Stern's warning on Chinese luxury watch market proves timely
Luxury watchmaker who said mainland market would slow down proved right as Swiss exports tumble and rival firms report declines in sales
The chairman of Patek Philippe, Thierry Stern, had advice for Swiss watchmakers several years ago that most rivals did not heed: do not overinvest in China. Amid the recent slowdown on the mainland, Stern's call has proved prescient.
Stern said everyone laughed at him when he decided to limit sales in the mainland to 130 pieces a year as brands including Omega and Cartier opened shops across China. Patek is now selling about 3 per cent of the 53,000 watches it makes annually to mainland shops , reserving the bulk of its production for traditional US and European markets and making mainland customers who want its watches travel to buy them.
Stern warned two years ago that market would slow down. "I said, I'm not willing to jeopardise the relationships that we have in the world with all the retailers and just to tell them, thank you for your help, but after a hundred years, now I go to China," Stern said in an interview at the Baselworld trade fair. "So I decided, and it was courageous at the time, to say, well, China is the last one, so they will have what is left."
The 14 per cent decline in Swiss watch exports to the mainland and Hong Kong has led some rivals to report declines in overall sales and has led others like Omega to expand outside of the market.
This month, Hermes International reported a decline in watch sales because of a fall in the Chinese market, while LVMH Moet Hennessy Louis Vuitton, the world's largest maker of luxury goods, said Chinese retailers have been purchasing fewer watches than expected.
Greater China imported more than a quarter of Swiss watches last year, according to trade group statistics. "Maybe they were too optimistic," Stern said, referring to the competition.
Swiss watchmakers are bracing for a slowdown this year as Kepler Capital Markets forecasts exports may increase 5 per cent, which would be the worst performance since the 22 per cent decline in 2009. The mainland market has been shrinking as the administration cracks down on extravagant spending by government officials.