The evolution of China’s luxury market

The 1990s, the beginning of Chinese luxury consumers

China has a long tradition of luxury craftmanship, such as painting or porcelain. An example of this is the art of painted landscapes called 山水 (shanshui,) which became popular during the Song dynasty. Since the Communist Era (1949), the economic elite went through difficult years due to opposition to the changes in ideology. However, Deng Xiaopping started liberalizing the economy in 1978 and in the 1990s, China therefore became one of the best place for foreign companies to relocate, causing a new economic elite to prosper. These wealthy communists have new needs, causing luxury demand to start to increase in the country. Up until now, the amount of Chinese luxury consumers continues to grow. Mr. Abtan, of the BCG, is convinced that the Chinese luxury market will continue to grow due to the “tsunami of the new middle class”.

The westernization of Chinese luxury consumption

The 1990s put China on the agenda of western luxury companies. They understood the potential of the Chinese luxury market. Many Western luxury brands opened their first Chinese store throughout the nineties, for instance Hermès in 1997, Cartier in 1992 and Chanel in 1999. Moreover, it is also during this decade that the private art market started to grow in China. The auction house “Duo Yunwan” was the first of the country in 1992 and some galleries also appeared around this time. The new economic elite had some demands which needed to be fulfilled but many luxury purchases were still made during trips in Europe. Thirty years later, there are many luxury shops and even flagship stores that symbolize the brand DNA.

Source: Behance – HERMES SHANGHAI By LEVI VAN VELUW

Millenials, the new cornerstone of luxury brands

Today, Millenials are the main Chinese luxury consumers. According to McKinsey insights, 43% of Chinese luxury consumers were born in the 1980s. This generation is accustomed to using social media platforms every day. Douyin or WeChat allows them to share content online. Also, the “generation Z”, born after the millennials is taking increasing parts. McKinsey shows that 28% of Chinese luxury buyers are born during the 1990s. They are used to going online to seek products and then to purchase the products in bricks and mortar stores. This is called ROPO: research online, purchase offline.  These new generations force luxury brands to shift themselves because of the importance of social media platforms.

The modern Chinese luxury market

Market segmentation

According to BCG, the Chinese luxury market grew by over 5% per year during the 2010s. It is currently the second biggest behind the US and is likely to become first in 2025.  In 2018, it exceeded 110 billion dollars, 33% of the global market. Ready to wear products, handbags and jewelry are the most popular luxury goods.

Source: BCG 2019 reports – Chinese luxury market distribution in 2018

According to Agility & Research 2016 reports, the top 10 favorite luxury brands in China are: Chanel is first, followed by Dior and Hermès in the top 3. Louis Vuitton, Burberry, Versace, Giorgio Armani, Prada, Gucci and Montblanc make up the rest of the top ten. These brands hold a strong brand image. Not a single Chinese luxury brand is ranked.

Source: Agility & Research 2016 reports – Top 10 luxury brands in China

European luxury brands come first

The prestigious reputation of European luxury brands stimulates a strong demand in among the status-oriented Chinese consumers. Companies with an important brand image, thanks to their history or famous stars wearing it, will be more popular in the country. Chinese luxury consumers wearing popular luxury brands will increase their social status. Still, some Chinese luxury brands try to become prestigious. For instance, Shang Xia was created in 2008 by Jiang Qiong Er and was bought by Hermès in 2010. The luxury brand is independent and focuses on the Chinese traditional style in its product. So far, Chinese buyers are not that interested in the brand because it is not well-known worldwide, but it takes time to create a solid brand image.

Recent shifts in the Chinese luxury market

Digitalization

This is the new cornerstone of every luxury brand in China. According to Bain Consulting, luxury companies doubled their digital marketing budget from 35% in 2015 to 70% in 2018. Chinese Millenials are the main luxury customers. Due to their use of smartphones, they shape how brands should address them. Now, Luxury brands work with key opinion leaders (“KOL”) as advertisers. These influencers have influence and can make a brand gain notoriety.  For instance, Cartier worked with the movie star Lu Han in 2016. They wanted to highlight men’s jewelry with the artist. KOLs are so popular that they can shift luxury trends in China. Moreover, luxury companies now present their new products online. During April 2020, Cartier showed its new watches on the online event: watches and wonders. Digitalization recently revolutionized the luxury industry and it can be an asset during unexpected crisis.

The challenge of selling alongside counterfeits

80% of counterfeit products come from China. According to European Union Intellectual Property Office, the luxury industry loses 60 billion euros annually. The impact is more than financial; brand image is also impacted. Also, it dwindles Chinese luxury trust in buying goods outside of official stores; online purchases are affected by this. In addition,  it wipes out the possibility of a second-hand market for luxury goods. Some brands like Louis Vuitton are investing massively to tackle fake products. The company invested around 40 million euros. Attacking counterfeits is an investment to protect brand image.

