Shuibei is abuzz with activity again, yet the likes of Chow Tai Seng can barely force a smile.

As gold prices pull back, Shenzhen's Shuibei has become bustling again. On October 23, the international spot gold price fell below $4,000 per ounce during intraday trading, marking the first time since July. As of October 29, the domestic spot gold price stood at around 865 yuan per gram, down nearly 400 yuan from the high point of the year. Back during the National Day holiday, as gold prices corrected from the high level at the end of August, the long-lost "gold rush" scene reappeared in Shuibei; after gold prices dipped again on October 23, passenger flow in Shuibei picked up noticeably once more.

However, the crowded crowds in front of Shuibei's counters do not mean that gold jewelry brands are having an easy time.

The latest disclosed Q3 financial report of Chow Tai Seng shows that the company's operating revenue in the third quarter decreased by 10.66% year-on-year, and the net profit attributable to shareholders dropped by 30.10% year-on-year. Of course, this financial report also sends optimistic signals: compared with the second quarter, both the revenue and net profit of Chow Tai Seng in the third quarter increased, and the single-quarter revenue is gradually recovering. However, the Q3 report only covers the period from July to September, and the gold buying boom in Shuibei in October has not yet been reflected in this financial report.

On one side is the gold buying boom in Shuibei, on the other side is the declining revenue of branded gold jewelry. Under the drastic fluctuation of gold prices, gold consumption is recovering, but the business model of gold jewelry brands that relies on franchising and store expansion is facing challenges.

Franchisees no longer stock up on goods

Let's first look at the latest performance of Chow Tai Seng. In the third quarter of 2026, Chow Tai Seng recorded a revenue of 1.943 billion yuan, down 10.66% year-on-year; its net profit attributable to shareholders was 201 million yuan, down 30.10% year-on-year. Revenue is falling, and profit is dropping even faster. Judging from this quarter alone, the revenue performance is not optimistic, but if we extend the timeline, the lowest point of performance in 2026 occurred in the second quarter.

In the second quarter of this year, Chow Tai Seng's single-quarter operating revenue was 1.687 billion yuan, down 12.31% year-on-year; its net profit attributable to shareholders was 156 million yuan, down 54.21% year-on-year. It is worth noting here that the profit in the current quarter fell to the lowest level in the first three quarters of this year, and the profit decline was significantly greater than the revenue decline.

Putting aside the fluctuation of gold prices, to understand the performance decline of Chow Tai Seng, we must first figure out how it makes money.

In Chow Tai Seng's business model, there are three main types of sales channels, including self-operated offline stores, online e-commerce platforms, and franchised stores. Among them, the franchising channel used to be the most important source of revenue. In the first half of 2025, franchising revenue accounted for 52.76% of the company's operating revenue, exceeding half; by the first half of 2026, this proportion had dropped to 19.42%, and e-commerce has replaced it as the largest source of revenue.

The so-called franchising business is divided into two types. One is that Chow Tai Seng wholesales gold and other ornaments directly to franchisees, who purchase the goods and then sell them in their own stores. The other is that franchisees purchase from suppliers designated by the company, and Chow Tai Seng mainly charges brand usage fees.

A key point is hidden in the first model, that is, whether franchisees are willing to continuously and in large quantities buy out gold from the brand side. Under the continuous fluctuation of gold prices this year, this has precisely become the weakest link in performance.

In the first half of 2026, Chow Tai Seng's franchising channel revenue was only 707 million yuan, down 70.84% year-on-year. Among them, the wholesale revenue of franchised gold products dropped from 1.824 billion yuan in the same period of the previous year to 253 million yuan, a decrease of 86.13%. In the same period, the company's self-operated offline and e-commerce revenues increased by 38.64% and 34.97% respectively, but still failed to fill the gap left by franchised wholesale.

Franchisees are hesitant to restock easily, which is closely related to the sharp fluctuation of gold prices at high levels since the beginning of this year.

