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Jun
2015

Watches and Jewellery sector focus

2011 was a hugely successful year in terms of sales for both the watch and jewellery sectors in China; consumers in tier 1 cities purchased both catagories as investments and in the case of watches, as gifts. Sales in tier 2 cities increased as brands expanded their sphere of influence.

In early 2012, the economic landscape changed, which to a greater extent was predictable, and at the same time Chinese business leaders and officials put the brakes on investments in preparation for the change of party leadership due to take place in November. The luxury sector in general adopted a holding pattern during which consumers began to keep a tighter hold on their purse strings, or in many cases, determined that they could get a better deal if they were to purchase the same product in Europe or the USA. Invariably, the market went into decline, at least by comparison to previous years, although still growing in actual terms.

Market penetration

In 2011, there were almost 1000 direct watch stores in China, and by the end of 2012 the estimate is that the number will be over 1400. What is interesting is to look at the distribution of directly operated watch and jewellery stores in China and to compare them with one another and those in the fashion industry.

The tables above list the top 15 cities in terms of the number of direct stores for the watch, jewellery and fashion sectors. Cities with the grey background are in the top 20 in China in terms of their GDP; any with a white background are not.

The top three cities in each sector are those we would expect to see in these positions, Shenyang having been reported on in the October Luxury Insights China review. From this point the lists start to diverge.

The watch sector is very much male dominated, and the city list demonstrates this; approximately half those places in the top 15 are locations where society and business principally revolves around men. Heavy industrial cities such as Dalian, Haerbin and Tianjin are there, as is the mining city of Taiyuan. Provincial hubs such as Xian and Zhengzhou come towards the end of the list, because consumers from smaller cities in their provinces visit in order to make luxury purchases. Northern cities are also those closer to Beijing, where gift giving, particularly in government circles, whose members are in the main male, has always been a strong cultural practice.

 

Even when compared to directly owned and operated fashion stores, the number of watch stores per city remains high, again an indication of the potential volume of interest in watches relative to other sectors.

The distribution of jewellery stores is by comparison relatively weak, and is typically limited to one per brand per city unlike the model for watch stores that involves multiple locations. Chongqing, Wuhan and Kunming are not as strong in watches, and are more female orientated in terms of luxury consumers, although they have strong industry, and perhaps culturally men do not dominate life as they do in the North East of the country to the same extent.

The expansion of luxury jewellery has moved deeper into China more slowly than watches or fashion, possibly because of male dominance in the family and business outside of the tier one cities, but also because woman in particular would have less opportunity to wear expensive jewellery, or the knowledge to purchase it.

The table does not tell us much about the purchase of non-luxury watches and jewellery, but at the lower end it is, in the main, made up of domestically made product. Historical data from the watch sector for example, demonstrates that the value of luxury watches imported into China has over recent years increased, whereas demand for lower end imported watches has decreased very dramatically.

The increased demand for high-end watches has also lead to a significant increase in watch prices.

According to a report recently produced by the Fortune Character Institute, the high-end jewellery sector contracted by 42% this year. Fashion and accessories by comparison slumped by 53%.

 

Store openings

The slowing market has not directly affected the store openings of those brands already in China
and some that had already committed to set up here. In late October, LV opened their first watch and jewellery boutique in China, and second only
in the world in the Beijing Yintai Centre. Dior also opened its first ever watch and jewellery boutique in the same location, as did specialist timepiece creator MB&F, which is its first outlet worldwide. In November, among many openings, De Beers opened its first boutique in Nanjing and Chopard its first in Shenyang. Market expansion goes on.


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