Hong Kong: Synchronised slow-down

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October 2012

At the Hong Kong Watch & Clock Fair Europa Star had the opportunity to talk to Mr Geoffrey Kao, Vice-Chairman of the Federation of Hong Kong Watch Trades & Industries Ltd., about the strategic orientation of the Hong Kong watch industry and his views on the current market situation and the future development of the industry.

Mr Geoffrey Kao
Mr Geoffrey Kao

Europa Star: In your presentation at the Hong Kong Watch & Clock Fair, you showed that the Hong Kong watch and clock industry exports everything except watch movements. Do you see any potential for the industry to produce finished movements?

Geoffrey Kao: There is actually an initiative that we started five years ago. It was a government initiative on developing movements. At an academic level it was a great success, but in terms of commercialising the movements, we are still a long way off. We have recently started a second initiative that follows on from the academic research to determine the specifications of the individual components required.

ES: What about focusing on commercialisation of just an individual component within the movement?

GK: I firmly believe this is a good idea. But as an industry, the consensus is for a full movement. But I believe it’s easier to make smaller steps than a big step towards a complete movement.

ES: There was a lot of talk about the protection of intellectual property at this year’s show. How important is this for the Hong Kong watch industry?

GK: We have a strong business integrity, which is why we have been very successful as exporters, because brands are very comfortable in placing orders in Hong Kong knowing that their intellectual property will be respected.

ES: People at the Hong Kong show seemed to be talking more openly about a global downturn in the watch industry, do you see this happening?

GK: I would say that it is more of a slow down than a downturn. So rather than Hong Kong growing at 50 per cent we are growing at 15-20 per cent. I therefore think it’s more correct to talk about an adjustment of expectations. A lot of bankers are saying that they expect 2013 to be a “synchronised slow down”. Also, purchasing behaviour is changing. The number of transactions is actually increasing, but the value per transaction is decreasing, which could have an impact on the luxury segment for watches with a retail price above CHF 3,000.

ES: Since Hong Kong is a big exporter to Switzerland, is it safe to say that as long as the appetite for Swiss watches is growing, the Hong Kong industry will also grow?

GK: Switzerland is a big market, but I think the trend towards fashion watches will have an impact in the future. This is already a visible trend in China. So even if Switzerland holds its position, the fashion trend will keep the industry growing. This is actually an opportunity for Hong Kong, because Hong Kong is known for its speed and efficiency, so we can follow the trends very easily.

ES: In the west, people tend to classify Chinese cities into three tiers. Is this fashion watch trend spread evenly across the different types of city?

GK: This is an incorrect way of viewing China. People should see China like Europe rather than like the US. There are 34 different regions, each with its own capital, each of which is a tier one city. Historically, there was very little connection between these regions and you could compare them to individual countries, each with their own different purchasing behaviour.

ES: Do you think the Swiss brands are aware of this?

GK: Well, the Swatch Group know what they are doing [laughs]. But some other brands are still learning. And it’s an expensive lesson to learn. For every ten brands that enter the market each year you see nine leaving.

See the other articles in our report from the 2012 Hong Kong Watch & Clock Show

Source: Europa Star October - November 2012 Magazine Issue