Swiss made watches industry

Among Swiss-made Watch Industry How
Do Luxury Houses Compete With Swiss
Heritage Brands In Mainland China

Tutor : Audrey Kabla
Students: WANG Shijian (Caroline), CHEN Yingyi (Erona)

contact: eronachen@gmail.com

1 INTRODUCTION


Background:

•  Swiss-made watch is the synonym of the high-end luxury
watch both in aesthetic aspect and functional aspect for
the exclusivity in the world.
•  In 2011, the export value of Swiss watch is 19.3 billion
francs, increased nearly 80% from 2000 (with 19.2%
increase from 2010).
•  A visible phenomenon since 2000s is many famous luxury
houses extended watch lines and compete with the
original heritage brands in Swiss-made watch industry.
•  In 2011,China broke up all records before with the growth
rate of nearly 50%. With 25% global market share, the third
export market in the world


Objective :among the Swiss-made watch how do luxury
houses compete with the heritage brands in the most
potential market —China ? Hong Kong, Singapore and
Japanese markets are the reference region and countries.

Structure:

1 Introduction
2 Swiss-made watch industry overview
3 Main differences between heritage brands and luxury
house brands
4 Strengthen Luxury houses competence in China
5 Conclusion
6 Reference


2 SWISS-MADE WATCH INDUSTRY
OVERVIEW


2.1 THE HERITAGE WATCH BRANDS

Born in 16th 17th 18th 19th

The Distribution of
Maîtres des Horologers Watchmaking in Jura Mountain
de Geneva
Vacheron
Constantin


2.1 THE HERITAGE WATCH BRANDS
Chart 1 Richemont Group Watch Brands Chart 3 LVMH Group Watch Brands

Chart 4 Rolex SA Watch Brands

Chart 2 Swatch Group Watch Brands
Chart 5 PPR Group Watch Brands

Chart 6 Private Watch Brands


2.2 KEY SUCCESSFUL FACTORS
2.2.1 BRAND’S HERITAGE
Every prestigious watch brand’s story is its unique heritage
A combination of ingenuity, experience and passion
Vacheron Constantin

Patek Philippe
Found in 1835 ,owning a Patek Philippe is “an entry into a family
business ,from father to son, each generation is dedicated to perpetuating a
unique heritage”


2.2.2 TIMELESS INNOVATION

From 18th to 19th

Two Crisis
1st American mass standard manufacture crisis
Multifunctional innovation and design
2nd Japanese “Quartz Crisis” in 1970s SMH invented
“Swatch”


2.2.3 STRONGLY KNOW-HOW

Industrial rules
Heritage houses’ aspires are both in technical
aspect and aesthetic aspect
Patek Philippe’s goal “to develop, manufacture the finest
watch in the world.”
Jaeger LeCoultre needs more than 100 techniques to
manufacture a watch and 1,000 hours’ test


2.2.4 CRAFTSMANSHIP

“Genava Seven Crafts”
Vacheron Constantin Dove Watch

Engraving Enameling

Gemsetting Guilloche

2.2.5 INDUSTIAL CRITERIA

Swiss Made Rule
80% of the production are finished in Swiss
• Its movement is Swiss;
• Its movement is cased up in Switzerland;
• And the manufacturer carries out the final inspection in
Switzerland.
The Identification Code of Swiss Made Movement

Right Wrong



Geneva Seal
In November 6, 1886 Geneva Seal was set up to avoid the
counterfeit and copied models. Now the official hallmark became
one of the most authoritative industrial standard for the most
excellent timepieces
12 criteria for movement



Patek Philippe Seal

The Patek Philippe Seal surpasses all standard for production
which taking all details as considerations to achieve the best
results.
The exterior elements

The movement (7 rules)
The international customer service


2.2.6 COMMUNICATION

Social media
6 languages versions Patek Philippe international magazine
Tag Heuer 3rd best luxury house in social media
Facebook 490.000 fans
Vacheron Constantin , Breguet , Blancpain created Ipad program
Non-Social communication

Patek Philippe Museum Tag Heuer 360 Showroom

2.2.6 COMMUNICATION

•  Event
IWC Dinner party in Plage Orange beach
•  Sponorship
Omega’sSeamaster Chrono NZL-32 for New Zealand team in
American Cup
•  Charity
Only for Watch Auction
Club/Membership
Vacheron Constantin


2.2.7 EXCELLENT SERVICE


2.3 LUXURY HOUSE BRANDS
Luxury Houses: luxury brands have product ranges as Haute
Couture, Luxury RTW, RTW, leather goods, accessories,
fragrances and cosmetics excluding Haute Horlogerie and
Haute Joaillerie

