Hong Kong's global watch domination ends

Hong Kong has been the leading export market for the Swiss watch industry for more than a decade. Not anymore. “It’s the end of Eldora...


Hong Kong has been the leading export market for the Swiss watch industry for more than a decade.

Not anymore. “It’s the end of Eldorado,” wrote Thierry Huron, founder of The Mercury Project, a Swiss watch and jewelry consulting firm, in an email.

With its sales focused on tourism shaken by pro-democracy protests in 2019, then completely blocked by a coronavirus-related tourist ban, Hong Kong lost half of its sales of watches and jewelry between 2018 and 2021, according to the July edition of the Sell-Out Index, the Mr. Huron’s monthly report.

The report, based on the Hong Kong Census and Statistics Department’s database, showed that the value of retail sales of watches and jewelry in the first half of 2021 was $ 2.5 billion. It was $ 5.7 billion over the same period in 2018.

Once a tax-free shopping paradise for more than 1.4 billion mainland Chinese citizens as well as international tourists, Hong Kong has restricted the entry of non-residents since March 2020, forcing its watch industry to shift to local buyers. .

And while the seven million inhabitants of the Special Administrative Region are among the richest and most voracious watch consumers in the world, watchmakers and industry experts say the market may never find its way back. former glory as an export destination and re-export hub for watches destined for the mainland.

“Hong Kong will certainly retain its role as a logistics hub, given its major advantages of being a free zone,” said Oliver R. Müller, founder of LuxeConsult, a watch consulting firm based near Lausanne, Switzerland. . “But I don’t think he’ll regain the importance he once had.”

“Brands have greatly reduced their local presence,” said Müller. “Do you really need to see stores with the same brands every 500 meters?

Before political unrest and the pandemic hit Hong Kong’s retail sector, the density of stores selling Swiss watches was actually a big part of the city’s appeal to mainland shoppers, who have invaded its luxury shops to buy duty free. watches for a fraction of the price they paid at home.

In 2020, however, those same buyers, unable to leave China, reoriented their spending on the domestic market, placing the country at the top of the list for exports, according to the Federation of the Swiss Watch Industry.

From January to July of this year, exports to China totaled 1.77 billion Swiss francs, or more than $ 1.9 billion, an increase of 63.7% compared to the same period in 2019. And exports to the United States, second Switzerland market, totaled 1.7 billion Swiss francs, an increase of 26.2% compared to the period 2019.

In contrast, exports to Hong Kong from January to July totaled 1.3 billion Swiss francs, a decrease of 24.1% compared to the period 2019, placing it in third position.

While current events have reshaped the image of short-term distribution, said Karine Szegedi, Managing Partner and Head of Fashion and Luxury at Deloitte Switzerland, the long-term outlook will rest on “the purchasing power of digital savvy, wealthy and distinguished people. conscious Chinese consumer; the opportunities available to them to purchase luxury goods in their country; and the increase in the number of brands (groups and independents) flocking to China physically or virtually, ”she wrote in an email.

For many Swiss watchmakers, that future is already here.

In an August interview with the watch industry publication Star of Europe, Georges Kern, chief executive of Breitling, said the company’s fiscal year ended in March with 90% year-on-year growth in the Chinese market.

“We still have to triple or even quadruple our turnover there to reach the level where we think we need to be,” he told Europa Star. “We are already in the top five for watchmakers in the US and UK, and we aim to reach the top seven in China. It is not a problem of strategy but of implementation. We have 30 stores and 50 points of sale there, but we will eventually have at least 150 points of sale.

Executives at Compagnie Financière Richemont, which owns eight specialty watchmakers including Jaeger-LeCoultre, IWC Schaffhausen and Panerai, are also optimistic about the Chinese market.

“With mainland China leading the macroeconomic recovery, it has now become the number one destination in terms of sales,” said Jérôme Lambert, CEO of Richemont, during the presentation of the group’s 2021 annual results in May. “And Asia-Pacific currently has a higher proportion of sales than Europe and the Americas combined.”

Mr Lambert said the group’s sales in mainland China increased 107% year-over-year and while he did not mention specific brands or revenue totals, he said that its watch brands and jewelry houses had achieved triple-digit growth on the continent.

He also noted “impressive growth” in Hainan Province, an island in the South China Sea that authorities in Beijing hope to turn into a free trade port, a national vacation destination and an international trade hub – in essence, a new Hong Kong.

(Whether it’s President Xi Jinping’s August 17 call for the regulation of wealth inequalities, and the subsequent drop in luxury stocks, will derail the industry’s growth plans in China, remains to be seen.)

A clear sign that the Swiss are keen to tap into Hainan’s potential is the location of the next edition of the Watches and Wonders luxury fair. For the second year in a row, the event is planned in Sanya, a seaside town in the south of Hainan, where, from October 1 to December 31, 13 watchmakers – including A. Lange & Söhne, Cartier and Vacheron Constantin – will present their products. at the international duty free shopping complex.

The opportunities for virtual sales on the continent are even more attractive. The mega-retailer Chow Tai Fook, authorized reseller of many Swiss brands such as Cartier, Rolex and Audemars Piguet, has invested heavily in digital tools, including a network of “”Cloud Kiosks”Who use artificial intelligence to recommend products to customers.

These have been installed in around 900 of its 2,000 stores in mainland China, according to Kent Wong, general manager of the Chow Tai Fook jewelry group.

Yet even the surge in retail sales in mainland China cannot mask Hong Kong’s enduring relevance to the watch resale market.

Consider the 12th Phillips auction in Hong Kong, held in early June. The sale totaled $ 24.7 million, the highest amount for a Phillips-hosted watch auction in Asia.

“The liveliness of the Hong Kong market has not suffered; it just got a little more local, ”said Aurel Bacs, the famous auctioneer whose consultancy Bacs and Russo heads the Phillips watch department.

All that fits Austen Chu It’s okay. On September 1, Mr. Chu, who sells used watches and is known as @bracelet on Instagram, opened its first physical store in the luxury Landmark Atrium shopping center in the central district of Hong Kong.

The store is “sandwiched next to the Tiffany flagship store and the Louis Vuitton flagship store,” Mr. Chu said. “Initially, WristCheck was going to open in Shanghai, but we decided to go to Hong Kong because of the ease of doing business here.

“People tend to forget that before the protests and Covid, Hong Kong was still the No.1 market for Swiss watches, which is incredible considering that only seven million people live here,” he said. added. “And last year it fell to No. 3 – with zero tourists. The purchasing power here is ridiculous.



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