COVID-19 is jeopardizing the luxury golden decade

The virus affected luxury companies regarding both demand and supply. First, shops were closed so Chinese luxury consumers could not buy luxury goods. There is a phenomenon of revenge purchase were people buy after the quarantine like in Guangzhou but it is difficult to estimate if it is going to be enough. Second, supply was affected because companies were not able to produce goods. The European factories were shut down. Still, European luxury brands remain solid in China. Their brand image continues to provide a good protection during unexpected events. As Alexis Karklins-Marchay, partner at Ernst & Young, noted: “In the eyes of Chinese luxury consumers, Prada, Chanel or Hermès are much more desirable, they are brands that don’t lose their character,”.

China has a long tradition of luxury. The 1990s however is the beginning of the luxury in contemporary China. Since this decade, the Chinese luxury market has grown rapidly every year. The country is vital for some companies like Longines, which conducts more than 80% of its activities there. Digitalization forces luxury companies to rethink their strategies. Even if the coronavirus momentarily damages the luxury industry, the brand image of European luxury brands is strong enough to recover and to bypass it. Nevertheless, it is never a viable strategy to focus only on one country’s market.

Author: Enzio Cacciotto

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

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This article How the Chinese luxury market poised to become the largest in the world is the first one to appear on Daxue Consulting - Market Research China.

How COVID-19 is jeopardizing the Chinese luxury demand

Stores, missing parts of the luxury experience

Luxury companies closed their Chinese stores during the outbreak. Hence, it was nearly impossible to fulfill offline Chinese luxury demand. Buying online is not really an alternative to solve the situation because Chinese luxury consumers are not used to buy online according to the ROPO model. Bruno Pavlovsky, president of Chanel’s fashion activities stated: “You have to be able to touch the creations, it’s part of the experience.”. Even if consumers do a lot of research online to find luxury products, they ultimately purchase in offline stores. It is an experience to be in a magnificent flagship store to buy a product with the help of assistants. Also, it creates a desired prestigious image to exit shops with a luxury item in hand. COVID-19 forced luxury stores to close which impeded the fulfillment of Chinese luxury demand.

Will revenge purchase be enough?

On Saturday April 11^th 2020, the flagship store of Hermès in Guangzhou reopened. Within the day, the shop made 2.8 million USD of profit. Then, buyers post on social media their purchase. This phenomenon is call “revenge purchase” where purchasing provides happiness to consumers after a long period of quarantine.

Even if this example highlights a more positive situation for the  Chinese luxury market after COVID-19, it is difficult to measure the impact of revenge purchase. Will it be enough to make up for lost profit? According to the consulting group Ruderfinnasia, Chinese luxury consumers will spend less on automobiles, watches, handbags and electronics in 2020. More than just a short period of closing for shops, COVID-19 might change the entire luxury consumption in the long term. Luxury brands should readjust their forecasts for 2020, even more if China is a vital area for them.

[Source: wwd.com – some revenge purchases quickly posted on social media]

The increasing weakness of Western luxury companies

The entire luxury industry has shut down

One of the main factors which impede the Chinese luxury market is having to shut down factories in Europe. Hermès had to close its factories to protect its employees. Coronavirus is impeding companies. Moreover, the virus affects subcontractors of the companies. For instance, China is producing sapphire crystal for the Swiss luxury watch industry. The entire production line is jeopardized. Even on the supply chain, trade exchanges had been slightly decreasing since February. The entire luxury offer is affected and is no longer able to fulfill the Chinese luxury demand.

Cancellation of useful marketing strategies

Luxury brands are hosting different events to improve their brand image or to present a new collection. For instance, Longines is the main sponsor of the horse grand prix “Longines masters” had been postponed. Prada and Chanel had also to cancel their fashion show. The coronavirus impacts the communication of luxury brand in China. They cannot anymore host events which increase their brand image or highlights their new collections. Still, the increasing digitalization in China gives alternatives in the Chinese luxury market after COVID-19.

Coronavirus brings more online opportunities

The rise of Chinese luxury brands

In April 2019, Chinese industry is recovering, whereas European production is still shut down. It might be the right moment for Chinese luxury brands to rise. Since they produce directly in the country, they can fulfill the Chinese luxury demand quickly. Icicle, a Chinese brand producing clothes created in 1997, has environmental compliance is one of their key-values. Another example, the brand Herborist which specializes in skincare. Created in the beginning of the 20^th century, the brand recently made a shift in its brand image to appear more modern. We are brought to a new are of the Chinese luxury market after COVID-19, where the top brands are domestic.

Digitalization, dodging the deficiencies of reality

Even if luxury brands had to cancel some marketing strategies, digitalization allows them to continue mass communication upon customers. According to Bain consulting, digitalization is the new keystone of luxury brands. Companies doubled their digital marketing budget from 35% in 2015 to 70% in 2018. They work more and more with influencers (key opinion leaders) on social media. For instance, Cartier worked with Chinese movie star Lu Han in 2016. The brand launched a communication campaign to increase the masculine jewelry. Influencers have a real influence upon Chinese luxury consumers. They work online which is an asset during the coronavirus, everyone even at home can watch their contents.