At the beginning of 2026, the international gold price surged all the way, once hitting a historical high of about $5,598 per ounce on January 29, then fell back rapidly, with the maximum pullback from the high point approaching 30%. The high-priced goods that franchisees had restocked before began to face significant shrinkage. At the same time, consumers adopted a wait-and-see attitude, which also increased the capital pressure occupied by inventory.

The semi-annual report states that the sharp decline in franchising channel revenue is a structural change in the supply model. Against the background of gold prices continuing to operate at high levels, franchisees, in order to avoid the risk of gold price fluctuation brought by direct procurement, prefer to adopt the designated supplier model, that is, to restock by only paying the brand usage fee.

The rapid fall of gold prices has not only affected franchisees' willingness to restock, but also directly affected the inventory value of Chow Tai Seng itself. In layman's terms, part of the company's gold raw materials and finished products need to be re-estimated according to the falling market price, and the resulting impairment losses are all included in the current profit.

Obviously, the sharp decline in franchising revenue and the impairment of inventory value led to the low performance point in the second quarter. More importantly, this is not an isolated case, and performance pressure has also occurred in similar brands.

Laofengxiang's revenue and net profit attributable to shareholders in the second quarter fell by more than 60% and 70% respectively; Caibai Co., Ltd.'s revenue in the second quarter only decreased by 3.64%, but its net profit attributable to shareholders fell by more than 70% year-on-year. Laofengxiang, like Chow Tai Seng, relies heavily on franchised wholesale, with an even steeper decline; Caibai, which is mainly self-operated, is less affected by the ebb of franchising, but still cannot avoid the pressure of impairment and declining gross profit margin. This shows that even if revenue does not shrink significantly, net profit is still under obvious pressure.

Revenue recovery lacks real profit quality

Judging from the data, Chow Tai Seng's performance in the third quarter has improved.

Revenue rose from 1.687 billion yuan to 1.943 billion yuan, and net profit attributable to shareholders rose from 156 million yuan to 201 million yuan, with the year-on-year decline also narrowing. But further disassembly will reveal that this recovery does not come from the strengthening of main business.

One of the changes comes from impairment. In the first half of this year, the cumulative loss of asset impairment of Chow Tai Seng was about 203 million yuan. In the third quarter, this figure turned into a small positive income of about 10 million yuan.

At the same time, the gross profit of the company in the third quarter did not grow synchronously. The gross profit in the second quarter was about 575 million yuan, but it dropped to about 549 million yuan in the third quarter, and the gross profit margin fell from 34.07% in the second quarter to 28.25%.

In other words, the revenue of goods sold by the company in the third quarter increased, but the gross profit decreased instead, and the profit-generating effect declined. It can be seen that the quarter-on-quarter rebound of performance in the third quarter is mainly based on the low base in the second quarter and the reversal of impairment, rather than the gross profit level has recovered.

In terms of channels, Chow Tai Seng is relying on self-operation and e-commerce to take over the growth. Subtracting the cumulative revenue of the three-quarter report and the mid-year report, the single-quarter self-operated offline revenue in the third quarter was about 530 million yuan, e-commerce revenue was about 1.019 billion yuan, and franchising revenue was about 369 million yuan. Among them, e-commerce has accounted for more than half of the operating revenue of the current quarter.

Behind the growth of self-operation, Chow Tai Seng is trying to close stores with low efficiency and increase the revenue of single stores. In the first half of the year, Chow Tai Seng's number of self-operated stores decreased by a net of 19, but the average single-store revenue of the self-operated channel increased by 41.85% year-on-year, and the average single-store gross profit increased by 47.51%.

Judging from the data, in the first three quarters of this year, the proportion of Chow Tai Seng's e-commerce business revenue has increased. In the first half of this year, the sales revenue of gold products on Chow Tai Seng's e-commerce platform increased by 62.18% year-on-year, mainly from investment gold products such as gold bars. However, the number of gold products sold through e-commerce channels decreased by 42.45% in the same period, indicating that revenue growth does not mean "more products sold", but the proportion of investment gold, unit price of products and other factors jointly pushed up the sales amount.

