Movement in high end
Demand for luxury timepieces, particularly rare models, is gaining as new markets emerge, especially on the mainland
Luxury watch brands are eyeing China as the next goldmine of opportunity with plans to capture a share of the world's fastest growing luxury market on the back of the rapidly emerging rich set.
China's population of high-net-worth individuals jumped 20 per cent last year from a year earlier, the world's second largest expansion behind India, according to a report by Capgemini and Merrill Lynch. There was also much growth in the mass-affluent population segment, the report noted. These are individuals on the brink of the high-net-worth individual threshold of US$1 million.
That is why watch brands have been prolific in opening dedicated boutiques in China. Glashutte Original is planning to add three stores to its six by the end of next year, while Audemars Piguet is scouting for suitable sites in Beijing and Shanghai.
The mainland imported Swiss watches to the value of 397.4 million Swiss francs (HK$2.62 billion) in the first half of the year, up 64 per cent from a year earlier, according to the Federation of the Swiss Watch Industry FH. Hong Kong imported Swiss watches to the value of 1.3 billion francs in the same period, a rise of 21 per cent from the same period a year earlier.
Up to half of the watches sold in Hong Kong are bought by mainland tourists who find prices more favourable than in their home cities because there is no import, consumption or value-added taxes, according to watch industry sources.
'For Swatch Group brands, including Glashutte Original, retail prices in China inclusive of VAT, are about 17 per cent higher than Hong Kong. For other brands in the market, the price difference can be 25 to 30 per cent higher,' said Leo Poon, Glashutte Original's vice-president for North Asia.
He said many luxury watch brands had seen double-digit growth on the mainland over the past five years, though the knowledge of consumers could vary dramatically.
Martin Ganz, vice-president of Breguet for Greater China, said: 'People's understanding of luxury watches in China is quite wide, [ranging from] people who are clueless, to collectors who are knowledgeable. But, overall, the Chinese are keen to learn.
'People in China have more of an understanding of the high-end luxury market. They are learning so fast from their peers.'
The reasons driving Chinese consumers to buy luxury watches are equally diverse, according to Dimitri Gouten, managing director of Piaget for Asia-Pacific.
'Watch buyers are either trendsetters, connoisseurs or they are buying as a status symbol or for indulgence.'
Wolfgang Sickenberg, chief executive of Audemars Piguet in Hong Kong, said all markets in their infancy tended to have a preference for more classical designs at the outset: round shapes and simple dials. But the more sophisticated Chinese cities of Shanghai and Hangzhou had embraced the avant-garde trends that used new materials such as carbon and steel, and special edition watches.
Watch brands know that education holds the key to unlocking the market potential and elevating the knowledge of consumers in areas such as new designs and mechanical movement.
Watchmakers are constantly launching education initiatives to stimulate consumer interest.
Piaget regularly organises road shows to showcase its museum pieces and collections across the mainland and invites experts to talk about specific aspects of its products.
Mr Gouten said: 'This is a good way for people to learn. They can touch the product and get advice and opinions from independent watch experts. This enables us to build up a close relationship with consumers. This is something we do in most new markets, but particularly in China.'
Audemars Piguet has been focusing its energy on educating retailers in 13 mainland cities by adapting its European training programme to the Chinese market.
Mr Sickenberg said: 'We see it as our duty to train retailers and end consumers about the value of our products and the value-added components of a watch.
'We do this by taking them back to basics so they can really appreciate the process of watchmaking.'
Audemars Piguet's academy for retailers, launched in Switzerland two years ago, would probably be extended to consumers in the longer term, he said.
'We will launch the retailers programme in China by the end of the year. It will show retailers the entire process of watchmaking from a theoretical and practical perspective so they can better understand how a watch is made and the concepts behind the mechanisms,' Mr Sickenberg said.
With Russia and the Middle East also contributing to demand, offering an array of products has become crucial.
Walter Von Kanel, president of Longines, said: 'It is important to propose a diversity of products to meet the different tastes of the consumer who wants more choice and timepieces that correspond with his or her differing lifestyle needs - enabling the purchase of more than one watch according to whether the person wishes to show the sporty, classical, elegant or fashionable side of his personality.'
And, as globalisation shrinks the world, watch brands are all taking a global approach.
Thierry Nataf, president and chief executive of Zenith, said: 'We notice that today's world is going more global and cultural differences tend to disappear.'
He added that the demand for custom-made timepieces was growing with people wanting to affirm their identities by wearing luxury products as a statement of their individuality.
With consumer demand expected to grow and an increasing preference for timepieces with intricate handiwork and artistic input, the major challenge lies in keeping up with new trends and designs given the shortage of watchmakers and artisans, and the fact that complicated watch movements can take several years to develop.