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An Officine Panerai watch with a 44mm dial. Luxury goods makers are focusing on China to revive their flagging sales, and Panerai’s dial sizes have shrunk by a third to cater to the preference of Chinese customers for more discreet watches. Photo: Shutterstock

In luxury, what Chinese want counts as sales in the rest of the world fall – witness watch brand’s launch of models with smaller dials

  • When a single pop-up store in a southern Chinese province made up nearly half the sales lost to falling custom in Hong Kong, Officine Panerai took note
  • Not only is the Italian watchmaker expanding there, it is tailoring lines to Chinese tastes as the luxury industry’s centre of gravity shifts east from Europe
Panerai

Luxury-watch maker Officine Panerai is known for its big and bulky timepieces. But its bestsellers are becoming smaller and smaller, largely due to Chinese buyers.

Its original military watches had 60 millimetre dials, yet the Italian brand now sells models as small as 38mm in China because of the preference there for more discreet products.

The watchmaker’s pivot to making smaller modes is an example of how luxury goods makers are retooling to suit Chinese tastes. This process is being accelerated by the nation’s economic rebound as the rest of the world continues to reel from the impact of the coronavirus pandemic.

“China, for the first time in the history of the brand, will become our No 1 country this year,” said Jean-Marc Pontroué, chief executive officer of Panerai, a unit of Swiss luxury group Richemont. “Now that we have a clear view of how big China is for the brand, how much even bigger it could be in the future, we know where to focus our investments.”

Panerai CEO Jean-Marc Pontroué says a single pop-up store in Hainan, China is making up 30 per cent to 50 per cent of revenue lost in Hong Kong.

China has become a lifeline for the luxury industry amid Covid-19. Driven by a pent-up desire to spend after months of social distancing and unable to travel overseas, Chinese consumers are spending heavily at home. Luxury demand there may surge 10 per cent this year, even as it plunges 45 per cent globally, Boston Consulting Group estimated in June.

Global brands are adjusting their long-standing practices, strategies and brand identities to cater to Chinese customers.

Luxury stores exit Russell Street, Hong Kong, amid tourist slump

Louis Vuitton held its latest men’s show first in Shanghai in August. The annual international watch fair for Richemont brands, known as Watches & Wonders – an elite industry event hosted usually in Geneva – was brought for the first time to Shanghai this week. In April, the Geneva fair was replaced by an online version.

Brands such as Louis Vuitton, Givenchy and Chloé have also started using live-streaming to push products in China – a popular style of social commerce where an influencer speaks live, promoting and trying out items.

All major brands saw soaring sales in China in the past few months, said Jason Yu, managing director at Kantar Worldpanel Greater China.

Panerai’s boutique in Hong Kong has seen a downturn in business.

Wine-to-watches luxury group LVMH’s China sales last quarter rose more than 65 per cent from a year ago while overall revenue dropped 38 per cent. Estee Lauder’s sales in China jumped 60 per cent, while another luxury conglomerate, Kering, saw a rise of over 40 per cent in sales after taking a hit in the first quarter.

“I believe the China market is big enough to justify any product adaptation,” Yu said. “A one-size-fits-all approach is less likely to succeed.”

Beyond shrinking its watch dials, Panerai plans to add eight new stores by March to strengthen its presence beyond the megacities of Beijing and Shanghai. It currently has 57 stores in China, accounting for about 40 per cent of its global network.

An empty Panerai store display in Melbourne, Australia. Photo: Carla Gottgens/Bloomberg

It will open two stores in the southern province of Hainan in the next two months after its first pop-up store there achieved “exceptional” success, Pontroué said. China recently allowed more tax-free shopping in Hainan. Opened in June, the foot traffic at Hainan’s pop-up store is almost double the pre-Covid level seen in its flagship Hong Kong store – the company’s largest boutique by space. Hainan is making up about 30 per cent to 50 per cent of Panerai’s lost Hong Kong sales, he said.

China’s size and its increasingly affluent buyers also make it a fertile testing ground for new products.

“It’s a very good laboratory to test new ideas,” Pontroué said. “Having China as our prime target is also a very good parameter to see if the new concept is a potential success or not.”

This article appeared in the South China Morning Post print edition as: Watch dials shrink to fit discreet Chinese consumers
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