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With Swiss watch exports to China in protracted free-fall amidst the country’s ongoing luxury market slowdown, the greater price-consciousness of Chinese consumers is forcing the watchmaking industry to do some soul-searching.
The monthly export report released this week by the Federation of the Swiss Watch Industry painted a seemingly grim picture when it comes to Chinese consumers. Total exports dropped 9.3 percent, falling to the lowest rate they’ve been since November 2009. These global results were made worse by especially poor numbers in the Greater China region, with a 29 percent drop in exports to Hong Kong and a 40 percent drop for mainland China.
But that doesn’t mean Chinese consumers have stopped buying watches altogether. On the contrary, they’re just becoming far more aware of price, and avoid high China tariffs by buying abroad and opting for more mid-range models. This week’s Swiss export numbers showed 53 percent growth for France, and an analyst at Bank Vontobel AG in Zurich told Bloomberg that “Chinese tourists traveled to Europe to buy more Swiss watches, so it shows the strength of tourism in Europe.”
Meanwhile, the timepieces that Chinese consumers have been buying have trended towards the less expensive since 2012—the onset of Xi Jinping’s anti-corruption campaign—when sales of top-end watches for official “gifting” purposes dried up. Over the past few years, the Swatch Group has steadily introduced more affordable models to its lineup in order to boost sales among middle-class Chinese shoppers. As a result, the conglomerate predicted in July that its sales in China in the second half of the year would increase. In addition, in a nod to the changing demands of Chinese watch-buyers (and to compete with the Apple Watch), brands have introduced high-end smartwatch features such as mobile payments.
In addition to a stubbornly challenging market environment, Swiss watch brands have also grappled with currency fluctuations in China. After seeing dampened earnings thanks to a surge in the franc, China’s yuan devaluation could now threaten to crimp sales in Europe among price-conscious Chinese tourists. As the market grows increasingly diverse and complicated, it’s vitally important for watchmakers to understand their Chinese consumers, including where they’re shopping and what’s influencing their purchase decisions. Otherwise, it’ll be continued tough times ahead.