Hong Kong’s Global Watch Dominance Comes to an End

Hong Kong was the Swiss observe industry’s No. 1 export market for far more than a decade.

Not any more. “It is the close of El Dorado,” Thierry Huron, founder of The Mercury Task, a Swiss observe and jewelry consultancy, wrote in an email.

With its tourism-pushed revenue dented by professional-democracy demonstrations in 2019 and then blocked completely by a coronavirus-connected ban on tourist arrivals, Hong Kong dropped 50 percent its enjoy and jewelry product sales involving 2018 and 2021, in accordance to the July edition of the Provide-Out Index, Mr. Huron’s month to month report.

The report, based mostly on the Hong Kong Census and Stats Department databases, showed the worth of retail income of watches and jewelry in the to start with half of 2021 totaled $2.5 billion. It was $5.7 billion all through the exact same period in 2018.

As soon as a tax-no cost procuring haven for mainland China’s a lot more than 1.4 billion citizens as nicely as worldwide travelers, Hong Kong has restricted the entry of nonresidents given that March 2020, forcing its view field to reorient itself to local potential buyers.

And although the distinctive administrative region’s seven million inhabitants are among the world’s wealthiest and most voracious observe customers, watchmakers and market authorities say the current market may well under no circumstances recapture its previous glory as an export location and a re-export hub for watches bound for the mainland.

“Hong Kong will surely retain its part as a logistics platform, provided its big pros of remaining a tax-cost-free zone,” mentioned Oliver R. Müller, founder of LuxeConsult, a look at consultancy dependent close to Lausanne, Switzerland. “But I really don’t feel it will regain the value it had just before.”

“Brands have diminished a great deal of their regional presence,” Mr. Müller reported. “Do you genuinely want to see retailers with the same brand names every 500 meters?”

In advance of the political unrest and the pandemic dealt a just one-two punch to Hong Kong’s retail sector, the density of merchants advertising Swiss watches truly was a substantial section of the city’s enchantment to Chinese mainland purchasers, who swarmed its luxurious boutiques to obtain responsibility-free timepieces for a fraction of the costs they compensated at house.

In 2020, having said that, individuals identical prospective buyers, not able to leave China, redirected their paying out domestically — lifting the place into the lead export location, in accordance to the Federation of the Swiss View Field.

From January to July this yr, exports to China totaled 1.77 billion Swiss francs, or additional than $1.9 billion, a 63.7 per cent increase over the similar time period in 2019. And exports to the United States, Switzerland’s No. 2 industry, totaled 1.7 billion Swiss francs, a 26.2 percent improve over the 2019 time period.

In contrast, exports to Hong Kong from January to July totaled 1.3 billion Swiss francs, a 24.1 percent decrease from the 2019 time period, putting it into the No. 3 situation.

While existing events have reshaped the distribution photograph in the shorter expression, said Karine Szegedi, handling spouse and head of trend and luxury at Deloitte Switzerland, the very long-time period outlook will experience on “the getting ability of the digitally savvy, wealthy and brand-acutely aware Chinese customer the prospects afforded to them to invest in luxury products and solutions domestically and the maximize in makes (each teams and independents) flocking to China both physically or virtually,” she wrote in an email.

For lots of Swiss watchmakers, that future is already in this article.

In an August job interview with the observe market publication Europa Star, Georges Kern, the main government of Breitling, said the company’s money year finished in March with 90 per cent year-around-year expansion in the Chinese current market.

“We still have to have to triple or even quadruple our turnover there to access the level we really feel we should really be at,” he told Europa Star. “We are now in the top rated five watchmakers in the United States and the United Kingdom, and we goal to arrive at the prime 7 in China. It is not a difficulty of method but of implementation. We have 30 boutiques and 50 points of revenue there, but we will finally have at the very least 150 stores.”

Executives at Compagnie Financière Richemont, which owns 8 specialty watchmakers, such as Jaeger-LeCoultre, IWC Schaffhausen and Panerai, are similarly optimistic about the Chinese marketplace.

“With mainland China main the macroeconomic recovery, it has now come to be the No. 1 place in terms of income,” Jérôme Lambert, Richemont’s main govt, claimed for the duration of the group’s 2021 annual effects presentation in May. “And Asia Pacific at present posts a larger proportion of profits than Europe and the Americas merged.”

Mr. Lambert mentioned the group’s product sales in mainland China grew by 107 % year in excess of calendar year and, even though he did not point out precise brands or earnings totals, he stated its watch models and jewelry houses had reached triple-digit development on the mainland.

He also singled out “impressive growth” in Hainan Province, an island in the South China Sea that authorities in Beijing hope to completely transform into a no cost-trade port, a domestic holiday vacation spot and an international commercial hub — in essence, a new Hong Kong.

(Whether President Xi Jinping’s Aug. 17 contact for regulation of wealth inequality, and the subsequent decrease in luxury stocks, will derail the industry’s designs for advancement in China stays to be found.)

A obvious indicator that the Swiss are keen to exploit Hainan’s prospective is the area of the future edition of the luxury reasonable Watches and Wonders. For the 2nd consecutive 12 months, the party is scheduled for Sanya, a southern Hainan beach front city, where by, from Oct. 1 to Dec. 31, 13 watchmakers — which include A. Lange & Söhne, Cartier and Vacheron Constantin — are to existing their goods at the International Responsibility No cost Searching Sophisticated.

Digital marketing prospects on the mainland are even much more alluring. The mega-retailer Chow Tai Fook, an authorized vendor for many Swiss brands these kinds of as Cartier, Rolex and Audemars Piguet, has invested intensely in digital applications, together with a community of “Cloud Kiosks” that use synthetic intelligence to suggest items to shoppers.

Individuals have been installed at about 900 of its 2,000 outlets in mainland China, according to Kent Wong, controlling director of the Chow Tai Fook Jewellery Group.

Yet even skyrocketing retail gross sales in mainland China are not able to obscure Hong Kong’s enduring relevance to the watch resale market.

Think about Phillips’s 12th Hong Kong auction, held in early June. The sale totaled $24.7 million, the major volume for a check out auction staged by Phillips in Asia.

“The liveliness of the Hong Kong current market has not endured it just has develop into a minimal a lot more neighborhood,” mentioned Aurel Bacs, the celebrated auctioneer whose Bacs and Russo consultancy operates the watch section at Phillips.

All of that fits Austen Chu just fantastic. On Sept. 1, Mr. Chu, who sells pre-owned watches and is identified as @wristcheck on Instagram, opened his initially brick-and-mortar retailer in the luxury Landmark Atrium mall in Hong Kong’s Central district.

The shop is “sandwiched future to the flagship Tiffany boutique and the flagship Louis Vuitton boutique,” Mr. Chu reported. “Initially, WristCheck was likely to open up in Shanghai, but we made the decision to launch in Hong Kong simply because of the simplicity of accomplishing business enterprise right here.

“People are likely to overlook that prior to the protests and Covid, Hong Kong was normally the No. 1 current market for Swiss watches, which is unbelievable, contemplating only seven million people today live in this article,” he added. “And very last yr it fell to No. 3 — with zero tourists. The paying electrical power below is absurd.”