Times are changing for luxury watch brands

China’s economic slowdown and the current government-led anti-corruption, anti-extravagance campaign are putting the squeeze on Swiss luxury watch brands that have depended on the market for growth. According to a report by Deutsche Bank, exports to Greater China plunged 26 per cent in March 2013 versus the same month last year.  

Nevertheless, there is still room for growth for these brands in China. The country still leads in this category with the highest year-on-year increase of 36 per cent in demand, driven by 63 per cent growth from prestige category brands, according to Digital Luxury Group’s (DLG) World Watch Report 2013.

A recently signed free trade agreement between China and Switzerland has brought some good news: China will cut import duties by 60 per cent on Swiss watches in the next decade.

Angelito Tan, founding partner and managing director of Robert, Tan & Gao (RTG) Luxury Consulting, says most watch industry insiders are still confident, as this agreement will act as a bridge between the Swiss and Chinese watch industries, enabling them to share knowledge and consumer expertise.The momentary slackening of the popularity of Swiss watches however does present an opportunity for China’s domestic luxury watch brands, such as Seagull, Shanghai Watch and FIYTA. 

“We have seen these brands being more aggressive in their marketing efforts recently, with FIYTA even presenting at Basel earlier this year among other international watch houses,” Tan says.

However, Chinese watchmakers still have a long way to go. Seagull has only sold two of its most expensive timepieces (priced at US$269,936) since 2010.

“Chinese brands, even those considered ‘heritage’ brands, have introduced several models aimed at luxury consumers, but they have consistently fallen flat,” says Emma Li, research and advisory lead at L2, a think tank for digital innovation.

The top 10 most wanted watch brands in China, with the exception of Cartier, are still all ‘made-in-Switzerland’. They are led by Omega, Rolex and Longines, according to the DLG report.

But this is no time for the brands to be complacent, say experts. To secure brand loyalty in China, they need to adapt more swiftly to changing preferences which are moving away from the gaudy and shiny to classic and elegant. Although brands like Rolex will still be perceived as extremely desirable by Chinese consumers, Tan says there will certainly be serious watch enthusiasts who are starting to prefer ‘quieter’ and understated brands.

Rolex for one has been revamping its communication worldwide and in China by investing in Formula One, golf and tennis, and repositioning itself as ‘The Swiss Watch Expert’. Some Swiss watch brands are focusing on more quality editorial generation and CRM initiatives such as private events where they can build relationships with consumers. An area of focus is after-sales service where some brands are known to offer sub-par services in China. 

“Boosting the quality of pre- and post-sale customer service will breed better brand loyalty and word-of-mouth—two things these brands critically need,” Li says.