Watch enthusiast Li Yanzhe is among the 400m Chinese millennials tipped to become an even more dominant force in global luxury consumption in the coming years. Chinese consumers accounted for a third of all global luxury spending last year — a proportion expected to rise to 40 per cent by 2025, according to McKinsey, a consultancy.
European and US brands have dominated China’s luxury market until now. Yet Mr Li’s peer group — which accounts for two-thirds of all luxury spending in China — is opening up to domestic names, creating fresh opportunity for quality homegrown watchmakers.
Annie Hou, vice-president of strategy at marketing agency Ogilvy in Beijing, is among those noticing changes in consumer attitudes. Millennials express themselves and shape their personal image through luxury goods, she says, and they are starting to open up to Chinese brands. “In their mind, domestic brands are no longer inferior to global brands,” she observes.
One reason behind the shift is that China’s economic rise over the past decade has fuelled a sense of national pride among its youth. “[The] post-90s [generation] grew up in an age when China had double-digit growth and rising global influence and reputation,” Ogilvy’s 2019 luxury report states. “They are much more proud to be Chinese and for many of them, Chinese [luxury] brands are as good as or even better than foreign brands in some categories.”
Despite this, 30-year-old Mr Li says he is reluctant to divert any of his Rmb100,000 ($14,850) annual watch budget to local dial names. He says he struggles to connect with local watch brands as they lack a compelling narrative and craftsmanship. “When Chinese brands make mechanical watches, they don’t have a core competitiveness such as the workmanship,” says Mr Li.
“And in terms of trends, they’re not really on the pulse . . . so these two elements are both done badly.”
Appealing to Chinese millennials is critical for all watchmakers: China’s retail market for watches was worth $11.4bn last year, up 10 per cent from 2017, figures from Euromonitor International show. A sizeable chunk of this stems from Swiss luxury watches: mainland China was the third-largest export market for Swiss timepieces in 2018 at SFr1.72bn ($1.7bn), behind Hong Kong and the US.
“International brands [marketed as] more premium are outperforming domestic ones,” says Stephanie Yao, senior research analyst at Euromonitor International. She cites clever tactics such as Omega’s release last year of a limited edition Speedmaster featuring Ultraman, a Japanese cartoon character from the 1980s and 1990s that was popular in China, as well as global brands’ push to reach Chinese customers through local social media platforms such as WeChat.
China’s swath of manufacturers-turned-brand owners, on the other hand, are held back by poor marketing strategies, believes Carson Chan, a watch expert and collector, meaning that a homegrown, high-end brand has yet to break through.
“You do have quite a few Chinese brands and they do have quality products, but unfortunately I don’t see any of them [adopting international brands’ approach to] marketing,” he says. “It seems to me all the marketing that they’re doing is saying: ‘Look, I can do it for half the price’.”
State-owned factories such as Shanghai Watch Factory started making watches in China from the 1950s.
The company made a shortlived bid for the luxury market in 2007, revamping its branding and bringing in Swiss designer Eric Giroud for two designs. But, says Mr Chan, the plan stalled and its focus returned to manufacturing.
While Swiss brands dominate China’s high-end market, in the mid-range — which covers pieces from $500 to $3,000 — manufacturers from Europe, North America and south-east Asia battle for market share, a 2018 report by the Hong Kong Trade and Development Council found.
Yet China is making moves to shift the balance: according to the country’s 13th five-year plan, the HKTDC report states, it plans to shrink the proportion of watches classed as “low-end own brands” by 2020 to beef up the mid and high-end tiers. This would raise the proportion in the luxury segment from 1 per cent of the total to 3 per cent.
Rossini is the biggest-selling Chinese watch brand
Chinese brands Rossini and Ebohr — both owned by the Hong Kong-listed group Citychamp Watch and Jewellery — rank first and third on sales, according to René Weber, luxury goods analyst at Swiss bank Vontobel. Shenzhen-based Fiyta is sandwiched in second place. These brands accounted for less that 4 per cent of China’s overall watch market last year.
It seems to me all the marketing that they’re doing is saying: ‘Look, I can do it for half the price’
The three brands’ watches sell for between Rmb1,500 and Rmb3,000 ($220-$440) — roughly the price of a Tissot —…