The prominent luxury watch brands are counting on lifting the health restrictions associated with the Covid-19 pandemic in China, to ensure that they achieve growth in 2023, without rushing to raise positive expectations, due to the delayed return of Chinese tourists to Europe.
China is a major market for watch manufacturers participating this week in the Geneva Watch Show, but exports of this luxury type of goods declined by 13.6% in 2022, coinciding with the implementation of the “zero Covid” policy and the high number of coronavirus infections during the end of the year. In February, watch sales began to recover by 8.2% year on year, according to statistics from the Association of Watch Manufacturers.
On the sidelines of the “Watches and Wonders” exhibition, in which 48 watch brands participate, including “Rolex” and “Patek Philippe”, the president of the association, Jean Daniel Pasha, expects that “China will restore a positive dynamism.”
And with the cessation of pandemic-related health restrictions, many financial analysts have significantly raised their forecasts for the growth of the watch sector in 2023. Consumers have saved large sums during the quarantine, as analysts from the “HSBC” banking group point to estimated figures of 6,600 billion renminbi. (about $959.87 billion) has been saved over the past three years.
Analysts from Morgan Stanley predict that Chinese consumer spending on luxury goods will increase by 20% in 2023.
They estimate that luxury lovers in China contributed about 60% of the sector’s growth between 2000 and 2019.
About three-quarters of their spending was on purchases outside China, which represents a financial bonanza for luxury stores in Europe, knowing that they have been used to buying products from China since the COVID-19 pandemic.
At a press conference at the watch fair, officials from the Swiss giant Richemont Group expressed caution. “We notice that customers have returned to the stores with a great desire to buy the products,” says Cyril Vineuron, President of Cartier, the main brand of the group, noting that “the change of course of such an important market affects the whole of Asia.”
However, predicting the market’s development in the short term is still difficult, according to Burckhardt Grund, CFO of Richemon, although he shows “optimism regarding China in the medium term.”
He notes that a “good level of activity during the Chinese New Year” was recorded in China, as well as in Hong Kong and Macau, in a recovery that extends to “Thailand, Japan and Australia”, with “first indications” of the return of Chinese tourists to Dubai, and he says, “But we did not notice until today their return.” to Europe”.
Guillaume de Saint, one of the officials in the “Hermes” house, which specializes in leather goods, does not doubt the desire of Chinese customers to return to France and Europe. “Flights to France are still limited,” he says.
Currently, the two most important goals of “Hermes”, which displays its latest watches in Geneva, revolve around “expanding the size” of its stores, and “gradually expanding” in the Chinese market by opening one store annually “in a new city,” according to Guillaume de Saint. In January, the house opened a store in Nanjing, bringing the number of its stores in China to 27.
In Lucerne, which is considered the first tourist destination in Switzerland, the Department of Tourism hopes that Chinese tourists will return to the region “during the summer or the end of spring,” according to what “visas and what trips to Switzerland allow,” says a spokesman for the city authorities, which constitutes a visit to shops. Watches are a major tourist activity.
“In the first stage, we will see wealthy clients arriving from China because tickets are very expensive,” says Antoine Bain, director of the watch department at Bulgari (a subsidiary of LVMH).
As for the analyst at Kepler Chevro, John Cox, he expects a “very strong year” for brands that “have a distribution network in China.”
“However, I am not sure of the results of the brands that depend on the return of the Chinese to Europe, because it will take time to record rates similar to those we were witnessing before the pandemic,” he added.
(AFP)
