BUSINESS
For hard products such as watches and jewellery, the strategy was exclusively based on price—it is luxury because it is expensive! In recent years, Swiss watch export statistics have shown that there has been an increase in value and a decrease in quantities. Despite this, brands continued to produce and focus on very expensive models. At the same time, following the fashion trends, watch brands launched new models during the watch fairs, just feeding the retailers’ stocks and ignoring the reality of the market. For the fashion brands, everyone was producing everything, as long as it had a logo on it. It was impossible to see a difference between the few brands. Although the Asian market started slowing down at the end of 2014, the brands still “danced on a volcano”, refusing to understand the changes. The first change or swing was the strong anti-corruption campaign in China, affecting probably around 30% to 35% of luxury business. This was the end of easy “corruption” money. There is a long tradition of gifting in China—you buy something expensive either to request a favour or to thank someone. Second, we had a very strong level of consumer maturity to deal with. Then along came the political issue in Hong Kong. In 2014, the young generation in Hong Kong demonstrated and occupied the Central District for a few months in order to protest against China not respecting its political engagement for the future of Hong Kong. Chinese people were now also travelling worldwide and not only within Asia. For example, 5 million travellers were on the go in 2014, compared to 110 million
in 2015. Recent surveys show that the buying trip is no longer the first priority—the Chinese want to discover the world. CHINA IS BECOMING A “NORMAL” MARKET Although it is becoming a normal market, the Chinese still revere the price point. For example, the Chinese rushed to Japan when the rate of exchange was favourable. So, where are we now? The Chinese market is a very large potential market with not only the biggest population of ultra-rich business people but a growing middle class with buying power. In China and in Asia, there is still a target market of very rich consumers but these markets are more and more mature. The fantastic development of the Internet and social media has completely changed the landscape and brands must now be careful because they can no longer catch clients with a flashy bling bling strategy. Brands must treat their customers well and give service, information and quality. They must go back to their DNA, promote their true value and know-how, adapt the public price of their new products to the real world, and keep some exclusivity for the ultra-rich only. There is also a real opportunity for “artisan” small brands that are specialised in one product with a high degree of know-how. Asia is definitely a strong market for luxury products. Brands must understand their Asian consumers, and mainly the Chinese who are moving very fast. They must hire the right people who can understand and feel these changes, particularly operational staff, who are the real engine of brands.