Moreover, luxury companies still continue to present their products with digital events. In April 2020, the event watch and wonders took place online. Luxury watch brands were able to present new products. Cartier launches a new version of its famous tank watch.

Even if the Coronavirus forced brands to cancel some events, the digitalization allows luxury companies to communicate with their consumers and continue their marketing strategies on the Chinese luxury market.

[Source: Watches and wonders website – Brands new products on the main page]

Thus, despite the decreased demand, some opportunities appeared on the Chinese luxury market both for digital events and for Chinese luxury brands. European luxury brand will face a difficult year and revenge purchase will not be enough to recover. Still, they remain highly popular in China and hold a strong brand image which appeal consumers in the country.

Author: Enzio Cacciotto

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

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This article The Chinese luxury market after COVID-19 survives through online channels is the first one to appear on Daxue Consulting - Market Research China.

From the creation of the brand to the success of Longines China

Longines: Tradition as a cornerstone

Longines has a long history. In 1832, Auguste Agassiz founded a factory of watch assembling in St. Imier, Switzerland. His nephew Ernest Francillon,  became manager and transformed the production in the 1860’s. He created the brand Longines. Since then, Longines helped aviation pioneers like Charles Lindberg. The pilot was wearing a Longines watch during the first direct flight across Atlantic in 1927. Also, the brand served as an official timer of prestigious sports events, including the Olympic Games. For the past twenty years, the brand focused on elegant sports like gymnastics or tennis. This effort match with the brand slogan “Elegance is an attitude” and its following path of heritage.

The 1970s: an uncertain era for the company

This era was particularly difficult for the entire Swiss watch industry. It is known as the “the quartz revolution” Many watch companies had to close. The Japanese watch industry made a technological gap. Seiko created its first quartz movement in 1969. It was a new way of thinking the entire watch industry. Mechanicals and automatic watches have low autonomy. It takes nine days to make the most high-end watch today, but it is usually around fifty hours. To recharge it, you have either to just wear it or to turn the crown. A quartz watch can operate for month without being recharged. The apparition of Japanese quartz watches on the market during the 1970 injured the Swiss watch industry. To endure this uncertain decade and survive Longines joined the SSIH, which became the giant Swatch Group in 1998 with brands such as Omega, Blancpain and many.

Longines is now one of the biggest brands of the Swiss industry

Nowadays, Longines is in the top 5 of the most profitable Swiss watch brands. One of its biggest competitors in China is Rolex. According to Swatch group statistics, Longines made a profit of 1.81 billion dollars in 2018. Only five swiss watchmakers sell more than 1 billion at retail annually. The brand is No.1 on the price range between 1000 – 3000 euros. The brand keeps its traditional DNA and do not want to produce smartwatches. Mr. von Känel is the current CEO of the company. He has been in the company for fifty years. He joined the company in 1969. His mission was to make Longines No.1 on the range price between one and three thousand dollars, an entry level price for the Swiss luxury watch market. A new focus of the brand is the Chinese luxury watch market.

Longines in China, the golden market

Longines’ China market entry

The market entry in China began as early as the 1970s. It is one of the first Swiss brands to settle in the country. The Chinese name of Longines China is  “浪琴”. In this era the Chinese luxury watch demand was not that important compared with today. The boom of Chinese luxury consumers arrived in 1990s. There are right now 12 official stores and around 400 retailers in china. The brand is also online with its Chinese website.

Around 700 thousand watches are sold there every year. It is a strategic country for the brand. Contrary to other watch brands, more than 50% of their consumers in China are women. The brand features interesting developing strategies. Longines China deployed strategies to ensure its development in the country, the brand needs to protect and increase its Chinese brand image.

Understanding Chinese uniqueness

Longines made interesting moves in their Chinese development. The company tried to adapt with the unique aspects of China to improve their relations with Chinese luxury consumers. They developed watch per pair offers for couples. Longines China knows the importance for many couple of the country to match their outfit. The brand surfs on this trend on the Chinese luxury watch market. Also, Mr Von Känel stated that good relations with the central government have always been useful. The CEO made around 300 business trips in the country to tie respectful relations. Hence, Longines is everywhere in China. It is important for the company to understand how the Chinese luxury market really works.

Digital marketing : a key point of Longines’ strategy

Digital marketing is the new key of success in China to improve Chinese brand image. Between 2015 and 2018, most of luxury brands doubled their digital budget. Longines China put an emphasis on digital marketing. The brand settled a partnership with Tmall since 2017 to increase its digital brand image. Chinese luxury consumers most of the time go online to see product and then buy it in store. This is call “ROPO”: research online and purchase offline. According to BCG statistics, the ROPO phenomenon is much higher in China compared with other countries. Digital marketing is important for Longines China to improve its visibility.

Longines China: Pursuing heritage and adapting with the future

Heritage is one of the keystones of the brand. The company is always following the origins of the company, a value which inspires Longines’ sponsorship with people or events. Mr. Von Känel underlined the importance of ambassador for Longines: “They transform simple watches into emotional object”. Especially in China where key opinion leaders called “KOL” have influence amongst Chinese luxury consumers. Luxury brands started to work with KOLs, sensing the potential. Zhao Liying is a famous Chinese actress who became ambassador for Longines. She is very elegant and displays this important value for the brand.

