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The Chinese watch market in 3 key concepts

ANALYSIS

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October 2019


The Chinese watch market in 3 key concepts

A cornucopia of contemporary consumption: this is how we could aptly describe the Chinese market, which today combines hyper-consumption with oversupply of goods. It is also a digital laboratory, where individualistic buying behaviour now dominates.

1. A DIGITAL LABORATORY

A cornucopia of contemporary consumption: this is how we could aptly describe the Chinese market, which today combines hyper-consumption with oversupply of goods. On the JD.com e-commerce site, for example, you will find ten times more watch references than on Amazon. The platform employs 160,000 people and has 300 million registered customers, making it the second most popular online sales provider in the country after Tmall (Alibaba).

Today, cash is disappearing in China, a society that has gone from Communist isolation to the ultra-connected world of 5G.

Beyond this abundance of supply, it is above all the sales channel that best distinguishes the Chinese market today. Combining highly efficient logistics, instant messaging and virtual payment, Chinese platforms have already achieved the famous “friction-free” and “seamless” shopping experience that is so highly soughtafter today by luxury brands. Everything, including prestigious watches, can be purchased online, at any time, and delivered within 24 to 48 hours. Today, cash is disappearing in China, a society that has gone from Communist isolation to the ultra-connected world of 5G. The centralisation of power and the creation of national champions ensure the effective deployment of new technologies in the daily lives of Chinese people.

Covering the rising Chinese watch market: Europa Star in 1998.
Covering the rising Chinese watch market: Europa Star in 1998.

China is now a digital, social and commercial laboratory. Some stores are already fully automated, with facial recognition in residential areas – a prospect that sets teeth on edge in the West, where television series such as Black Mirror raise the spectre of a dark future under the protection of new technologies. One tool now dominates all daily interactions: WeChat (from the Tencent group) with its one billion users. Watchmakers are now deploying there in force.

One tool now dominates all daily interactions: WeChat (from the Tencent group) with its one billion users. Watchmakers are now deploying there in force.

This online sales ecosystem is organised around “influencers”, who reach levels of trust that no brand alone can claim. Considered more reliable than luxury brands, they encourage impulse and direct buying, titillating the desire of the new elites and the middle class (now larger than the entire American population) to catch up.

Mainland China is a growing market for Swiss watchmakers, while the traditional hub of Hong Kong has lived ups and downs since 2000.
Mainland China is a growing market for Swiss watchmakers, while the traditional hub of Hong Kong has lived ups and downs since 2000.

2. INDIVIDUALISTIC BUYING BEHAVIOUR

The corollary to this giant virtual consumerist network is the growing individualism of Chinese society. In the specific case of luxury goods, we should also mention that the anti-corruption campaign led by Chinese President Xi Jinping has meant the weakening of purchasing practices using “para-public” money (gifting). This has led to a major change in the consumption of watches.

“As soon as you buy a watch for yourself and no longer for gifting, the reasoning changes,” says watch journalist Ryan Chen. “We want to know which brands have the best value. Because of that, watch information in China has increased considerably.” A good example is Xbiao, the largest watch database in China, which displays the price of watches.

“As soon as you buy a watch for yourself and no longer for gifting, the reasoning changes.”

It has also led to a more critical and reasoned approach to Swiss watchmaking, even if the (not necessarily neutral) influencers remain an important factor in purchasing choices. At the same time, bloggers and influencers specialising in watches (who are still quite rare) provide more detailed information on the sector. And collectors’ clubs such as the Shanghai Watch Gang are part of this wave of market-building and education.

What is still striking to an outsider is the confusion of genres on sales platforms, with dishwashing liquid offered alongside expensive watches. Accompanying the growing sophistication of the Chinese market, Tmall and JD.com are trying to design segmented luxury offers. They have recently joined forces with international partners including Yoox-Net-A-Porter (Richemont) and Farfetch respectively. The aim is now to incorporate luxury products into this Chinese digital “everyday life” ecosystem, for a more educated and individualistic clientele.

The aim is now to incorporate luxury products into this Chinese digital “everyday life” ecosystem, for a more educated and individualistic clientele.

Chinese luxury spending is expected to double by 2025, according to Bain and Morgan Stanley estimates.
Chinese luxury spending is expected to double by 2025, according to Bain and Morgan Stanley estimates.

3. CASUAL STREETWEAR

Although online shopping is gradually making inroads into the world of luxury in China, as it is all around the world, physical points of sale still represent the bulk of watch sales. A presence in China itself, beyond the fragile Hong Kong hub, is increasingly important.

As such, although it has not taken the same digital approach as Richemont, the Swatch Group benefits from a pioneering omnipresence on the Chinese market, thanks among other things to the joint venture established with the Hengdeli Xinyu group. Presence on Tmall or JD.com cannot not yet beat this major asset: comprehensive coverage of the territory. Another advantage for the Biel group is that they have the benefit of establishe, qualified and experienced field teams in China itself. The same applies to Titoni.

“China’s younger generations go to the mall first to have fun, then to buy. The entertainment dimension is very important.”

Another striking factor is the Chinese streets! The omnipresent young people display a pronounced casual streetwear style. No need to don a suit to attend a watch presentation by a luxury brand. Pablo Mauron, head of the Digital Luxury Group in China (who himself rarely wears a suit in Shanghai), is a connoisseur of the lifestyle of the country’s newer generations. “As elsewhere, they function a lot as tribes. The urban sartorial style is popular here but in general, the fashion is much more casual than in the West. I think Swiss watchmakers remain a little too formal for this market, where streetwear is very popular.”

This advice is relevant not only to watch design, but also in terms of how to sell them. “China’s younger generations go to the mall first to have fun, then to buy! The entertainment dimension is very important,” continues Pablo Mauron. “Brands such as Starbucks or Nike have understood this and offer original and fun experiences on-site.” Given the size of the market, there is certainly no single strategy that will have all the answers. For Pablo Mauron, it’s “better to invest in a reduced number of key flagship stores while promoting e-commerce, rather than multiplying openings of fairly standard points of sale”.