Swiss Watch Leaders Are Eager to Make Up for Lost Time in China

After three years of conducting business in Asia virtually — via video calls, digital conferences, even holograms — Swiss watch executives have travel on the brain.

“I just came back from Hong Kong,” Julien Tornare, chief executive of the Swiss watch brand Zenith, said in a phone interview in late February.

“And I’m going to mainland China in April,” he added. “We haven’t been there in three years. We’re organizing a lot of dinners with collectors and clients. We have to celebrate a few boutique openings that we couldn’t celebrate during Covid. I want to do a ribbon cutting.”

Mr. Tornare, like many of his fellow executives, is eager to make up for lost time in Asia. And now that Watches and Wonders, the high-end watch industry’s annual showcase of new products, has ended in Geneva, brand managers are shifting their attention to key markets including mainland China, Hong Kong, Macau, Japan, South Korea, Singapore, Thailand and Vietnam.

In 2022, Asia accounted for nearly 40 percent of all Swiss watch exports by value, according to the Federation of the Swiss Watch Industry (by comparison, North America accounted for 16.7 percent). And despite declines in the Chinese market — 2022 exports dropped 13.6 percent from the prior year, largely from the effects of lockdowns — many industry watchers remain bullish about prospects in the region.

“Look at China and Hong Kong together,” Jean-Philippe Bertschy, a luxury goods analyst at Vontobel, a private banking and investment management group based in Zurich, said in a phone interview. “If you take the combined markets, they are still down 5 or 8 percent versus pre-Covid levels. The situation remains volatile, but if you look at the increasing middle class, they like to have luxury products to show off. Growth is still a given.”

The Swiss seem determined to make the most of the bounce back in Chinese luxury spending that many have been anticipating since December, when Beijing abruptly ended its zero-Covid policy.

Pablo Mauron, the Shanghai-based managing director of the Digital Luxury Group, a consulting agency headquartered in Geneva, said the easing of restrictions had a dramatic effect on daily life in China. “The entire city got sick in a month, but after that, it really reopened,” he said on a video call.

“It went really fast, from empty restaurants to being full again, from empty shopping malls to seeing lines again,” he added.

While the entire region holds promise for the Swiss (“You can feel the buzz in the air,” said Christoph Grainger-Herr, the chief executive of IWC, referring to the watch business in Southeast Asia), China’s vast numbers of luxury consumers are the linchpin for any brand fixated on growth. That explains why tracking their shopping habits — including, crucially, whether they plan to purchase luxury timepieces at home or abroad — remains a hot topic in Switzerland.

“When will travel retail become a reality?” Mr. Mauron said. “That’s still an open question.”

For now, many brands are banking on Chinese shoppers sticking close to home. “We expect them to come this year a lot to Hong Kong and Macau,” Mr. Tornare said. “Then they’ll go back to Europe, Dubai, U.S., probably in 2024. That’s a very important piece of information for us because we know where they’ll be spending.”

All eyes are on Hainan Province, an island in the South China Sea that the authorities in Beijing are developing into a free-trade port, domestic vacation destination and international commercial hub to rival Hong Kong. Indeed, Watches and Wonders Hainan just concluded its third edition, which ran from Dec. 2 to Feb. 28. The show, founded in 2020 in the southern resort city of Sanya, added a second location in the island’s provincial capital of Haikou for the 2022 run.

The government’s hope is that the island’s duty-free shopping malls will lure Chinese shoppers, and persuade them to spend their money domestically as opposed to on the high streets of Europe, where many Chinese preferred to do their luxury shopping until the lockdowns in 2020 began.

Swiss watchmakers are betting big on Hainan’s success. Later this year, for example, Breitling plans to open a shop-in-shop at DFS Mission Hills, one of the most luxurious malls on the island.

“We want to triple our business in Hainan in the next five years,” Georges Kern, the brand’s chief executive, said on a video call.