Moreover, the company is sponsors the “Longines China tour” annually. It is a horse grand prix in several city of the country. The company raises its Chinese brand image, following its motto of “elegant sport”. With its partners and sponsorship, Longines China highlights the importance of heritage for the company.

Impediments that are weakening Longines China

Fake products, a plague to luxury brands

China is one of the main counterfeits producers. The quality of fake products is increasing astonishingly. As for every brand, counterfeits are an important problem for Longines China. According to the Foundation High Horology, around 40 million fake watches are product annually. The company hired spies to track down fake outlets. The brand is also working with Chinese customs agency. Fakes are dangerous for the brand image of the Company. The brand will appear less trustworthy. It is one of the reasons why Chinese luxury consumers do not want to buy online. When they purchase in official stores, they are sure that products are not fake. Moreover, Longines Cartier is losing selling because of counterfeit products.

The Coronavirus and the future for Longines China

The Coronavirus impacted the Chinese economy and raised questions about the future of the entire Swiss industry. China is the largest market for the company. Some issues there directly injure the entire Swatch group. On their presence in China, the company cancelled some sponsored events. For instance, Hong-Kong Longines Masters 2020 had been cancelled. These events are important for the Chinese brand image of Longines China. Also, sales of Longines are mainly made in China. Thus, if Chinese luxury watch market is ill, the company will suffer from it.

Are luxury watch brands too dependent on China

According to the watch market expert Olivier Muller, watch companies are too dependent from China. If the Coronavirus continues to impact the economy in the future, Longines will lose its principal source of profit. Moreover, there is an impact on the production. Both Longines factories in Switzerland and their Chinese subcontractors are closed. Not only the company stores but the entire production line closed. How will Longines able to fulfill the Chinese luxury watch demand? 2020 will be a drastic year for the company.

The Coronavirus raises questions about the company management. Even if, in the past it was profitable to invest a lot in China, the situation of Chinese market dependence is dangerous.

China is the most profitable market for Longines

To conclude, Longines has a long history of tradition since its origins in St.Imier. It is now one of the top 5 swiss brands. The company was one of the first to start on the Chinese luxury watch market in the 1970s. Today China is the most profitable market for Longines. This is also an important factor in the production line with many subcontractors. Longines is completely dependent of the country for its growth. The Coronavirus is challenging the company both on the production and the Chinese luxury watch demand. 2020 will be a difficult year for the company and the entire Swatch group. Should Swiss watch companies rethink their strategy with China?

You can also view here our analysis of the entire Swiss luxury watch market in China

Author: Enzio Cacciotto

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This article Longines in China: the top watch brand in the middle kingdom is the first one to appear on Daxue Consulting - Market Research China.

Cartier: from its origins to the Chinese luxury goods market

Origins of Cartier, the “king of jewelers”

Louis-François Cartier created the jewelry brand in 1847. The brand quickly became prestigious thanks to its finest quality and many royal family and rich people adopted its products. In 1902, the reputation of Cartier is so important that the Prince of Wales (King Edouard VII) stated “Jeweler to kings, king of jewelers”. The brand established rapidly abroad in countries like the US or the United-Kingdom. They also found some clients amongst the Russian royal family in the 1900s. After the Second World War, Hollywood stars adopted the brand. Cartier has backers in royal families and stars since. Still, they created of tiara of Kate Middleton for her wedding with the Prince Charles. Through decades, Cartier successfully gained a solid reputation acclaimed by the most elitist people in the world. This brand image is a real asset for Cartier China

Watchmaking, the second main knowledge

Beside their solid reputation as a jewelry maker, Cartier began in the watch industry in 1904. This year, Louis Cartier created one of the first wristwatch for his aviator friend Alberto Santos-Dumont. In this time, wristwatches were mainly for women, pocket watches were more common for men. The Brazilian aviator needed a wristwatch to be able to see time information while flying.

The First World War generalized the use of wristwatch for men and was also an inspiration for the brand. In 1919, Cartier created the Tank watch with the shape of a military tank. One century later, the brand is considered as one of the main brands of the Swiss watch industry. In 2001, the company opened its own factory in Swiss to control every process of the watchmaking creation. Today, watchmaking is a real part of Cartier DNA. These watches are popular upon Chinese luxury consumers. The Chinese luxury watches market is an important part of the luxury industry.

Cartier today: a powerful brand on the Chinese luxury goods market

Nowadays, The Richemont group owns Cartier and also famous brands like IWC or Montblanc. It is the second biggest luxury group behind LVMH. Cartier is first on the jewelry market and second behind Rolex on the watch market. According to Statista, the brand holds a value of 6 million million US dollars.

