At This Year’s Baselworld Fair, Industry Still Buzzing About China’s Luxury Watch Demand
Despite concerns about the health of the luxury watch market in China for the coming year, experts and industry insiders congregating at this week’s Baselworld watch and jewelry fair predict that the market is set to continue growing, albeit at a much slower rate than it has at its high points.
Amidst China’s crackdown on official luxury gifting, some new China numbers have given high-end wristwear companies ample cause for concern. For starters, exports of Swiss watches to China were down 31 percent year on year in March, according to a recent Financial Times report. This decrease was one of several oscillations that have occurred over the past few months. In related news, a January Hurun Report consumer survey showed a marked drop in the popularity of luxury watches as gifts among China’s super-wealthy, a disconcerting figure when combined with estimates that 40 to 75 percent of luxury watch purchases in China are bought as gifts.
These figures may sound grim on their own, but growth persists in the luxury watch market in China for foreign companies. China remains ahead of the United States in luxury watch demand for the second year in a row, and a recent research report published by Digital Luxury Group reported a 36 percent increase in demand for luxury watches.
“Despite a reported slowdown in the region often attributed to the reluctance towards government gifting, we can’t realistically forecast a significant market decrease in the mid-term as the fast growing middle-class, quick wealth creation from tier 2 and 3 cities as well as increasingly important travel spending are strong drivers that are here to stay,” said Pablo Mauron, Digital Luxury Group’s general manager for China.
Swiss group Swatch expects sales growth in China in the coming year. The company, which outperformed other luxury conglomerates in overall sales this year, projects a growth rate of 10 percent in 2013. Meanwhile, competitor Richemont is optimistic about its global 2013 sales forecast and is heavily investing in the Chinese market, having recently teamed up with Hong Kong jewelry company Chow Tai Fook to create a joint venture that plans to distribute Baume & Mercier watches on the mainland.
One of the reasons for continued demand may be watch companies’ adaptation to the growing trend of “stealth wealth” in China. “This year, there is a clear trend toward gifting more modestly priced top luxury goods,” Hurun Report founder and chief researcher Rupert Hoogewerf told Women’s Wear Daily. Watches have been a point of sensitivity among officials hoping to avoid extravagant displays of wealth, which was most recently evidenced by a viral photo of the recent Sichuan earthquake relief effort in which a local government official posing with Premier Li Keqiang has a visible watch tan line. In addition to political concerns, Chinese consumers are generally looking to more sophisticated and understated styles as the luxury market matures.
Although luxury watch sales are set to slow, companies’ reliance on China and other BRIC countries for main sources of growth remains. This sentiment was summed up by François-Henry Bennahmias, chief executive of the independent watchmaker Audemars Piguet, who said of China’s market relative to others, “If I am driving at 80 mph and slow down to 60 mph, yes, it is a difference. But if everyone else is only going 40 mph, I am still faster.”