Time to reflect on luxury watch market (hktdc.com)


	Tommy Leung, CEO of Peace Mark, says the Chinese mainland holds the greatest potential for luxury watches

	Despite its HK$205,000 price tag, this Seagull mechanical watch has a huge following

The Hong Kong watch industry is bucking the global economic trend by posting strong export growth, including to the United States, in the first half of the year. "The watch mass-market is weaker, but the luxury and higher end markets remain strong," said Tommy Leung, Chief Executive Officer of Hong Kong-based Peace Mark (Holdings) Ltd. Overall, watch exports rose 20 per cent in the first half of the year, with South American countries including Brazil and Argentina seeing some of the highest increases.

For its part, Peace Mark, a leading international watch and jewellery company and Asia's largest luxury watch retailer, reported a turnover of US$535.5 million for the year to March, an increase of 37.4 per cent from last year. Mr Leung said the strong growth can be attributed to the higher demand for luxury products because of the drop in demand for the lower end watch ranges.

A shift towards mechanical watches is also fuelling growth in the sector. Mr Leung said supply is currently unable to keep up with demand for the more traditional mechanical watches, which are now prized over quartz watches because of the craftsmanship involved. Mr Leung said only about 25 million mechanical watch pieces are produced from the Chinese mainland, Japan and Switzerland – the three main watch manufacturing bases - compared to one billion pieces of quartz watches. Its popularity is even being seen in the fashion, or younger brand, range. "If the trend continues to shift towards mechanical watches, I believe we still won't be able to keep up with demand in 10 years' time."

First mover advantage

Peace Mark foresaw the trend nearly a decade ago and began scouting for existing mechanical factories in the mainland. Last year, it acquired a majority stake in the state-owned Tianjin Seagull Watch Company, the largest mechanical movement factory in China. The acquisition means the company now holds more than 40 per cent share of the mechanical watch market. Peace Mark has 11 production facilities in eight locations, mainly in the mainland, but also in Switzerland and Hong Kong.

Peace Mark has also extended its retail footprint, mostly into the mainland. Acquisitions made during the Sars economic downturn in 2003 have now put the company in a "firm retail position," with some 1,000 outlets in the luxury to mid-range in the mainland. This year, it signed an exclusive franchise agreement with diamond jeweller De Beers to operate their retail stores there. It also acquired Singapore's largest watch retailer, Sincere Watch Ltd, to use the company to enter India, another important growth market for watches and luxury goods.

But Mr Leung sees the greatest potential in the mainland market, where consumer spending on watches has grown. "Watches are an important lifestyle accessory. People used to fork out a few hundred yuan for a watch. But now they're willing to spend a few thousand. There are 1.3 billion people in the mainland. And to meet demand, it will take 100 years to outfit every person in China."

Peace Mark will be one of the major exhibitors at the Hong Kong Watch & Clock Fair, 3-7 September at the Hong Kong Convention and Exhibition Centre. Organised by the Hong Kong Trade Development Council, Hong Kong Watch Manufacturers Association and the Federation of Hong Kong Watch Trades and Industries, the fair is the largest of its kind, with more than 800 exhibitors expected to take part this year.