In addition, investment gold usually has a low profit margin. In the first half of the year, the gross profit margin of Chow Tai Seng's e-commerce channel dropped from 30.28% to 21.88%, among which the gross profit margin of e-commerce gold products dropped from 19.99% to 14.63%.

Therefore, e-commerce can bring about the growth of operating revenue, but may not necessarily solve the profit problem. Without the synchronous growth of high gross profit products, the more gold bars are sold, the overall gross profit margin will still be dragged down.

In addition, the predicament of the franchising channel, which used to bring the most revenue, has not been completely solved. In the first three quarters, Chow Tai Seng's franchising revenue decreased by 67.84% year-on-year, among which the wholesale revenue of gold products decreased by 84.32%. But a notable detail is that the brand usage fee revenue of the franchising business in the third quarter increased by 9.08% year-on-year.

It should be noted that since April 14, Chow Tai Seng has raised the brand usage fee of gold products priced by gram from 12 yuan/gram to 24 yuan/gram. With the charging standard doubled, the brand usage fee revenue only increased by 9.08%, which means that the shipment volume priced by gram is likely to still be decreasing. This shows that franchisees are still operating the brand and paying brand usage fees, but the overall restocking is more cautious, especially unwilling to use a large amount of capital to buy out inventory as in the past.

Gold consumption returns to cost performance priority

Shuibei during the National Day holiday provides another perspective for observing gold consumption.

A person in charge of a shop mainly engaged in wedding products in the Shuibei market introduced to China Securities Journal that after entering the National Day holiday, the Shuibei market ushered in the busiest consumption season of the year, with the flow of people almost 4 to 5 times that of usual.

This shows that the demand previously suppressed by high gold prices has not disappeared. Demands for wedding, daily wearing and other scenarios still exist. Once the price falls, some consumers will choose to re-enter the market.

Behind the boom in Shuibei, it shows that consumers are paying more and more attention to the channel price difference and cost performance of gold jewelry. For example, the domestic spot gold price was 865 yuan/gram on October 29, while the promotional price of a certain brand in the same period was about 1028 yuan/gram, while the gold bar price of a certain shop in Shuibei was 883 yuan/gram, and the price of jewelry gold was 903 yuan/gram including processing fees. Obviously, when purchasing products in brand stores, hidden store costs, craft premiums and other factors all increase the cost of buying gold.

The gold buying boom in Shuibei, on the one hand, proves that gold consumption still has resilience, on the other hand, it also shows that more and more consumers begin to calculate gold raw materials, processing fees and brand premiums separately.

For consumers who buy gold jewelry, if they can buy similar products at a lower price in Shuibei, the high premium of brand stores will no longer have obvious advantages. If consumers pay more attention to low premium and value preservation, Shuibei and other investment gold channels will benefit more. In this case, even if gold jewelry brands lower gold prices, they may not be able to win back consumers by relying on their popularity.

Of course, this does not mean that the brand premium has lost its value. Design, craftsmanship, after-sales service and cultural expression can still be reasons for consumers to be willing to pay. But brands need to prove that the higher cost of buying gold does not only correspond to brand marketing and LOGO.

In the past, gold jewelry brands achieved expansion by opening franchised stores. The more stores there are, the more products are wholesaled out, and the larger the company's revenue scale. However, in the environment of high-level fluctuation of gold prices, more rational consumers, and franchisees unwilling to bear inventory risks, the efficiency of this model is declining.

Chow Tai Seng has taken the initiative to make adjustments, including closing low-efficiency stores and improving the efficiency of self-operated stores. The focus of competition for gold jewelry brands in the future may shift from "how many stores have been opened" to "how much profit each store can make". When consumers begin to pursue cost performance, brands need to consider what irreplaceable added value they can provide.

The consumer demand for gold will not disappear, but under the extremely high uncertainty, the past growth model that relies on store expansion and franchised wholesale is already difficult to continue.

This article is from the WeChat Official Account "Baobian" (ID: baobiannews), written by Gao Yuzhe, edited by Liu Yangzhe, and published with authorization from 36Kr.