After hopes earlier this year that China’s Swiss watch sales slump was on an uptick after hitting rock bottom, new data released today by the Federation of the Swiss Watch Industry shows that the luxury wristwear industry is going to have to hold on longer before seeing signs of stability.
According to the Foundation’s monthly industry report, Swiss watch exports to mainland China fell by 16.5 percent over the month of April. Hong Kong remained a bright spot with 9 percent for the same time period. The mainland decline, however, has brought total Greater China export growth numbers down from 5 percent in the first quarter to 3 percent in the first four months of 2014.
While China’s luxury industry has been slowing thanks to a number of factors, including declining GDP growth and more Chinese shoppers buying abroad, the downturn in watch sales is generally attributed to China’s anti-corruption campaign. While not all luxury segments have been affected equally, luxury watches and high-end spirits have been some of the hardest-hit sectors thanks to their popularity for official “gifting” or bribery purposes. Swiss watch sales in China experienced a staggering growth rate of 97 percent from 2000 to 2012, according to data from Credit Suisse. When China’s anti-graft campaign was announced, this increase came to a halt almost immediately and has remained on a downward trajectory.
Industry insiders were optimistic about a turnaround in December, when exports to China increased 18.8 percent. Richemont reported earlier this month that although the company saw a 7.5 percent decline in sales during the 12 months leading up to March 31 this year, the last six months of this period began to see an uptick. “Because we are starting to see better figures and growth in China over the last few months, we are rather optimistic, ” said Richemont Co-CEO Richard Lepeu. Signs of decline have come creeping back quickly, however. In March, exports were down 1.7 percent, and April’s numbers indicate that the market is still highly prone to fluctuation.
For many Swiss watch brands, the promise of China’s future economic growth has encouraged a “stay the course” attitude toward dealing with the current slump. Many have been stepping up their China marketing efforts as a result of the slowdown. For example, Omega recently hosted a major gala dinner with American actor George Clooney in Shanghai called “Le Jardin Secret,” which showcased the brand’s Aqua Terra collection to a group of VIP Chinese customers. Although companies face short-term challenges, they still hold a bright attitude about the future. “The middle class continues to grow and I don’t think the slowdown is as serious as the media in the West are saying,” said Omega President Stephen Urquhart to Women’s Wear Daily at the event. “The demographic signs are good here.”