February 7, 2012

Chinese Appetite For Omega And Breguet Fuels 18% Swatch Group Sales Boost

Consumers In Asia Accounted For More Than Half Of Swiss Timepiece Sales In 2011

Omega store on Shanghai's Nanjing Road

Omega store on Shanghai's Nanjing Road

Amid signs that the astronomical growth rates in China’s luxury market — which we’ve seen rising rapidly since 2009 — may be taking a much-needed breather (though remaining well in the double digits), this week the Swatch Group announced that spending by Chinese consumers proved instrumental in its 18 percent sales boost last year. Owners of luxury watchmakers Omega and Breguet, as well as the flagship Swatch, the group recorded income of 1.27 billion Swiss francs (US$1.4 billion) last year, up from 1.07 billion francs ($1.16 billion) in 2010. Rising demand in the Greater China region has been a key factor in the sales growth seen among Swiss watchmakers, with the region consuming more than half of all Swiss watch exports in 2011, which climbed 19 percent to a record 19.3 billion francs (US$20.9 billion).

Though some luxury retailers worry that a regional slowdown in luxury consumption may take hold this year amid a tougher economic backdrop, the Swatch Group expects growth to continue throughout the year, though the company admits that the year will be more difficult due to “the high benchmark” set in 2011. Rather than holding back this year in high-demand markets like China, however, we might see the Swatch Group and other watch-heavy luxury groups like LVMH and Richemont continue to expand there. As Bloomberg notes today, flagging demand in the European market is expected to make Swiss watch exporters even more reliant on Asian markets this year, and even after factoring the comparatively high demand in Asia, global growth may slow to the single-digits.

Coming shortly after the Lunar New Year holiday, when many mainland Chinese tourist-shoppers headed to Hong Kong or overseas for sightseeing and shopping (often in equal measures), the Swatch Group’s announcement reflects the fact that Greater China will remain one of the most critical markets for Swiss watchmakers for the next several years at the very least. Though some Hong Kong retailers expressed disappointment that spending by mainland Chinese tourists during the 2012 Lunar New Year festivities wasn’t as lavish as last year, this may indicate that the easiest demographics in China — wealthy urban entrepreneurs and aspirational middle class shoppers — have simply slowed their pace of consumption in the former British colony. Considering these key demographics are increasingly setting their sights on more far-flung destinations, including New York, Thailand and the Maldives, this doesn’t necessarily mean a decrease in luxury spending. According to the Beijing-based World Luxury Association, overall luxury spending by outbound Chinese tourists during this year’s Lunar New Year holiday rose 28.6 percent this to US$7.2 billion.

No matter what, considering the size and nature of the mainland China market, where an expanding middle class is still taking shape and overcapacity is far from apparent, Swiss watchmakers should expect to see new customers reliably emerging and making a high-end timepiece their first major luxury purchase.


Business & Finance / Culture / Travel & Leisure / Watches
Tag: breguet, chinese new year, hong kong, lunar new year... , More
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