For the past three years, executives at Swiss watch brands have been communicating via video calls, digital conferences and evenHologramHaving previously conducted business in Asia virtually, they are now eager to be on the market in person.
“I just came back from Hong Kong,” Julien Toner, CEO of Swiss watch brand Zenith, said in a phone interview in late February.
“I’m going to mainland China in April,” he added. “We haven’t been there in three years. We have a lot of dinners scheduled, meetings with collectors and clients. We’re also celebrating the opening of several boutiques, which have been delayed during the pandemic. I want to do a ribbon-cutting ceremony.”
Like many of his peers, Tonner is eager to make up for lost time in Asia. Now that Watches & Wonders, the haute horlogerie industry’s annual showcase for new products, has concluded in Geneva, brand executives are turning their attention to key markets, including mainland China, Hong Kong, Macau, Japan, South Korea, Singapore, Thailand and Vietnam.
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According to the Federation of the Swiss Watch Industry, Asia will account forSwiss watch exportsNearly 40% of the total (compared to 16.7% in North America)Despite a decline in China’s market share—a 13.6% year-on-year decline in 2022, largely due to pandemic containment measures—many industry observers remain bullish on the region’s prospects.
“You have to look at the Chinese and Hong Kong markets together,” Jean-Philippe Berch, a luxury goods analyst at Zurich-based private bank and investment management group Vontobel Asset Management, said in a telephone interview. “If you combine the two markets, they are still down 5%, 8% from pre-pandemic levels. The situation is still volatile, but if you look at the growing middle class, they like to buy luxury goods to show off. Growth is still inevitable.”
The Swiss appear determined to take advantage of a rebound in Chinese luxury spending that many have been anticipating since the Chinese government abruptly ended its “zero quarantine” policy in December.This backlash will happen.
Pablo Moron, Shanghai-based general manager of Digital Luxury Group, a Geneva-based consultancy, said the easing of restrictions had a huge impact on Chinese people’s daily lives. “The whole city was sick for a month, but after that, it really reopened,” he said in a video call.
“It’s changing very quickly, empty restaurants are filling up again, empty malls are seeing lines again,” he added.
While the region as a whole carries Swiss hopes (“You can feel the excitement in the air,” IWC CEO Christoph Grainger-Heyer said of its watch business in Southeast Asia), China’s large pool of luxury consumers is key for any brand focused on growth. That explains why tracking their shopping habits — including, crucially, whether they plan to buy luxury watches at home or abroad — remains a hot topic in Switzerland.
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“When will travel retail become a reality?” Moron said. “It’s still an open question.”
For now, many brands are banking on Chinese consumers sticking to shopping near their home turf. “We expect a lot of people to come to Hong Kong and Macau this year,” Tonare said. “Then they will go back to Europe, Dubai, the United States, maybe in 2024. This is very important information for us because we know where they will spend.”
All eyes are on Hainan Province, an island in the South China Sea that Beijing is developing into a free trade port, domestic resort and international business hub to rival Hong Kong. In fact, the third Hainan “Watches & Wonders” exhibition, which ran from December 2 to February 28, has just ended. The exhibition was founded in the southern resort city of Sanya in 2020, and a second venue was added in Haikou, the island’s capital, in 2022.
The government hopes the island’s duty-free shopping malls will attract Chinese consumers and persuade them to spend money at home rather than on Europe’s high streets, where many Chinese preferred to buy luxury goods before the lockdown began in 2020.
Swiss watchmakers are betting big on Hainan’s success. Breitling, for example, plans to open a shop-in-shop later this year in Mission Hills Duty Free City, one of the island’s swankiest shopping malls.
“We want to triple our business in Hainan in the next five years,” brand CEO George Kern said in a video call.
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Kern explained that in 2020, the pandemic forced the brand to pause its expansion plans in China, which are only now starting over, and he stressed that the biggest obstacle to gaining a foothold in China was more about logistics than sales.
“We don’t have a product problem,” he said. “We have a tactical problem.”
In other words, how can a brand reach a country that spans more than 4,800 kilometers from east to west and has a population of more than 1.4 billion people? Residents of megacities such as Shanghai, Beijing and Shenzhen account for only a small fraction of its wealth.
These questions have long troubled foreigners seeking a piece of China’s pie, but they have become more pressing given the country’s isolation.
“It is difficult to make appropriate budgets and forecasts for China,” Oris Chief Executive Rolf Studer said by phone. “Now we are adapting to the changing situation.”
“I still believe China will come back. They love watches, they love luxury goods, and these things will stay more in the Chinese market. I welcome that because when you have a local buying locally, you have the opportunity to develop a relationship.”
It was with an eye toward fostering these relationships that Ulysse Nardin CEO Patrick Pruneau relocated its Chinese subsidiary from Hong Kong to Shanghai in 2017.
“We felt it was a natural move for the brand,” Prunio said in a video call. “We felt the mainland was becoming more influential and we needed to be closer to the market.”
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This proximity is paramount when trying to understand the evolving relationship between Chinese buyers and watch trends.
When Swiss watchmakers first began operating in the region 20 years ago, the prevailing aesthetic followed a simple formula: “Everyone was looking for a classic three-hand gold watch with a white dial,” says Guido Treni, CEO of Parmigiani Fleurier.
Times are changing too fast. “Today’s trends,” said Zenith’s Toner, “are all about sport, modernity and leisure.”
Whether this is linked to President Xi Jinping’s “common prosperity” campaign aimed at discouraging public displays of wealth, the Swiss are not saying, but the sporty, casual trend appears to be spreading, even to the fast-growing second-hand market, although Chinese buyers have long preferred new watches to second-hand goods.
“Traditionally, watches are thought to carry the soul of their previous owners, which is not necessarily a good thing,” Arjan van der Wal, CEO of second-hand dealer Watchfinder & Company, said in a telephone interview. “But in China, interest in second-hand watches is on the rise. It seems like a real shift is happening.”
There may also be a shift in the way the Swiss are cultivating Chinese buyers. For years, they have used the Lunar New Year to sell limited-edition timepieces based on the Chinese zodiac and its associated animals. “This year we saw a lot of rabbits,” Mr. Treni said.
But Parmigiani did not follow suit, but launched theTonda PF Summer Calendara built-inChinese perpetual calendar. This watch is a highly complex timepiece, combining the solar and lunar calendars on a red dial, considered an auspicious color in China, and a platinum case.
Treni said this was to create a watch that reflects the brand’s respect for Chinese culture.
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Last month, Louis Vuitton took a similar approach with the launch of the Tambour Opera Automata watch, a nod to the Sichuan opera’s “face-changing” art technique where performers quickly change colorful masks to express different emotions.
These are subtle but important indicators of a new realization among luxury watchmakers: To succeed in China — and indeed across Asia, where so many Chinese are expected to travel — luxury brands must rethink the way they have traditionally catered to local buyers.
“There has always been this idea that Chinese consumers don’t know what is good and they need guidance,” said Mr. Malone of the Digital Luxury Group. “Today’s young consumers are more confident in their taste.”
Austin Zhu, founder of Wristcheck, a second-hand watch retailer in Hong Kong, has witnessed this evolution firsthand. Before 2018 or 2019, “a lot of the Chinese market was following Western trends,” he said in a video interview. But now things are changing. A classic example is Richard Mille’sBefore entering the US marketwhich has long been highly respected in Asia.
“Asia is going to start to drive trends in a big way. In the past, they were more of followers, but now they are starting to set trends.”