September 24, 2021

The World Live Breaking News Coverage & Updates IN ENGLISH

The World Live Breaking News Coverage & Updates IN ENGLISH

Hong Kong’s Global Watch Dominance Comes to an End

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, Hong Kong’s Global Watch Dominance Comes to an End, The World Live Breaking News Coverage & Updates IN ENGLISH
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, Hong Kong’s Global Watch Dominance Comes to an End, The World Live Breaking News Coverage & Updates IN ENGLISH
, Hong Kong’s Global Watch Dominance Comes to an End, The World Live Breaking News Coverage & Updates IN ENGLISH

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

Not anymore. “It is the end of El Dorado,” Thierry Huron, founder of The Mercury Project, a Swiss watch and jewelry consultancy, wrote in an email.

With its tourism-driven sales dented by pro-democracy demonstrations in 2019 and then blocked entirely by a coronavirus-related ban on tourist arrivals, Hong Kong lost half its watch and jewelry sales between 2018 and 2021, according to the July edition of the Sell-Out Index, Mr. Huron’s monthly report.

The report, based on the Hong Kong Census and Statistics Department database, showed the value of retail sales of watches and jewelry in the first half of 2021 totaled $2.5 billion. It was $5.7 billion during the same period in 2018.

Once a tax-free shopping haven for mainland China’s more than 1.4 billion citizens as well as international tourists, Hong Kong has restricted the entry of nonresidents since March 2020, forcing its watch industry to reorient itself to local buyers.

And while the special administrative region’s seven million residents are among the world’s wealthiest and most voracious watch consumers, watchmakers and industry experts say the market may never recapture its former glory as an export destination and a re-export hub for watches bound for the mainland.

“Hong Kong will certainly retain its role as a logistics platform, given its major advantages of being a tax-free zone,” said Oliver R. Müller, founder of LuxeConsult, a watch consultancy based near Lausanne, Switzerland. “But I don’t think it will regain the importance it had before.”

“Brands have reduced a lot of their local presence,” Mr. Müller said. “Do you really need to see shops with the same brands every 500 meters?”

Before the political unrest and the pandemic dealt a one-two punch to Hong Kong’s retail sector, the density of stores selling Swiss watches actually was a large part of the city’s appeal to Chinese mainland shoppers, who swarmed its luxury boutiques to purchase duty-free timepieces for a fraction of the prices they paid at home.

In 2020, however, those same buyers, unable to leave China, redirected their spending domestically — lifting the country into the lead export spot, according to the Federation of the Swiss Watch Industry.

From January to July this year, exports to China totaled 1.77 billion Swiss francs, or more than $1.9 billion, a 63.7 percent increase over the same period in 2019. And exports to the United States, Switzerland’s No. 2 market, totaled 1.7 billion Swiss francs, a 26.2 percent increase over the 2019 period.

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

While current events have reshaped the distribution picture in the short term, said Karine Szegedi, managing partner and head of fashion and luxury at Deloitte Switzerland, the long-term outlook will ride on “the purchasing power of the digitally savvy, wealthy and brand-conscious Chinese consumer; the opportunities afforded to them to buy luxury products domestically; and the increase in brands (both groups and independents) flocking to China either physically or virtually,” she wrote in an email.

For many Swiss watchmakers, that future is already here.

In an August interview with the watch industry publication Europa Star, Georges Kern, the chief executive of Breitling, said the company’s financial year ended in March with 90 percent year-over-year growth in the Chinese market.

“We still need to triple or even quadruple our turnover there to reach the level we feel we should be at,” he told Europa Star. “We are already in the top five watchmakers in the United States and the United Kingdom, and we aim to reach the top seven in China. It’s not a problem of strategy but of implementation. We have 30 boutiques and 50 points of sales there, but we will eventually have at least 150 outlets.”

Executives at Compagnie Financière Richemont, which owns eight specialty watchmakers, including Jaeger-LeCoultre, IWC Schaffhausen and Panerai, are equally optimistic about the Chinese market.

“With mainland China leading the macroeconomic recovery, it has now become the No. 1 location in terms of sales,” Jérôme Lambert, Richemont’s chief executive, said during the group’s 2021 annual results presentation in May. “And Asia Pacific at present posts a larger proportion of sales than Europe and the Americas combined.”

Mr. Lambert said the group’s sales in mainland China grew by 107 percent year over year and, while he did not mention specific brands or revenue totals, he said its watch brands and jewelry houses had achieved triple-digit growth 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 transform into a free-trade port, a domestic vacation destination and an international commercial hub — in essence, a new Hong Kong.

(Whether President Xi Jinping’s Aug. 17 call for regulation of wealth inequality, and the subsequent decline in luxury stocks, will derail the industry’s plans for growth in China remains to be seen.)

A clear sign that the Swiss are eager to exploit Hainan’s potential is the location of the next edition of the luxury fair Watches and Wonders. For the second consecutive year, the event is scheduled for Sanya, a southern Hainan beach city, where, from Oct. 1 to Dec. 31, 13 watchmakers — including A. Lange & Söhne, Cartier and Vacheron Constantin — are to present their products at the International Duty Free Shopping Complex.

Virtual selling opportunities on the mainland are even more alluring. The mega-retailer Chow Tai Fook, an authorized dealer for numerous Swiss brands such as Cartier, Rolex and Audemars Piguet, has invested heavily in digital tools, including a network of “Cloud Kiosks” that use artificial intelligence to recommend products to customers.

Those have been installed at about 900 of its 2,000 stores in mainland China, according to Kent Wong, managing director of the Chow Tai Fook Jewelry Group.

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

Consider Phillips’s 12th Hong Kong auction, held in early June. The sale totaled $24.7 million, the largest amount for a watch auction staged by Phillips in Asia.

“The liveliness of the Hong Kong market has not suffered; it just has become a little more local,” said Aurel Bacs, the celebrated auctioneer whose Bacs and Russo consultancy runs the watch department at Phillips.

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

The shop is “sandwiched next to the flagship Tiffany boutique and the flagship Louis Vuitton boutique,” Mr. Chu said. “Initially, WristCheck was going to open in Shanghai, but we decided to launch in Hong Kong because of the ease of doing business here.

“People tend to forget that prior to the protests and Covid, Hong Kong was always the No. 1 market for Swiss watches, which is incredible, considering only seven million people live here,” he added. “And last year it fell to No. 3 — with zero tourists. The spending power here is ridiculous.”

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