Begin: 1920s (Hermès with Movado) with increasing
popularity of the wristwatches

Pop-up: 1970s, assuming a relation with Quartz Crisis
•  Increasing demand/ lower cost to manufacture (luxury
houses)
•  Searching for financial support (Swiss Heritage Watches
Brands)



1972 1987 late 1980s 2000 2002 2009

1928 1975 1988 1990 early 2000s 2007 2012



Three approaches:

•  Cooperate with Swiss manufactures then purchase
ex Gucci with Severin Montres
•  Establish own workshops in Switzerland
ex Chanel, Louis Vuitton
•  Licensing
ex Burberry, Armani with Fossil


2.4 BRIEF SUMMARY
Cases from Haute Joaillerie entered into Swiss watches industry

Cartier (first practical wristwatch 1904: “Santos”)
•  Enter slowly, 50 years after the brand established. Movement
from Jaeger-LeCoultre (exclusive supply).
•  Embracing Art and charity: “l’Art de Cartier” exhibition 1989

Tiffany & Co.
•  Join venture with Swatch Group 2007 (20 years contract)
•  2011 lawsuit to break the contract (unsatisfying sales,
inadequate distribution and maintenance of brand image)


2.4 BRIEF SUMMARY
Cases from luxury houses (more difficult) entered into Swiss watches
industry

Chanel
•  Swiss workshop
•  Première: Linkage of brand universe and Couture aesthetic aspect
•  J12: its first unisex watch with innovative material, ceramic
•  Joaillerie Watch: precious materials, high-end prices

Hermès
•  First luxury house entered cooperate with Movado
•  Not able to gain legitimacy without creating an professional image at the
beginning


3 MAIN DIFFERENCES BETWEEN
HERITAGE BRANDS AND LUXURY
HOUSE BRANDS


3.1 THE PRODUCT MIX
3.1.1 PRODUCT

Usually, watch from heritage brands use more complicated
technique, even in the aesthetic aspect. However, luxury
brands watch are more fashionable and ornamental
Firstly, the traditional craftsmanship
Enamel

Jaeger LeCoultre Reverso à Eclipses Timepiece


3.1 THE PRODUCT MIX
3.1.1 PRODUCT

Jewelry-encrusted

Piaget Boucheron

Skeleton

Jaeger LeCoutre Master Minute Repeate Piaget Altiplano

3.1 THE PRODUCT MIX
3.1.1 PRODUCT

Movement

The Main Luxury Brands Watch Movement Supply


3.1 THE PRODUCT MIX
3.1.1 PRODUCT

Complication
Brand Share of Tourbillon in market Hermes Cape Coq
Moon Phrase

Materials
Case and straps FX Piaget


3.1.1 ICONIC PRODUCT/COLLECTION
Jaeger LeCoultre Reverso
Back in 1931, in a dusty vortex and to the accompaniment of
horses’ hooves hammering, an idea was born: a watch with a
dial that could protect itself from shocks, with a personalized
background


Breguet Reine de Naples Collection
Breguet's Reine de Naples collection is inspired by an early
bracelet watch A. -L. Breguet created for Bonaparte's sister
Caroline, Queen of Naples


Cartier Tank
Cartier Tank collection was created by Louis Cartier in 1917,
which inspired by the new Renault tanks which Cartier saw in
use on the Western Front,so the collection are similar to
those of tanks found on First World War on the battle.


Chanel J12
In 2000 Chanel launched the initial model of the unique
Chanel watch line; the Chanel J12. But the important stage of
the Chanel J12 occurred in 2005
the first unisex watch
the first watch in high-tech non-scratch ceramic material


Hermes H
Since its first launch in 1996,Hermes H watch enjoys its
popularity to attract female.As the name implies, the case
stands for Hermes "H" is a bold design in the motif and the
thin lines emitted radially in character board.


Louis Vuitton Tambour
In 2002,Louis Vuitton launched the first watch collection-
Tambour, the word that evokes both the cylinder of a clock,
the ancestor of the western watch, and a musical instrument
associated with celebrations.


3.1.1.2 ASIAN IMPRESSION
As the consumption rapidly increased in Asia, more and
more brands applied Asian elements in their design to target
the customers.

Piaget Dragon & Phoenix Collection TAG Heuer Yin Yang


3.1.1.2 ASIAN IMPRESSION
Some brands use colour code to attract Asian customer, as
red is the lucky colour for Southeast Asia.