The China market entry of Cartier started in 1992 with a store in Shanghai. The Chinese name of Cartier China is “卡地亚”. Currently, the brand possesses 37 stores in China. According to its official report, The Richemont group including Cartier, made a profit of 4.3 billion euros in Asia in 2018. It represents 40% of the group total profit. Since the 1990s the booming Chinese economy created massive opportunities for luxury brands. Thirty years after, the Chinese luxury goods market is vital for many luxury brands.

[Source: Behance.net – Cartier X Modern Weekly magazine By Yulong Lli]

How Cartier China developed on the Chinese luxury goods market

A golden market for the luxury brand

Through years, the luxury market in China is increasing and evolving. Cartier China features many developing strategies to adapt mutating Chinese luxury consumers.

Cartier China makes expositions to improve its Chinese brand image. Two expositions were made in 2009 and 2019 in the Palace Museum of Beijing. The first one is named: “Cartier Treasures – King of Jewellers, Jeweller to Kings” and the second “Beyond Boundaries: Cartier and The Palace Museum Craftsmanship and Restoration Exhibition”. They both tend to make the high-quality work of Cartier known in China. Not also among Chinese luxury consumers but also artists or those who like arts and craftmanship.

Currently, one the main purpose of Cartier China is to attract  male Chinese customers. Arnaud Carrez stated: “If you look at our designs, we’re dominantly feminine because we’re a jeweler but it doesn’t prevent us from addressing men with elegance and sophistication,”. As the communication director of Cartier International underlines: a majority of Chinese customers of the brand are women. The brand tries to raise interest among Chinese men on the Chinese luxury goods market. Thus, they launched in 2016 a Chinese advertising campaign with actor Lu Han to celebrate the “Juste Un Clou” bracelet. With such a young movie star, Cartier is aiming male and particularly young men. They are the main core of the Chine luxury goods consumer.

[Source: South China Morning Post – Lu Han in an advert for Cartier jewellery]

Digital strategies, the new cornerstone of Chinese marketing.

According to Bain Consulting, from 2015 to 2018, the digital marketing proportion in the total marketing budget of luxury brands in China increased. It progressed from 35% to 60-70%. Luxury brand try to seize the online luxury opportunity in China. On January 2020, Cartier made an agreement to sell their product with the T-mall marketplace. This will contribute to improve the Chinese brand image of Cartier China.

It is too soon to notice if this will have an impact on the brand selling in China. Most of the time, Chinese luxury consumers go online to seek product and then they go to real stores to buy products. This concept is called ROPO (Research Online, Purchase Offline) and is the main luxury buying strategy in China. Buying online can be a real solution for city where the luxury goods demand exists but is not filled by stores. Cartier China also has their own Chinese online store.

[Source: https://www.cartier.cn/ – Cartier China website]

Second, Cartier China started to work with “KOLs”. Key opinion leaders are online influencers. Lots of luxury brands are working with them because they have a real influence of the Chinese luxury goods market as they can improve the Chinese brand image of any company. The brand is working for instance with Chrison, an influencer with five million followers on Weibo.

Cartier China: Issues slowing development

Counterfeits, the nightmare of luxury brands.

In China, up to 70% of bags or designer jewelry bought online are counterfeit. In non-brand stores 60% of luxury goods are imitations. Cartier is one of the most affected brands by this phenomenon. The brand stands with Louis Vuitton, one of the most engaged luxury brand in China to wipe out fakes. Indeed, in the 1990s, consumerist culture appeared. The booming middle class increased the demand of luxury goods in China. The backfire is that it also increased the counterfeits industry in China. Since then the quality of fakes has improved a lot. Today more than 73% of fakes came from China. Cartier China has to tackle the fake luxury goods industry. The brand is losing money and it could confuse Chinese luxury consumers.

The Hong-Kong crisis and the Coronavirus: Impediments for Cartier China

Since 2019, these two recent events have strong impacts on the Chinese market.

First, the Kong-Kong crisis which complicated shopping and tourism there. The island is today the first watch industry market in the world. Recent events affected the Richemont group. Cartier is one of the main watchmakers of the group. According to Richemont statistics, retail sells of jewelry, watches and luxury gifts were affected. There was a decreased of 47.1% in August and of 40.8% in September. Chinese luxury consumers demand was impacted by this.

[Source: Cartier.hk – CARTIER PEKING ROAD BOUTIQUE]

Second, the Coronavirus has an impact on Cartier China. In one hand, the company had to close its main shops in China. In the other hand, the company closed its jewelry and watchmaking factories, in March 2020. Around 1200 workers cannot work. This will impede the fulfillment of the Chinese luxury goods demands. Both hands are weakening Cartier China whether on the demand and the offer.

Thus, for decades Cartier kept a strong brand image. The brand is known for its finest quality in jewelry or watchmaking in every country. The Chinese entry market of Cartier started in 1992. Almost thirty years later, the Chinese luxury goods market is vital for the brand. Cartier China continue to develop its strategy, particularly with digital marketing. Still, the Coronavirus could have a real impact for the watch and jewelry market on the long-term. Which could weak the company in China and the whole Richemont group. But contrary to other jewelry brand, the Chinese brand image of Cartier could save the company.

