Vertime, a mid-priced watchmaker for fashion brands such as Ferragamo and Versace, aims to double its points of sale on the mainland at a time when Beijing has vowed to crack down on corruption and the gift culture.
The Swiss manufacturer of timepieces acknowledged the economic and political headwinds in the Chinese market.
It had to overcome relatively high start-up costs and the challenge of distribution when entering the mainland's affluent first-tier cities.
In an interview with the South China Morning Post, Vertime chief executive Paolo Marai said sales of its Ferragamo timepieces jumped 40 per cent in the first quarter from a year earlier, while sales at luxury brands such as Rolex and Omega have plunged an average 40 per cent.
"It seems that we are unaffected by China's latest anti-corruption campaign, probably because our products are not considered as the gift type of product," Marai said.
"We are still an emerging brand in the massive Chinese consumer market, where market turbulence has had a greater adverse impact on market leaders."
President Xi Jinping has clearly voiced his desire to fight corruption. Xi has warned government officials not to accept luxury gifts such as jewellery and expensive wine. He aims to tackle bribery at all levels and plans to increase checks on officials' power. Widespread corruption has been a problem since late leader Deng Xiaoping began economic reform in 1978, but anti-bribery talk is in the spotlight as it is seen as a root cause of social unrest, which could destroy the ruling party's political legitimacy.
Commenting on the bumpy road facing the watchmaker, Marai, who is based in Switzerland, said during a recent visit to Asia that the firm's mainland expansion strategy would focus on department stores in Beijing and Shanghai. The plan is being fuelled by a rapidly rising class of "newly rich" Chinese looking to demonstrate their taste and status. The points of sale will be doubled to 40 by the end of this year.
"The size of the Chinese market can be a fantastic opportunity for any brand. Nevertheless, the cost of distribution has prohibited us from further expansion into the second-tier cities," Marai said, suggesting sales of the firm's "casual luxury" products remain lukewarm at the moment.
Vertime produces 150,000 timepieces annually. Sales of Versace-branded watches account for 68 per cent of the firm's overall revenue, while the fast-growing Ferragamo-branded timepieces make up the rest.
The Ferragamo watches are sold at prices ranging from US$900 to US$1,500, with the target client group spread between the ages of 30 and 50.