Chanel J12 Gucci 1921 Pendant Version


3.1.2 PRICE
Luxury Watch Pyramid


3.1.2 PRICE
The Selected Prestige Watch Price Range (regular models)

Hermes price range

Entry level watch brands


3.1.3 PLACE
3.1.3.1 GLOBAL DISTRIBUTION

Swiss Heritage Watches Brands:
•  Selective distribution: Trade show, boutiques, POS
•  Exclusive distribution: VIP sales, Auction (Limited edition)

Luxury houses:
•  Selective distribution
•  Exclusive distribution
+ Licensing


3.1.3 PLACE
3.1.3.2 ASIAN DISTRIBUTION
Chart 14 Swiss Made Watches Geographical Distribution (in CHF million)

Asian region experiencing nearly 100% increase.

3.1.3 PLACE
3.1.3.2 ASIAN DISTRIBUTION

Chart 15 Percentages of Swiss Made Watches Exported to Different Continents
2007-2011 (100% in Total Each Year)


3.1.3 PLACE
3.1.3.2 ASIAN DISTRIBUTION – SWISS HERITAGE
WATCHES BRANDS

Case: Rolex, which has entered Chinese market for nearly
100 years

25 authorized
retailers 25 authorized
retailers

More than 230 authorized retailers in China, distributors of Mainland China mainly locate in Shanghai.

3.1.3 PLACE
3.1.3.2 ASIAN DISTRIBUTION – SWISS HERITAGE
WATCHES BRANDS

One in every 23.46 square mile

Total area of Tokyo: 844.66 sq. mi. with 36 retailers & boutiques.

3.1.3 PLACE
3.1.3.2 ASIAN DISTRIBUTION –
LUXURY HOUSES

Less aggressive
•  They generally distribute
watches by themselves
or parent company.
•  No watch boutiques only
boutiques for both watch
and jewelry.

ex Hermès in Wangfujing
department store, Beijing/
Ralph Lauren, a new 320 m2
boutique for watch & jewelry
at Hong Kong’s Peninsula
Hotel


3.1.4 PROMOTION
SELECTIVE ADVERTISING

Patek Philippe

•  2010 “Heritage” campaign
also communicate to
female target “Something
truly precious holds its
beauty forever.” on high-
end magazines.
•  Digital campaign form of
themed microsites
(English & German in UK,
Germany, US and a
selection of international
media sites)


3.1.4 PROMOTION
SELECTIVE ADVERTISING

Chanel

•  communicate J12 in
Japanese female market
in 2011
•  Kiko Mizuhara (Norwegian
Wood) in attractive and
special emotional
expressions


Image 29
3.1.4 PROMOTION
ENDORSEMENTS

2005, Audemars Piguet
chose Michelle Yeoh to be
the 1st Chinese
spokeswoman

2012, Gucci has chosen LI
Bingbing

Image 30

Image 31 Jaeger-LeCoultre Reverso
80th Anniversary Exhibitions
3.1.4 PROMOTION
PUBLIC RELATIONS

Exhibitions
Event
•  Sports
Touring from Shenyang, Dalian, Shenzhen, Hangzhou,
•  Charitable Shanghai and Ningbo six important cities

Private Clubs
Image 32 Omega for London 2012
Limited Edition Seamaster 1948
Audemars Piguet + ThePuristS, Cocktail party
in Singapore introducing Jules Audemars
Handwound High-Beat Chronometer to watches
collectors. 2010

Olympic games for 80 years
since the 1932 Los Angeles Olympic Games


3.1.4 PROMOTION
PUBLIC RELATIONS Image 33 Louis Vuitton Tambour for America’s Cup

Exhibitions
Event
•  Sports
•  Charitable
Private Clubs Image 34 Gucci support the
China Soong Ching Ling Foundation

Chanel 2012 BaselWorld Exhibition


3.1.5 PEOPLE
Case: TAG Heuer with i-reel.fr for its corporate training (Chanel)


3.1.5 PEOPLE
Luxury houses retail training for all segmentations, Chanel (NY)
Training Film Series "WRAP YOURSELF IN LUXURY" for its retail
training by Rockville’s (Movado).