Author: Enzio Cacciotto

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This article Cartier in China: The king of jewelers is the first one to appear on Daxue Consulting - Market Research China.

Rolex, Omega, Patek Philippe, Cartier, Channel, Longines, Tissot, Rado, Blancpain and Piaget are the top ten luxury watch manufacturers ranked in the Chinese market in 2019. The luxury market in China has been soaring from 2017 to 2018 with a compound growth rate at 40%, which makes China a big potential market for luxury manufacturers to acquire and compete. The luxury watch market in China is estimated to be worth 19.4 billion RMB.

Men between the ages of 25 to 40 are the main consumers in the luxury watch market in ChinaLuxury watch consumers in China buy watches as to depict status and consider 5,000 RMB as an entry price for luxury watches. Consumers learn information online but tend to purchase luxury watches in physical stores. “Swiss Made” watches are the first choice for luxury watch consumers in China.

[Data source: Forward the iresearch ‘luxury watch consumers gender/age distribution in China (2019)’]

Celebrity Endorsement and Soft Marketing

According to the research result given by the market research company Synovate, wealthy Chinese people like to purchase luxury with distinct visual logos and high brand awareness. Therefore, brand awareness becomes a key factor of Chinese consumers’ purchasing decisions. As data provided by iresearch, the most efficient strategy to enter and occupy the luxury watch market in China is celebrity endorsement.

[Data source: Forward the iresearch ‘The marketing strategies of luxury watches in China that are popular among consumers (2019)’]

Chopard China marketing strategy

In May 2018, a Swiss luxury watch brand, Chopard in China declared Wang Yuan (Roy Wang), a pop star, as its ambassador. The declaration Weibo was reposted over one million times.

[Source: Weibo ‘Chopard declares Wang Yuan as its ambassador’]

However, the celebrity effect is not always long lasting. As of January 19^th, 2020, only 7 of Chopard’s Weibo that were related to Wang Yuan were reposted over 100,000 times. They were usually reposted  around 20,000 times. Chopard’s brand exposure grows when Wang Yuan has TV shows or films on and when Chopard in China has special campaigns with Wang Yuan, such as the Valentine’s Day event with Wang Yuan. If Chopard in China uses celebrity effect as its primary market strategy in the luxury watch market in China, it needs to adopt the most popular celebrity as its ambassadors and keep him active in the public eyes to maintain the brand exposure in luxury watch market in China.

Soft marketing of luxury watches

Some famous brands prefer to use soft marketing in the luxury watch market in China. Although they do not sign any celebrity to represent their brands specifically, they ask celebrities to be guests at their brand events, sponsor film festivals, or plant ads in films to enhance the brand publicity. In 2012’s Cannes Film Festival, two Chinese film stars Chen Kun and Qing Hao were wearing Dior wristwatches. What’s more, many other Chinese film stars were wearing luxury watches too: Zhou Xun with Channel, Gong Li with Louis Vuitton, and Liangchao Wei with Cartier. These are all parts of the soft marketing effort made by luxury watch brands. It is obvious to see soft marketing has become a sustainable marketing strategy widely used by luxury watch manufacturers to better compete in the luxury watch market in China.

Status and Rolex in China

Rolex watches are meant to represent the upper-class income group individuals who live a lavish life. Therefore, unlike Chopard, it uses undifferentiated niche strategy all over the world, including the luxury watch market in China.

Chinese netizens responses to the Zhihu question  ‘what was the experience after purchasing your first Rolex in your life’. The response with the most upvotes said he had looked for a Rolex Yacht-Master watch for three years in many different countries and finally got it in a small Rolex exclusive store in London. He felt purchasing a Rolex watch was a turning point in his life. Whenever he had the urge and pressure to make a decision, the Rolex reminded him to calm down because people who wear Rolex watches have to be sophisticated. When he noticed other people were staring at his Rolex, he felt proud and extraordinarily satisfied. Rolex was the first luxury watch brand that entered the luxury watch market in China after the Chinese economic reform. Rolex in China has a special place in the hearts of luxury watch consumers in China. They do not only treat Rolex as a symbol of luxury and prestige as other luxury watches in China, but also a timeless masterpiece. Although, some of the luxury watch consumers in China do not buy Rolex in mainland China because of the limited supplies and relatively higher price.

[Source: sina.com.cn ‘Rolex with Li Na’]

Brand awareness without social media

Rolex in China does not focus on short-term brand exposure or social media marketing since its brand awareness is high in China and its target segment is concentrated. Rolex’s marketing strategy focuses more on advertising artistic and athletic activities. Rolex has continued sponsoring tennis tournaments for many years and aligns with excellence in tennis. In 2011, Rolex signed an endorsement contract with Li Na, a trailblazer for tennis in Asia. Li Na referred Rolex as a booster for the tennis development in China. Rolex is driving the technological advancement, state of design and positive brand image to be ahead in the luxury watch market in China.