Mr. Kern explained that in 2020, the pandemic forced the brand to put its plans for Chinese expansion on hold and they are only now being restarted. He emphasized that the biggest obstacles to gaining a foothold in China have more to do with logistics than sales.

“We don’t have a product issue,” he said. “We have a tactical issue.”

In other words, how does a brand cover a territory that spans more than 3,000 miles from east to west, is home to more than 1.4 billion people and where the residents of megacities such as Shanghai, Beijing and Shenzhen represent a mere fraction of its wealth?

These are questions that have long preoccupied foreigners angling for a piece of the Chinese pie, but they have taken on new urgency in light of the country’s isolation.

“It’s difficult to make proper budgets and predictions for China,” Rolf Studer, the chief executive of Oris, said on a phone call. “Now we are adjusting to a changing situation.

“I still believe China will come back. They like watches, they like luxury goods, things will be kept more in the Chinese market itself. And I welcome that, because when you have a local person buying locally, then you have a chance of developing a relationship.”

The need to nurture those relationships is precisely what led Patrick Pruniaux, chief executive of Ulysse Nardin, to relocate his Chinese subsidiary from Hong Kong to Shanghai in 2017.

“We felt it was a natural move for the brand,” Mr. Pruniaux said on a video call. “We saw the mainland as a growing influence and we needed to be closer to the market.”

Nowhere is the proximity more important than when trying to understand the evolving relationship that Chinese buyers have with timepiece trends.

Twenty years ago, when Swiss watchmakers first began operating in the region, the prevailing aesthetic adhered to a simple formula: “Everybody was looking for a classic three-handed gold watch with a white dial,” said Guido Terreni, chief executive of Parmigiani Fleurier.

Oh, how times have changed. “The trend today,” said Mr. Tornare of Zenith, “is all about sporty, contemporary and very casual.”

Whether that has anything to do with President Xi Jinping’s “common prosperity” campaign, aimed at discouraging public displays of wealth, the Swiss aren’t saying, but the sporty, casual trend appears to have legs. It is even playing out in the rapidly growing pre-owned market, despite a longstanding preference among Chinese buyers for new, rather than used, goods.

“Traditionally, the watch carries the soul of the previous owner with it and that’s not necessarily a good thing,” Arjen van de Vall, chief executive of the pre-owned dealer Watchfinder & Company, said on a call. “But the interest in pre-owned is catching on in China. There seems to be a real shift happening.”

The same could be said of how the Swiss are cultivating Chinese buyers. For years, they have used the Lunar New Year to market limited-edition timepieces themed around the Chinese zodiac and its 12 related animals. “This year we saw many rabbits,” Mr. Terreni said.

But instead of following suit, Parmigiani in January introduced the Tonda PF Xiali Calendar, with a complete Chinese calendar. The horologically complex wristwatch combined solar and lunar calendars on a red dial — a color considered auspicious in China — framed by a platinum case.

The intention, Mr. Terreni said, was to create a watch that reflected the brand’s respect for Chinese culture.

Last month, Louis Vuitton took a similar approach with its Tambour Opera Automata, which honors the art of bian lian, or face changing, a style of Sichuan opera in which performers rapidly change colorful masks to indicate different emotions.

These are subtle but important indicators that luxury watchmakers are coming to a new understanding: To succeed in China — and indeed, in all of Asia, given the expectation that many Chinese will travel within the region — luxury brands must rethink the way they traditionally have catered to local buyers.

“There was always this idea of the Chinese consumer who doesn’t know what’s good and needs guidance,” said Mr. Mauron of Digital Luxury Group. “Now you have young consumers who are much more confident about their tastes.”

Austen Chu, founder of Wristcheck, a pre-owned watch retailer in Hong Kong, has witnessed that evolution firsthand. Before 2018 or 2019, “a lot of the Chinese market was following what was cool in the West,” he said on a video call. “But that’s now shifting. One classic example: Richard Mille was cool in Asia for years before he even reached the U.S.

“Asia will start to dictate trends a lot more. In the past they were more followers, but now they are starting to lead.”

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