3.1.6 PROCESS

Main differences:

•  Security (Security guard, locked door, ex Place Vendôme)
•  Sales team: knowledge of Haute Horlogerie
•  After sales services: Customer service centers (ex Rolex China)


3.1.7 PHYSICAL EVIDENCE
Image 36 Piaget Boutique at Marina Bay Sands in Singapore


Image 38 Hermès Watch and Jewelry Boutique in Beijing China


3.2 COMPETITION
Chart 19 Simplified Swiss-made Watch Brands Segmentation Mapping (Eurostaf
Research published 2011)


3.3 LUXURY HOUSES
BRANDS LESSON LEARNT

•  Swiss Manufacture
•  Respecting Brand Universe
•  Innovation
•  Selective Distribution and Communication
•  Well-Trained Service Team


3.4 CONSUMER BEHAVIOR ON SWISS-
MADE WATCHES
Demographic
2011 Swiss Made Watch Distribution

Customers : between 30-55,among them 55%male and 45%female


3.4 CONSUMER BEHAVIOR ON SWISS-
MADE WATCHES
Chart 21 Consumer Perceptive
(Eurostaf Research published 2008)

Firstly, respecting the authority of “Swiss made”.
Secondly, a wise way of investment.
Thirdly, a Swiss made watch is a symbol of social status.
Fourthly, women became an important purchased force in luxury
watch segment.

4 STRENGTHEN LUXURY HOUSES
COMPETENCE IN CHINA


4.1 ANALYSIS IN MAIN REFERENCE
COUNTRIES AND REGION
4.1.1 JAPAN

•  Revolution during Quartz Crisis 1970s
•  Key players: Seiko, Citizen and Casio
•  Shrinking market size

Chart 22 Swiss made watches imports of Japan and Hong Chart 23 Japanese Watch Market Size
Kong 2007-2011 (Federation of the Swiss Watch Industry (Yano Research Institute Ltd.)
FH, unit: Billion Dollars)


4.1.1 JAPAN
Chart 24 Wristwatch Consumer Awareness Survey 2012,
Japan (Federation of the Swiss Watch Industry FH)

•  Sophisticated
development of
both Swiss
Heritage Watches
Brands and
Luxury houses.
•  15/35 (43%)


4.1.2 SINGAPORE

•  Swiss economic model
•  Chinese culture influence (75% population)
•  Hong Kong (retrocession)
•  Security
•  High taxes on vehicles
•  English (official language)


4.1.2 SINGAPORE

•  Independent contributors: passionate retailers, collectors
•  A country of fine watches connoisseurs.

Worldwatchreport 2011

4.1.3 HONG KONG, CHINA

•  Import Swiss made watches the most
•  Certain amount re-export (Preferential policy on taxes )
•  Mainland Chinese consumption more and more influential
•  Mainly speak both English and Cantonese

Left: Chart 25 Swiss Made Watches Import Value of Hong Kong
(Federation of the Swiss Watch Industry FH, unit: Billion Dollard)

Right: Chart 26 Watch Exporting value of Hong Kong
(Federation of the Swiss Watch Industry FH, unit: Million Dollard)


4.2.CHINESE CONSUMER BEHAVIOR
4.2.1 HISTORIC AND CULTURAL ASPECTS
According to Swiss watch industry report 2011 the whole
value of the Chinese market in last year is over 1600 CHF
million，while the increasing rate is 48.7% ,occupies 8.5% of
the whole world Swiss watch consumption.


4.2.1.1 HISTORICAL REASON
Show off
the success people who obtained their wealth between
1980s and 2010s show a strong demand to show their wealth
by wearing the luxury goods.

Asian Countries’ Stages of Luxury Evolution


4.2.1.1 HISTORICAL REASON
•  The strong desire to show the social status by the
influence of hierarchical social system which existing in
China for thousands of years.
•  The phenomenon of admiring the western culture and
products.(The lost generation)


4.2.1.2 DEMOGRAPHIC
80% of the wealthy people in China under 45 years old
(concentrated on 25-45 years old) comparing with America’s
30% and Japan’s 19%, the Chinese luxury clients are quite
young.

While among these clients most of them are male, mainly
three types:
governments,
Bosses
university professors.


DOMESTIC CONSUMPTION
30% of wealthy people lived in the four biggest cities in
China, Beijing, Shanghai, Guangzhou and Shenzhen while
50% of wealthy household lived in the top ten cities
comparingwith 25% of United States.

Distribution of Chinese Wealthy Household Luxury Customers Distribution


OVERSEAS CONSUMPTION

•  57% luxury purchasing occurred in foreign countries
•  the top three are France, Italy and United States.
•  To be clearly is that among the left 43% there are still 23%
•  indirectly purchased from abroad by overseas purchase
agency or individuals
•  what is to say that 80% of Chinese luxury consumption in
abroad due to the high import tax.
•  luxury watch segment the Mainland China’s price is 45%
higher than Hong Kong, 51% higher than them in United
States.