Luxury Watch market in China Faces counterfeiting

[Source: xw.qq.com ‘Guangzhou Customs seized counterfeit watches’]

Switzerland and Guangzhou Customs made an alliance against counterfeit watches. They destroyed a large number of counterfeit watches at the end of year 2019, which were worth around 350 million dollars. Experts said those counterfeit watches bore a remarkable resemblance to the authentic watches. The counterfeit watches caught in Guangzhou were not sold in China, but exported to Europe.

[Source: xw.qq.com ‘foreigners buy counterfeit watches’]

Many people buy counterfeit goods at Xiushui Street in Beijing, which is famous for its fake but good quality products. Counterfeit luxury watches from Xiushui Street are one of the most popular goods among foreign visitors.

Luxury watch brands should put more efforts on content marketing about the value of authentic watches and encourage consumers to buy watches at authorized stores. On the other hand, brands should also ally with government organization to seize counterfeit watches and strength punishments against counterfeiters, authorized dealers and counterfeit buyers.

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This article The Luxury Watch market in China: Status, sophistication and counterfeiting is the first one to appear on Daxue Consulting - Market Research China.

Rolex entered Chinese market with an objective of providing the high and luxury hand watch with innovative technology and design so as promoting its brand to a kind of collective item which symbolize as prestige, luxury and high quality. Rolex in the Chinese market has changed the game of luxury watch in china, being the fact that there were some luxury brands Such as Omega, Cartier which dominates the market before the emergence of Rolex.

Case study of Rolex in China: The emergence of the luxury market

According to Global Digital, the global watch market share was $21 billion in 2016 and expected to reach $30 billion by the end of 2020. China is a key influencer in the growth of the luxury watch market with market growth of over 59%. Rolex is the leading luxury watch brand globally, but the situation is different in China, where  Omega has the leading market share, followed by Rolex and Cartier. The emergence of Rolex in the Chinese market was not a bizarre scenario to most luxury consumers because it has entered Hong Kong since 1972 through Emperor Watch & Jewellery before it entered the mainland China in 1995 in cooperation with Peace Mark, the largest luxury watch retailer in Asia.

Rolex in China: How it delivers luxury to customers

The Chinese luxury watch market attracts the attention of global luxury watch manufacturers all over the world. Rolex’s success in the Chinese market has to do with its global recognition, which symbolizes power and success. 

Brand Marketing of Rolex in China

As the most prestigious luxury watch brand in such a competitive market, where luxury customers are often brand loyal, Rolex had to make a good first impression when entering the Chinese luxury watch market, which is tactically done through branding and naming。When naming is well-done, it can have a real impact on the sales of a product. Let’s take, for example, Omega’s bestselling luxury watch in China: the De Ville model. Its Chinese translation is 蝶飞 (Die Fei) which means flying butterfly, an elegant and easy-to-remember name for Chinese clientele. As opposed to the most loved De Ville, Rolex’s Oyster Perpetual Submariner green-dial version has been given the name of “green water monster” (绿水鬼， Lu Shui Gui) on the Chinese luxury watch market, while the black dial version was called “black water monster” (黑水鬼 Hei Shui Gui). Not the most elegant name indeed, but Rolex decided not to confuse people like Hublot had done by choosing a new official name and made it their official transcription. The Rolex watch brand image in China had become a key symbol of its success during the 1980s as it widely spread throughout Hong Kong to Guangdong.

Celebrity Marketing of Rolex in China

Rolex’s perception among Chinese customers is that the round face shape is deemed auspicious, and its golden crown logo symbolizes success, status and power. To keep this perception, the company chose the top Chinese musicians Lang Lang (朗朗), Li Yundi (李云迪) and Yujia Wang (王羽佳) as its brand ambassadors.

Experience Marketing of Rolex in China

Traditionally, Rolex’s marketing strategy focus on advertising artistic and athletic activities, using both domestic and international celebrities. The company sponsored one of the most favorite sports in China (Tennis) from 2009 to 2018. This strategy has ultimately strengthened Rolex’s perception among the Chinese, not to mention the upper-class crowd that normally follows tennis.

Understanding the market segmentation is a key element of Rolex in the Chinese market

International companies consider China as a huge potential market for profit, due to its economic development and population. Rolex’s success in the Chinese market has to do with a vivid understanding of the right market segment; they open shops in first-tier cities such as Shanghai and Beijing. Hong Kong seems to be one of the global luxury centers since before Rolex came to China, an industrious gateway to China with more than half of its women population has a passion for luxury.

Case study: Marketing strategy of Rolex in china

SWOT Analysis of Rolex in China

Marketing Mix of Rolex in China

Product: The brand was already famous, it has developed the unique product design, name, color and features both physically and psychologically to stand out among the market competition. Rolex in the Chinese market has successfully penetrated the luxury taste of Chinese customers, not only true brand name, image, and quality but also through packaging.

