Sophie Chen
Aug 26, 2013

Times are changing for luxury watch brands

SECTOR STUDY: Evolving tastes and a government crackdown on extravagance have ended the Swiss watch joyride in China. What can local and foreign brands do to build loyalty.

Rolex: Repositioning to secure loyalty
Rolex: Repositioning to secure loyalty

China’s economic slowdown and the current government-led anti-corruption, anti-extravagance campaign are putting the squeeze on Swiss luxury watch brands that have depended on the market for growth. According to a report by Deutsche Bank, exports to Greater China plunged 26 per cent in March 2013 versus the same month last year.  

Nevertheless, there is still room for growth for these brands in China. The country still leads in this category with the highest year-on-year increase of 36 per cent in demand, driven by 63 per cent growth from prestige category brands, according to Digital Luxury Group’s (DLG) World Watch Report 2013.

A recently signed free trade agreement between China and Switzerland has brought some good news: China will cut import duties by 60 per cent on Swiss watches in the next decade.

Angelito Tan, founding partner and managing director of Robert, Tan & Gao (RTG) Luxury Consulting, says most watch industry insiders are still confident, as this agreement will act as a bridge between the Swiss and Chinese watch industries, enabling them to share knowledge and consumer expertise.The momentary slackening of the popularity of Swiss watches however does present an opportunity for China’s domestic luxury watch brands, such as Seagull, Shanghai Watch and FIYTA. 

“We have seen these brands being more aggressive in their marketing efforts recently, with FIYTA even presenting at Basel earlier this year among other international watch houses,” Tan says.

However, Chinese watchmakers still have a long way to go. Seagull has only sold two of its most expensive timepieces (priced at US$269,936) since 2010.

“Chinese brands, even those considered ‘heritage’ brands, have introduced several models aimed at luxury consumers, but they have consistently fallen flat,” says Emma Li, research and advisory lead at L2, a think tank for digital innovation.

The top 10 most wanted watch brands in China, with the exception of Cartier, are still all ‘made-in-Switzerland’. They are led by Omega, Rolex and Longines, according to the DLG report.

But this is no time for the brands to be complacent, say experts. To secure brand loyalty in China, they need to adapt more swiftly to changing preferences which are moving away from the gaudy and shiny to classic and elegant. Although brands like Rolex will still be perceived as extremely desirable by Chinese consumers, Tan says there will certainly be serious watch enthusiasts who are starting to prefer ‘quieter’ and understated brands.

Rolex for one has been revamping its communication worldwide and in China by investing in Formula One, golf and tennis, and repositioning itself as ‘The Swiss Watch Expert’. Some Swiss watch brands are focusing on more quality editorial generation and CRM initiatives such as private events where they can build relationships with consumers. An area of focus is after-sales service where some brands are known to offer sub-par services in China. 

“Boosting the quality of pre- and post-sale customer service will breed better brand loyalty and word-of-mouth—two things these brands critically need,” Li says.

EXPERT OPINION Brands need to explain their exclusivity

Bertrand Ternat, associate director of loyalty, Ipsos Hong Kong

The past decade of double- or triple-digit growth numbers in China has created great euphoria across the Swiss watch industry in the country.

The joyride seems to have slowed considerably this year. There are three major drivers for this change:

The buyers are now the users. The new gift policy issued by the Central Government has resulted in Chinese shoppers thinking twice about ostentatious displays of wealth.

Coupled with the rise of Chinese homegrown brands (Chow Tai Fook was ranked ahead of Cartier among jewellers in the latest Digital Luxury Group report), Chinese watch brands such as Seagull or The Chinese Timekeeper may see their long brand construction work pay off this year.

Growing sophistication has led to Chinese consumers starting to avoid shiny products with big logos and diamonds in favour of more discreet options. Brands such as Longines, Tissot and IWC have enjoyed rising popularity with the right product mix and positioning.

The new generation of Chinese affluent have travelled extensively, studied abroad and expect a similar in-store experience at home as overseas. They expect to get the same free services they received from a boutique in Geneva from a boutique of the same brand in Shanghai.

The successful watch brands in the future will be the ones that are able to transmit the DNA of their watches to the consumer, the story behind the craftsmanship, and what makes them so exclusive —or in other words, luxurious.

 

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