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China Watch Market

Major international luxury watch manufacturers are pivoting their brand strategy toward the China market in 2021, as the industry’s highest spending demographic is concentrated in one region for the first time. Between January and November 2020, Swiss watch exports to Mainland China amounted to USD 2.39 billion, a 17.1 percent increase over the same period during the previous year.

Fine watches may even be considered the most important sector of China’s overall luxury market, as timepieces have the strongest cultural connotations of wealth and social status out of all consumer products in contemporary Chinese society. China’s luxury watch culture has evolved as much as the market has grown since Rolex first established its local distribution channels in the 1990s. Today, China’s watch market is driven by young, highly informed enthusiasts who are equally open to vintage, pre-owned timepieces from specialized online marketplaces and contemporary collections from Jaeger-LeCoultre, IWC and Hublot.

China was the first country to suffer the economic impact of COVID-19 and also the first to recover in business. COVID 19 had severely impacted global exports of high-end Swiss watches. However, it was the only country to have recovered and shown year-on-year growth. This is in contrast to the continued decline in the US, Europe and Japan.

Considering that travel retail will not fully recover until 2022-2023 and that a return to growth in economies outside of China will prove challenging, Swiss brands have more incentive to invest in the China market in the near future.

Official sales channels are increasingly setting up online platforms, as digital marketing and distribution become increasingly important. Tmall Luxury Pavillion now hosts digital boutiques for major Swiss watch manufacturers, including Richemont’s subsidiaries Montblanc, Piaget and IWC, while WeChat provides mini-apps, social media channels and sales platforms for brands and distributors within its mega-app ecosystem.

Audience engagement, digital brand development and streamlined social media sales channels make digital platforms essential for marketing in China’s consumer economy. Video and livestreaming platforms have increasingly taken center stage.  Kuaishou increased their gross merchandise volume by 800% in 2020, to 332.68 billion RMB, while Douyin (TikTok) reported that their transaction volume tripled. WeChat and Douyin also engage audiences through minigames,  which range from brand information quiz challenges to virtual character customization with branded apparel.

Digital channels present innovative brand development strategies, which are particularly effective with engaging younger demographics. However, in-store retail will continue to be the primary sales channel for luxury watches.

While Digital marketing platforms are key to building brands in China’s watch market, the culture continues to thrive at major in-person social events like Richemont’s Watches and Wonders exposition, annually held in Shanghai, and Sanya, Hainan Island, which is emerging as a major duty-free retail destination. The central government is continuing to pursue policy incentives to encourage its citizens to purchase more goods and services domestically.

An increase in the duty-free shopping limit from RMB30,000 to RMB100,000 per year in Hainan, will encourage Chinese consumers to spend a large portion of their buying power away from international destinations such as the US and Europe. In-store luxury retail within China is set for recovery and growth, as most Chinese consumers take delight in the tangibility of the in-person shopping experience when it comes to higher end luxury products.

In-store experiences make the most substantial contribution to driving sales of High-end watches. Surveys indicate that consumers around the world are more likely to make their watch purchases offline,  which suggests that the luxury watch market is not likely to fully digitalize.

According to Ira Melnitsky, CEO of the largest US luxury watch retailer Tourneau, “the future of traditional retail is still very strong and will be complemented very well by our digital and e-commerce initiatives. One will support the other and vice versa.”  China’s market is likely to grow along the same lines.

Chinese consumers have not only driven growth in Asia but have also been responsible for the large growth in travel retail sales overseas. The relaxation of duty-free policies within China will inevitably harm the recovery of travel retail in areas such as Hong Kong, Europe, and the US as more Chinese consumers make their purchases domestically.

China’s luxury timepiece market is one of the most exciting sectors anywhere in the world, as the culture of appreciation for fine miniature handiwork, precision functionality and long-term durability continues to develop, driven by knowledgeable, passionate and enthusiastic demographics with rising incomes. Should you have any interest in distributing luxury products in China’s dynamic, rapidly expanding consumer market, we would be happy to schedule a free initial consultation.