Price: Because its target customers were mostly upper class living in a first-tier and second-tier cities, along with the recognized brand prestige, the company chose a higher pricing strategy. Rolex in the Chinese market is currently facing a huge problem of counterfeiting, meaning consumers are starting to see fake Rolex watches sold in China at much cheaper prices, watering down the brands’ prestigious image, and leading to the loss of customer loyalty

Place: The Chinese Luxury watch market is like others watch market elsewhere on earth. From the beginning, the Rolex entered into Hong Kong’s market through one of the most successful luxury retailer in Hong Kong (Emperor Luxury & Jewellery), located in the ritzy shopping malls of central Hong Kong. However, presently, Rolex in the Chinese market is not limited only to the physical shops, but the company has established itself on online shopping platforms such as JD.com. 

Promotion: This is one of the most important elements of Rolex’s China Marketing Strategy. Rolex had performed extraordinary well in promoting its product within a short period of time, despite its late arrival in the Chinese market compared to its competitors. The promotional strategies of Rolex in the Chinese market involve; celebrity endorsement, sponsoring sporting events such as Tennis, the China Sea Race, etc.

Market segmentation of Rolex in China

China is a huge market with a lot of potentials, but only for those who can sort out its complexities. Rolex’s success in the Chinese market has more or less to do with its segmentation, for which Rolex has critically examined before entering the market in China. Rolex narrowed down the large, diversified target audience into specific and defined groups: Age (20-45), income (Upper class & Middle class), location (Tier-1, Tier-2 and rarely Tier-3) and social class (Higher social class).

Capturing the first glance of the customer as an effective strategy used by Rolex in China

Rolex watch brand image in china is like other countries, as the brand image portrays power, success and achievement. The Rolex perception among Chinese customers was positive, despite the fact that some do consider the product as a symbol of extravagance and arrogance, while at the same time, mystery. According to Kevin Roberts, CEO of Saatchi & Saatchi: “Mystery opens up emotion. It lies in the stories, metaphors, and iconic characters that give a relationship its texture. The mystery is a key part of creating loyalty beyond reason.”

Rolex’s leveraging of mystery among a Chinese audience is elegantly summarized in the book, Luxury China: Market Opportunities and Potential by Michel Chevalier, Pierre Xiao Lu: “It combines the past, the present and the future, tapping it into dreams and inspiring through the myths and icons it creates. This is true of Rolex, which is certainly the most mysterious brand in the watchmaking world, not only because of its particular status and the secrecy surrounding its financial performance but also thanks to some key points of its communication strategy.”

Rolex’s success in China’s market

Rolex is the global leading manufacturer of watches. However, the situation is arguably different in China, where Omega leading the region. Rolex adopts different marketing strategies to win the market by exercising its effective marketing mix. Rolex in the Chinese market has significantly changed the passion for luxury watches among the higher social classes in China. With an effective marketing strategy, Rolex has become the Chinese luxury watch market being the second-largest luxury watch brand after Omega, despite being a late entrant.

Author: Abdulhamid Sillah

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This article The pinnacle of the Chinese luxury watch market: Rolex in China | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

The Chinese luxury watch market is facing many issues when coming to branding and naming strategy.

As most occidental companies are now realizing, naming is crucial when it comes to the Chinese market. Indeed, Chinese speakers will have a hard time memorizing and pronouncing the English name of brands or of products. If the firm doesn’t step up and settle for an official Chinese name following a strict Branding strategy process, then the customers will do it instead.

Branding strategy of Hublot in China

We have the example of Hublot, which was known as ‘恒宝’ (Heng Bao, permanent treasure) in China: A few years ago, the firm chose ‘宇舶’ (Yu Bo, phonetic transcription) as their official transcribed name. However, most people still refer to the brand using its previous name: it may be because of the translation that made more sense and was somehow more elegant, or just because the previous name was already deeply imprinted into the consumers’ mind, making it difficult for them to put a new name on the brand. Either way, the results are clear: when it’s not Heng Bao, it’s Hublot ; but very few people use the official transcribed name when searching for the brand…

Naming is crucial on Chinese luxury watch market

On the contrary, when naming is well-done, it can have a real impact on the sales of one product. Let’s take for example Omega’s bestselling luxury watch in China: the De Ville model. Its Chinese translation is 蝶飞 (Die Fei) which means flying butterfly, an elegant and easy-to-remember name for the Chinese clientele. This might just explain its enormous success in China, as shown in the graph below:

As opposed to the most loved De Ville, Rolex’s Oyster Perpetual Submariner green-dial version has been given the name of “green water monster” (绿水鬼， Lu Shui Gui) on the Chinese luxury watch market, while the black dial version was called “black water monster” (黑水鬼 Hei Shui Gui). Not the most elegant name indeed, but Rolex decided not to confuse people like Hublot had done by choosing a new official name, and made it their official transcription.

This shows how important naming is for an occidental firm that wants to expand in the Chinese luxury watch market: whether it be the branding strategy, or the products’ name, it does make a difference in the company’s image for the local audience.

To learn more on luxury brands in China –

This article Branding: Chinese luxury watch market is the first one to appear on Daxue Consulting - Market Research China.