It’s a big world out there as watchmakers see their margins get squeezed
A look into how luxury watches are faring in the global market.
The global market for luxury watches seems to be in slow motion. Usually led by Japan and China, where sales of Swiss-made watches rose by more than 400 per cent between 2005 and 2013, Asia has been particularly weak.
Receipts have likewise taken a beating in Russia amid punitive Western sanctions and also in the United Arab Emirates, where abysmal oil prices are hurting the Gulf’s previously high-octane economies.
Thanks in large part to a strong franc, Swiss global watch exports, dominated by giants Richemont and Swatch, dropped to US$13 billion between January and July, down 1.2 per cent year-on-year.
In the key markets of Hong Kong and Macau, retailers are reducing inventories or, worse, closing high-rent stores as margins get squeezed. Shipments of Swiss watches to Hong Kong fell by 20.5 per cent in the first nine months.
Luxury watch sales have been dampened by a raft of factors: recent political ructions in Hong Kong; a sharp drop in the number of tourists from mainland China; the slowing mainland economy; anaemic Chinese stock markets; and the end of exorbitant gift-giving to officials amid Beijing’s anticorruption campaign.
Some analysts, who have forecast a 4 to 7 per cent increase in Swiss watch sales, remain optimistic, with signs of recovery in the United States and Europe, and sustained purchases by Chinese customers travelling overseas, especially in France and Britain.
Aldo Magada, CEO of LVMH-owned Zenith, recently told The Financial Times that its mainland customers had shifted their shopping trips from Hong Kong to Japan.
“At a brand level, a global approach ensures a stronger, more consistent message, but the strategy has to allow for some level of localisation in below-the-line initiatives so that you are always addressing relevance,” says Catherine Feliciano-Chon, founder and managing director of CatchOn PR and branding consultancy.
Brand ambassadors can have a big impact on the mainland, but some brands highlight craftsmanship or technical complexity, she says.
Global and local branding can also be done through the clever use of social media and online marketing, plus event, sports or media sponsorships.
The recent launch of the Apple Watch has left some brands jittery, although groups such as Swatch have jumped on the smartwatch bandwagon.
The next big challenge is to capture the short attention spans of the millennial buyers.
