Live Issue... Luxury watches find booming market in China

Having a Swiss-made watch clasped around one’s wrist is a talisman of attainment for Chinese men.

“A watch is a must,” says Sandy Chen, research director, TNS China. “When buying up, they start with a luxury watch, next comes the luxury car, and last is the luxury apartment. Men compare and discuss watches, and they need a watch of a certain quality to be part of the social circle.”

The most aspirational brand is Rolex, cited by 31 per cent of consumers in a survey of men and women with monthly household income above Rmb 9,000 (US$1,300), as reported in the 2009 TNS China Luxury Study. Omega (18 per cent), Vacheron Constantin (nine per cent), Longines (eight per cent) and Cartier (seven per cent) follow.

The Chinese shop overwhelmingly by brand rather than model. “This is the early stage of luxury consumption,” says Chen. Awareness of classic watches, their brands and product imagery is low, compared to that for luxury cars, even though today more people buy high-priced watches than cars.

Darryl Andrew, CEO of Synovate China, adds: “A few brands such as Rolex and Omega have emerged as badges or symbols of success, making it hard for other brands to get traction. Panerai, Piaget and Vacheron Constantin have better pedigrees but have yet to establish a profile in the market.”

China is probably Asia’s largest end destination for luxury watches, as it is believed to have knocked Japan from the top spot last year.

For the Swiss brands, 2008 was certainly a spectacular year. Global sales totalled CHF9.9 billion (US$9.3 billion), according to the Federation of the Swiss Watch Industry (FSWI), and 46 per cent of those watches went to Asia, with an average export price of $563. The recession didn’t strike until the year’s last quarter. Sales fell 26.3 per cent to CHF7.3 billion for January to July 2009 versus the same period of 2008.

Hong Kong is the world’s biggest buyer, importing CHF1.2 billion from January to July this year, most of which it re-exports.

How many of those watches bound for Hong Kong end up in China is a bit of a puzzle. FSWI president Jean-Daniel Pasche says: “We estimate that 30 per cent of the volume and 10 per cent of the value of Hong Kong’s import is re-exported to China. But we don’t know how many watches are sold in Hong Kong to Chinese tourists.”

One motivation is a 20 per cent luxury tax the Chinese Government imposed on watches priced above $1,200 in April 2006.

“Many of the affluent still buy watches in Hong Kong where it is cheaper,” says Jessica Lo, managing director, China Market Research Group (CMR). “But young consumers are buying cheaper watches in China. There is a shift away from the pirated watches that are everywhere — people now want the real thing.”

For many, buying a luxury watch means a visit to Xinyu Hengdeli, the country’s largest luxury watch retailer. Xinyu Hengdeli already has 210 outlets, and plans to expand to 300 by 2011. Swatch Group holds an 8.1 per cent stake and LVMH Moet Hennessy Louis Vuitton holds 7.5 per cent in Xinyu Hengdeli.

“A notable trend is for retailers to ask fashion brands to design special watches exclusively for their stores,” says Michelle Wang, founder of the consultancy, The Genesis Solutions.

The momentum of the market is apparent in Nielsen adspend numbers. TV, newspaper and magazine expenditure more than doubled from Rmb 752 million in 2005 to Rmb 1.9 billion last year. The current year should achieve a new high, as from January through July, adspend had already totalled Rmb 1.4 billion. Synovate’s Andrew says that out-of-home is a favourite vehicle for luxury watches.

“When you are in the airports at Beijing or Shanghai, there are massive posters you can’t miss,” he said. “It is very targeted. They’re going after people who can afford international travel.”

“If you look at the in-flight magazines of China’s airlines, you will be amazed at what is being advertised.”

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This article was originally published in 10 September 2009 issue of Media.