Ripe time for luxury brand expansion

PUBLISHED : Monday, 14 November, 2011, 12:00am
UPDATED : Monday, 14 November, 2011, 12:00am


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Retailers are facing heated competition to attract increasingly wealthy mainland shoppers, and luxury watch brands are flocking to open stores in China.

US jewellery and watch brand Harry Winston has opened a flagship timepiece store at Elements shopping mall in West Kowloon, while Swiss watchmakers Maurice Lacroix and Zino Davidoff - also known for its cigars - plan to expand further into the competitive market.

Overseeing the three brands' expansion is DKSH Hong Kong, which wants to tap into Chinese consumers' increasingly deep pockets at a time when high unemployment in America continues to bite and the spiralling European sovereign debt is weakening consumer demand.

'Greater China is the most flourishing market in [terms] of income growth and middle-class numbers,' said DKSH Hong Kong managing director Victor Hew. 'We saw the fervour and felt the pulse of mainland buyers a few weeks ago at an in-house auction.'

A collection of top-end watches was auctioned off last month in Hong Kong, where a mainland bidder snapped up a Harry Winston 18-carat white-gold watch for HK$2.55 million, from the original floor price of HK$2 million.

DKSH - which helps foreign brands access customers in new markets with marketing, sales, distribution, logistics and after-sales services - expects the brand outsourcing business to grow 7 per cent annually over the next five years, citing results of a survey by consultant Roland Berger last month.

Hew said the number of sales locations of Maurice Lacroix timepieces - currently 39 in Hong Kong and 83 on the mainland - would be increased.

Harry Winston, meanwhile, plans to more than triple the number of shops from four to 13 in Asia, excluding Japan, by 2016.

But Hew conceded that high rents posed challenges to the expansion. For example, there are only two Harry Winston watch stores on the mainland, and they are located in second-tier cities Dalian and Kunming.

'Property rents are expensive in Hong Kong and on the mainland,' Hew said. 'Harry Winston's stand-alone stores will land in first-tier cities like Beijing and Shanghai later.'

Recently, research by Forbes showed that the number of billionaires in China would jump 80 per cent to 115 this year from last year. The nation is destined to be the second-largest country with the biggest crop of billionaires after the United States, where billionaire numbers are expected to climb 2 per cent to 413 this year.

But tapping into the mainland market is punishing, due to fierce competition, and it requires big investments. Billionaire Cheng Yu-tung's Chow Tai Fook Group is testing the waters for an estimated US$4 billion initial public offering in Hong Kong to help fund expansion of jewellery shops while London-based gem trader Graff Diamonds is rumoured to be planning a listing.