Online watch retailing can’t ignore China

It’s only a matter of time before China overtakes the United States as the second largest export market for Swiss watches. Hong Kong was first to dethrone Uncle Sam ten years ago, and China should soon be joining its special administrative region in the top slots. The resulting duo will represent a market for watchmakers twice that of the United States. The proof is in the figures: shipments of Swiss watches to the US fell by a cumulative 13% in fiscal 2016 and 2017 whereas exports to China grew 15%. The trend shows no signs of abating either: the United States was back on track in Q1 2018 with an 8.9% rise in Swiss watch exports but was still outpaced by China at +19.2%. In fact China has played catch-up so well that the gap between the two markets has shrunk from 76% in 2015 to 23%.

There’s a similar dynamic online. In 2017 and for the first time, more Chinese visited luxury watch brand websites than Americans. The former accounted for 21% of global traffic versus 13% for the latter, according to the latest World Watch Report by Digital Luxury Group (DLG), which bases conclusions on its analysis of 120 million visits. Chinese consumers have been especially busy online, as demonstrated by a 35% increase in traffic to Swiss watch brand websites in 2017 compared with a tiny 1% for their American counterparts. Commenting on results, David Sadigh, CEO of Digital Luxury Group, declared that “the destiny of the Swiss watch industry is now tied to Asia, and China specifically. Global watch brands that do not manage to generate desirability in China will find it hard to sustain their businesses in the long run.”

Partnerships on the rise

Message received loud and clear, if recent developments are any indication. In the 2000s, when China emerged as the new hotspot for watch sales, brands rushed to expand their footprint in this promising market and opened stores left, right and centre. Today, as a second deployment gets under way, online platforms have ousted brick-and-mortar as the focus of attention – particularly as they offer a low-cost solution to the problem of how to cover such a vast territory, at a time when the Chinese government is implementing measures to boost domestic consumption in an economy that remains over-dependent on export demand. A sign of the times, announcements of partnerships have been coming thick and fast.

At the Baselworld fair in March, Darwel, which handles communication for Swiss exhibitors, announced a new partnership with i2i Group China, a company that connects Chinese tourists to brands. Some two million Chinese travel abroad each year. Chances are they will browse one of the i2i magazines handed to them at visa application points and, from there, visit one of the group’s dozen or so WeChat sites, tailored per destination or type of product, where they’ll find more than enough targeted content to retain their interest. Given that four out of ten Swiss watches are purchased by Chinese shoppers who still make the vast majority of their purchases when travelling, it’s a strategy that makes perfect sense. “We bring content and direct contact with the brands,” says Darwel Chief Executive Yves Vulcan. “Brands are more and more interested in building their presence on Chinese social media, in fact we’re currently developing a platform for fifteen watch brands.”

One billion WeChat accounts

Audemars Piguet is ahead of the game. Earlier this month, it announced a collaboration with JD.com, the Chinese Amazon, to develop its e-commerce business in the country. JD.com, meanwhile, ran a campaign in April to recruit European luxury brands. Wan Chen, who heads the online retailer’s watch department, was at Salon International de la Haute Horlogerie in January, where she spoke to Swiss daily La Tribune de Genève: “We used to come [to SIHH] to get a clearer understanding of brands’ needs. Now we’re here to bring them to China. After signing agreements with Zenith and Chopard, we’ve entered into partnerships with Eberhard & Co and with H. Moser & Cie. The agreement with Moser coincides with the brand’s first steps in China and a store opening.”

More recently, online luxury giant Farfetch announced its partnership with JD.com, which looks to be distancing its competitor Tmall, operated by Alibaba, whose Luxury Pavilion platform launched in August 2017. José Neves, founder of Farfetch, had this to say in an interview to LuxurySociety, the website of Digital Luxury Group: “China is a huge country. It is already the largest e-commerce market in the world, and will soon be the largest luxury e-commerce market in the world. So there’s definitely room for more than one platform or one player in the market.” While Mr Neves is right, the fact remains that WeChat is behind virtually all these projects. There is no getting away from the multi-pronged app – which clocked up one billion user accounts in March this year – whether as a host for brands’ product pages or their online stores, as a provider of payment services, purchase history and other information, or to accompany the customer’s purchasing journey both online and offline. In a word, a vital ecosystem for any brand hoping to succeed in China.