The luxury watch industry is not a particularly dynamic one. It sells expensive, high quality timepieces to wealthy consumers. Purchases are relatively infrequent, many buyers seek to amass substantial collections, and status signaling is a key benefit. All of these factors have remained unchanged for decades.
But that does not mean the market is totally static, because other forces exert influences that even the oldest, most traditional luxury watch brands cannot ignore. In particular, globalization and shifting economic interactions demand that they reorient their targeting and positioning, to ensure they are available where their wealthy, demanding consumers want to find them.
Historically, that targeting mainly involved Western economies, and especially the United States. But in the past couple of decades, shoppers from China have gained increasing dominance among the market. Relatively newly wealthy buyers travelled from China to international markets to snap up luxury items, seeking to benefit from the lower taxes charged in places like London, Hong Kong, or Dubai, compared with those imposed within China. According to some estimates, 70 percent of luxury spending by Chinese consumers took place in non-Chinese locations.
But then of course, COVID-19 and the related travel restrictions made such global shopping trips impossible. Sales of luxury watches in Hong Kong or the United States almost immediately dropped, to a significant degree. As you might have guessed, these sales climbed nearly as precipitously within China though.
That meant that luxury watch brands had to scramble to adjust their marketing efforts and supply chains to get more products to China, while limiting shipments to their conventional targets. A few of them experimented with pop-up shops, but the majority turned to digital sales. Alibaba, China’s dominant ecommerce platform, attracts an estimated 757 million regular visitors. It also hosts the Tmall Luxury Pavilion, a dedicated site for luxury sales, on which famous names such as Piaget and Montblanc now post a range of offerings. Chinese consumers also are heavy users of the WeChat social media app, such that in addition to using it to connect with friends, they make about 1 billion daily purchases through WeChat Pay. Thus brands such as Omega focused on that digital platform to provide wider access to consumers interested in its watches.
Not all companies have been as nimble though. Various luxury brands note their dismal sales in an era in which international travel and physical shopping has been so drastically limited. These players hope and predict that Chinese consumers will return to their habits once travel restrictions are lifted, because they find their international shopping trips not just efficient for purchase but also enjoyable. Thus analysts offer the caution that luxury brands must continue to look out for the need to adjust; they cannot assume that a solid presence in China is going to be the solution for the future.
A luxury watch might be a solid, substantial investment that people plan to hold onto for generations. But a luxury watch brand’s marketing strategy cannot be solid or unchanging. It must include efforts to remain flexible and open to change.
- How can luxury watch brands ensure that they remain nimble and ready to change as the markets change?
- What global marketing considerations, beyond the effects of COVID-19, are relevant for these brands?
Source: Robin Swithinbank, “China Takes the Lead in Demand for Swiss Watches,” The New York Times, January 14, 2021