4.2.1.3 NEEDS

Chinese Consumption in Swiss Made Watch Segment
(Federation of Swiss Watch Industry)

•  Hard luxury consumption increased steadily in China due to
the Chinese people have the saving awareness.
•  The belief in authority became a strong reason for
luxury watch purchasing. In many occasions Chinese
people like to be the “followers” mostly by the theory of
Confucius.


4.2.1.4 GIFT GIVING

Gift giving is an important way to show the emotional
affection to others.
The Swiss made watch gift giving in China has two main
types, between relatives or between social partners.
Relatives :Permanent love or Good luck!
Social partners
Gift Giving Phenomenon


4.2.2 THE SECOND-IER AND THIRD-IER CITIES
CONSUMPTION

Second-tier cities and third-tier cities’ consumption power
increased rapidly.
Reasons:
•  Less curious about luxury watch
•  Strong purchase power(Gucci in Zhengzhou)
•  First-tier citizens became wiser and having a better taste

Luxury houses strategy: Gucci opened 9 stores in China, 8 of
them in second-tier cities or third-tier cities.


4.3 ACTION PLAN
4.3.1 PRODUCT

•  Movement: more complex with
complications in mechanic
movements (female clientele)
•  Design: not too fancy, not oversize,
classic, special, unique, cultural
(male), precious stones, elegance
(female)
•  Complications: a trend, Asian
women love watches with
complications (FT 2010) ex
tourbillons, skeletons, GMT
•  Aesthetic Aspect: preferable color,
clean dial face, square shape,
traditional aspects


4.3 ACTION PLAN
4.3.2 PRICE

•  Fashionable watches with lower price
•  Fine watches as investment and a sign of social status with
higher price
•  Price isn’t the priority of decision making

ex Swiss Heritage Watches Brands
•  TAG Heuer Carrera Automatic $2,500
•  Breguet Classique Grand Complication $103,100

ex Luxury houses
•  Chanel J12 Automatic 38mm ceramic $5,600
•  Chanel J12 Automatic 38mm ceramic $37,700 (with diamonds)
•  Chanel Grand Complications watches $150,000 (assumed)

4.3 ACTION PLAN
4.3.3 PLACE

•  Beijing (capital)
•  Shanghai (financial center)
•  Guangzhou (import and export business)
•  Shenzhen (strategic location between Hong Kong &
Guangzhou)
•  Chengdu, Chongqing, Shenyang, Hangzhou, Tianjin, Dalian,
Wuhan, Suzhou and Nanjing (increasing demand)


4.3 ACTION PLAN
4.3.4 PROMOTION
Media
•  Magazine such as VOGUE, ELLE, Rayli, Vivi,
W, Numéro etc.
•  King-size billboards in CBD, airports
•  Selective TV advertising
•  Digital advertising

Non-media
•  Endorsement
•  Charitable supports


4.3.5 PEOPLE

•  Firstly, to build the professional image of the luxury
brands’ watch needs deeply understanding the
information of their own brand and product
•  Secondly, understand the Chinese customers. In some
level the hierarchical system still influences in Chinese
people’s thinking
•  Brand code dress


4.3.6 PROCESS
•  What expect of a customer go to a store is not only for the
product but also for the excellent service !
•  Greeting
•  Don’t follow
•  Asking what they want ,in Northern part no price related,
contrary in South
•  Different recommendations for male and female
•  Accompany person is important
•  Drinks and story telling depends
•  Elaborately packaged
•  “ Good bye” with accompany to the door

•  Luxury needs spacious!

The Interior of Patek Philippe Store in Shanghai
•  Brand identity code
•  Consultant table
•  Salon


4.3.8 BRAND QUALITY CONTROL

•  Brand quality control is not only about process of
purchasing but also for after sale service.
•  Service center in China
•  Longer warranty period
•  Counterfeit solution


5 CONCLUSION


•  Increasing purchasing power of Chinese residents
•  Higher English level
•  Development of Internet
•  Oversea experience

•  More knowledgeable in Swiss made watches industry
•  Strong recognition of luxury houses (Trend setters)
•  Customer loyalty of luxury houses

CHINA COULD BECOME THE BIGGEST
LUXURY HOUSES WATCHES MARKET

WANG Shijian (Caroline) & CHEN Yingyi (Erona)

End


Swiss made watches industry

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