business Practice” approach– Against “Zero-Price Tour”– First to implement “180 days refund policy”– First to implement “Buy in HK, Maintain in PRC”– Intro Non-Cash Transactions– Good Documentations

• Contracts, IT, Audit trails

ACHIEVEMENTS FOR THE YEAR 2009

Summary:

Summary for the Year

• Achievements for year– Smooth Transition for the New Management

• Good Reception from the Media, Partners and the Public

– Improvements over efficiency even against Economic Tsunami changes

– Reduced Gearing even during tough times– Improved internal controls across the company,

verified by independent parties– Continuous Dividend payment to improve Shareholder

returns– Resumption of Trading on HKSE (Jun 2009)

Store network – 170+ stores

Xinjiang 陔蔭2

Gansu 裘顏1

Sichuan 侐捶8

Yunnan ? 鰍2

Guizhou 惸笣2

Guangdong 10

Hunan 綬鰍1

Jiangxi 蔬昹1

Fujian 腦膘4

Zhejiang 涳蔬6

Shanghai 奻漆8

Jiangsu 蔬妶5

Anhui 假閣1Hubei 綬控

1

Shandong 刓2

Tianjian 毞踩4

Henan 碩鰍2Shaanxi ? 昹

3

Hebei 碩控3

Beijing 控儔13

Liaoning 腶 ?7

Jilin 憚輿1

Heilongjiang 2

Xinjiang 新彊2

Sichuan 四川8

Yunnan 雲南3

Guizhou 貴州6

Guangdong 廣東 16

Hunan 湖南Jiangxi 江西2Fujian 福建

Zhejiang 淅江7

Shanghai 上海15

Jiangsu 江蘇19

Anhui 安徽3Hubei 湖北

2

Shandong 山東7

Tianjian 天津4

Henan 河南6

Shaanxi 陝西5

Hebei 河北4

Beijing 北京29

Liaoning 遼寧6

Jilin 吉林2

Heilongjiang 黑龍江3

6Guangxi 廣西

6

The wholly-own, Franchise and JV shops are grouped into 6 divisions and 3 regions.

Hainan 海南 2

4Regions Own shops JV shops Fran.

shops Cities

Northern PRC Division 4

Division 9

Southern PRC Division 7 Division 8

Central PRC Division 5 Division 6

Total

12

17

3013

2038

130

7

-

-3

--

10

-

25

--

-3

28

哈爾濱 , 長春 , 沈阳 , 抚顺 , 大連 , 青島 濟南 , 烟台 , 淄博北京 , 天津 , 西安 , 石家莊 , 塘沽

廣州 , 深圳 , 海南 , 佛山 , 广西 , 廈門 , 福州 長沙 , 南昌 , 武漢 , 合肥 , 焦作 , 洛阳 , 郑州

兰州 , 成都 , 重慶 , 昆明 , 貴陽 , 新疆 上海 , 寧波 , 杭州 , 无锡 , 南京 , 昆山 , 苏州 , 常州 , 南通 , 温州 , 常熟

甘肅Gansu1

Improvement in result mainly due to :

1. Growth in turnover and contribution from Mainland China

2. Compensation income from early termination of a shop lease

Turnover for the year : $1,959M(+2.2%)Profit attributable to equity holders of the Company $ 104.8M(+5.6%)

FY 08-09 Results

16

Cost / turnover under control and EBIT / turnover maintained stable

FY 08-09 Results

Borrowings was HK$ 131 million & gearing decreased to 22.7%

Equity attributable to shareholders increased to $ 512 million

Cash, Gearings and Equity

Feb 07 Feb 08 Feb 09HK$ m HK$ m HK$ m

Borrowings 149.6 171.1 131.8 Cash, Bank& undrawn banking facilitiy 99.2 79.0 137.0

Total Assets 920.9 1,259.0 1,212.4 Equity attributable to shareholders 275.6 401.6 512.1 Total Equity 307.3 448.2 580.4

Gearing (Borrowings / Total Equity) 48.7% 38.2% 22.7%

Dividends (Final 3 cents/share + Interim 2 cents/share = 5 cents /share)

Earnings per share increased to HK$ 0.50

Net assets per share increased to HK$ 2.45

Dividends and Returns per share

無鍚商廈

Wuxi

New Stores in PRC

Opened and expanded shops (HK)

Key Shop in Mongkok

Mongkok Hollywood Plaza (MH) - Perspective

International exhibitions

Hong Kong Premier Pavilion Jewellery Fair – 18th-21st June 2009

Continuous Product Innovations:Estrella, 100 Facets

Amazon Segundo Collection

Moving forward!• Continuous improvements:

– Efficiency and Effectiveness of the team– Brand improvements

• Nurturing of New Brand: TSL:SAXX• Continue Strong Position in Up-end market in PRC• Premium Position for TSL: Estrella product line• With Improved New Product and Shop Experiences• Strong Recognition in Wedding Market segment

• Cautious approach: – For New Shop investments– Raw Material Pricing not stable– Unknown Economic Recovery Cycle

Summary: reborn into a new industry

1st Generation HK Manufacturing Entrepreneur

Modern Retailer for Chinese

Low Cost High Value

Skill and Knowhow in Production Design, Fashionable Branding

Mass, Economy of Scale Targeted, Economy of Scope

Vertically Integrated Manufacturer Quick Response Efficient Retailer

Traditional Apprentices System Re-engineered Corp Governance

Trusted Brand name Trusted Brand name

Believe in Service, go the extra step Believe in Service, go the extra step

Long term loyal customer Long term loyal customer

Care and Love for the Customer Care and Love for the Customer

Strictly Private & Confidential

Summary: Navigating the Tsunami

• A clearly defined mission• Hard work

– Modern mgt tools– Process re-engineering– Innovation in retailing– Changing industry practice thru leadership

• Media Management– Press, client, public, government

Personal Sharing

• How’d I come to join TSL?• A little bit on my background• What’s the chemistry that drive success and

failure?

Discussions

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Contact

• Email: Erwin@fdlife.com• Twitter: erwinhuang• Facebook: erwinhuang1• Today’s presentation: SlideShare.net/erwinhuang

Preparation Slide after these(Not used)

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