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Watches & Jewellery February 2013

The winners and losers of policy and sentiment

The general slowing of the Chinese economy, and the affects and influence of the new leadership appointments in the last quarter of 2012 have impacted the entire luxury sector, but perhaps those brands supplying products often given as gifts the most. Richemont, for whom many of its brands fall into the gifting category, has been hit hard, reporting zero growth in China in the last quarter of 2012. Swatch Group on the other hand reported 15.6% growth rate for its watch and jewellery group, and has said that in China, both geographically and across all its brands which performed well.

By comparison to Richemont, Swatch Group has products covering not only the high luxury sector, but also affordable luxury price points. With the downturn in the economy last year, consumers became more cautious in their spending, and often traded down a notch in terms of price, but they still spent money. It appears that Swatch was able to meet the new consumer sentiment, whereas Richmont struggled to do so. Predictions from observers and experts in the industry like ourselves would be that after the party congress in March when all government officers will have been appointed and new policies are in place, business is likely to pick up until after this time.

In the mean time Swatch Group is still bullish about 2013, and other brands such as Tiffany that had a poor end to 2012, also still see China as a very critical market. It would appear that Tiffany may have become a victim of the more considered and conservative attitude that Chinese consumers adopted in 2012. The brand itself attracts consumers amongst the ‘twenty something’s’, and in particular those who are getting married. It’s products range from relatively low cost silver items, to expensive wedding rings, and has to some extent at the lower price point to compete with a number of Asian brands that are perceived to deliver similar products and quality at a lower price. By comparison, its Hong Kong competitors TSL and Chow Tai Fook both reported very positive performance figures for 2012.

These quotes made on social media sites may or may not represent consumer sentiment, but they are food for thought. Demonstrating value for money will become a challenge for many luxury brands over the coming year.

“Tiffany is not value for money, they are kind of stuck in the middle”

“Tiffany is not that high end like Bvlgari and Cartier, but have similar quality as the Hong Kong brands TSL or Chow Tai Fook, which are much cheaper”

The challenge for Tiffany in 2013 is to reassert its position and value in the eyes of a more sophisticated consumer group. Their buyers are internationalised and knowledgeable, so this will not be simple.

Store openings and expansion

The Italian jewellery brand Pomellato has been very active in emerging markets recently. The brand opened its first boutique store in Hong Kong and the second store in Singapore at the end of 2012. It will open the third Chinese store in Beijing in 2013; its existing stores are in Shanghai and Hangzhou. With the exception of the stores in Singapore, all the stores of Pomellato in Asia are directly operated by the brand.

They are positioned as a luxury brand here in China in all the media reports, yet their price, which is used as a benchmark by Chinese consumers, does not reflect this in our view. As everyday jewellery, they must be careful to communicate well with consumers who are used to seeing gold and diamonds as luxury, and who regard rare coloured stones as lower value.

“We have plan to expand the sales network in China, however as usual, we will concentrate on the quality rather than the quantity. Potential markets in the second and third tier cities will be our focus.” David von Gunten, CEO of Audemars Piguet Greater China.

In January just before Chinese New Year, the largest Breguet boutique store in the world opened in Xintiandi in Shanghai. Glashutte continued its expansion by opening its third Chinese boutique store in the MIXC mall in Chengdu at the end of 2012 and the first boutique store and fourth in China in Daqing in Liaoning province, at the beginning of 2013.

10th January 2013, Panerai entered into the Shenyang market by opening the first direct store in Shenyang Plaza 66, and on the next day, a new Tiffany boutique opened in the same place. Simultaneously, Damiani added a new store in Suzhou and on the following day, Piaget celebrated its first direct store opening in the Nanjing Deji Plaza. The refurbished Bvlgari boutique store in Shanghai’s Plaza 66 reopened in 15th January. And on the 19th, Chaumet held an opening ceremony in the Hefei Yintai center.

Changing consumer attitudes

The change in consumer preference to purchase less ostentatious products has been regularly reported. In Qingdao for example, the end of 2012 would normally be a time of high volume sales of visibly luxurious watches, but according to a salesman in Omega, “the sales of watch collection with luxuriant design are not optimistic, while, those with simple and understated design are comparatively popular for consumers.” Through our own research and mystery telephone shopping carried out across 96 stores belonging to two large Watch and Jewellery brands, when we asked about suitable products to be given as gifts many salesmen recommended that the understated style of a watch with leather strap was preferred by consumers for gifts giving, rather than those with gold straps, or that used diamonds.

Snake adaptations

As we have come to expect at this time of year, the animal of the New Year, in this case the snake has found its way into many new collections or special editions, in addition to be used as an emblem for general brand awareness.


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