I recently had a special opportunity to spend time with Dr. Tina Zhou, the director of the Fortune Character Institute, a well-known luxury research group based in Shanghai, to talk about the Chinese luxury market.
The Chinese market has gotten a bad reputation lately, with the anti-corruption laws and the prosecution of such high profile officials as “Brother Watch”, who allegedly took watches in exchange for favors and contracts. Many brands, as a result, have turned away from China. Zhou believes this is a mistake for the long term.
Zhou, who has been studying the Chinese luxury market for many years, is optimistic about its future. “The Chinese luxury market is still expanding in size,” she says. “Chinese consumers still greatly desire luxury products and have the buying power; they also love personalized and diversified brands. An increasing number of high-end and niche brands have entered China, which boosts the continual growth of the Chinese luxury market.”
There are a number of high profile brands now aggressively entering China, even though the majority of fine watches sold to Chinese are still purchased outside of China, due to the high luxury tax on the mainland. Brands, she says, need to have a presence in the Middle Kingdom in order to capture the traveler who will buy when abroad.
“Watch brands form a relationship with Chinese customers through various activities, which are often held in first-tier cities like Beijing and Shanghai where consumers have more buying power, but not in second and third tier cities,” she notes. “The main activities are sales activities, which are not very effective. Consumers need more education on watch knowledge and brands, which will influence their choices. Brands need to continue to expand into the other cities, which have enormous potential.
“The first kind of watch purchaser loves top brand watches, names like Rolex and Patek Philippe and Omega, which are collectable and have value-added functions,” she details. “Another kind of purchaser chooses fashion watches, which are accessories. Finally, there is a new consumer of watches in China who is educated about fine watchmaking and buys based on quality and innovation, not necessarily for the brand name.”
Watch brands that have a history in China often do better than newcomers, because the Chinese trust brands they have heard of for a long time.
“Trust is a very serious issue for Chinese consumers, because Chinese consumers are concerned about quality and safety problems and worried about counterfeit products, which hits hard on the trust they put on made-in-China products and brands, and results in pursuit of foreign products of better quality,” she points out. “If international brands only care about sales and don’t focus on service, it will do harm to the trust the Chinese have in international brands over the long-run.”
Zhou was recently in Europe leading a group of Chinese on a “DNA of Luxury” tour. The group started in Paris, meeting with brands like Chanel and Louis Vuitton, then made its way to the wine country in France, then came to Switzerland and toured Hublot, Vacheron Constantin and MB&F, and had meetings with the CEOs of Ulysse Nardin, Artya, Manufacture Royale, Suzanne Syz Jewelry, H. Moser and Hautlence. The tour’s farewell meeting was held at the well-known luxury watch retailer Les Ambassadeurs in Geneva.
This was the first of what could become a regular thing, bringing wealthy Chinese clients to Switzerland to learn more about fine watchmaking.