Chinese demand keeps watchmakers ticking in Lucerne

By Bloomberg News in Geneva (China Daily) Updated: 2012-12-31 09:51

Even before the Christmas tree went up at 124-year-old Bucherer AG in the lakeside town of Lucerne, the Swiss watch boutique was already planning decorations for the year of the snake.

Chinese demand keeps watchmakers ticking in Lucerne

A Longines booth at a recent watch and jewelry show in Switzerland. Switzerland's watchmakers sold fewer watches to foreign customers this year as lower demand in Asia led to the first decline after 32 months of growth, the Federation of the Swiss Watch Industry said in October. Swiss watch exports to China plummeted almost 28 percent in September, while sales in the major re-selling hub in Hong Kong dropped nearly 20 percent. Provided to China Daily

Chinese symbols marking the start of the lunar new year on Feb 10 will greet the busloads of Asian shoppers who visit Lucerne every day and invite them inside to see watches from TAG Heuer, Rolex and more than 20 other brands.

Fewer than half of the timepieces bought at the Lucerne store in December might be for Christmas, according to Joerg Baumann, Bucherer's marketing director. That's a welcome boon as banks cut jobs and Swiss unemployment hovers at its highest level in 20 months.

"Other parts of the year have caught up" with Christmas, Baumann said, "which is good news for retailers because everyone wants a stable business and not an extremely seasonal one".

Asian consumers are easing the Swiss watch industry's reliance on Christmas and offsetting Europe's slowing economy. While December is still the most important sales period, it's diminishing in importance and may be surpassed by the Chinese New Year within seven years, said Jean-Claude Biver, chairman of LVMH Moet Hennessy Louis Vuitton SA's Hublot watch brand.

"When I started 38 years ago, December and Christmas were 30 percent of the business, but that has weakened as sales have become more and more constant during the 12 months," Biver said in his office overlooking Lake Geneva and the French Alps. Christmas now accounts for 15 percent to 20 percent of watch industry revenue, he said.

Triple taxation

The Chinese mainland and Hong Kong make up the biggest market for Swiss timepieces, accounting for 30 percent of exports of the country's roughly 200 brands in 2011, according to the Federation of the Swiss Watch Industry. Exports to those two destinations rose 10 percent in the first 10 months of 2012.

Chinese interest in high-end watches remains strong despite concerns about an easing of economic growth, according to Digital Luxury Group. The number of online searches for luxury watch brands in China increased about 40 percent during the first half of the year, the researcher said.

Purchasing watches abroad allows Chinese consumers to sidestep three layers of taxes imposed on watches in China: an 11 percent import duty, a 20 percent tax on high-end watches and a 17.5 percent value-added tax, according to HSBC.

Cie Financiere Richemont SA, the maker of Vacheron Constantin and Cartier watches, said last month that the weakness of the euro was luring more Asians to take vacations in Europe, helping boost revenue in the region.

"Local consumption in Switzerland is not bad and there's probably even some growth, but the main driver is tourism," said Patrik Schwendimann, an analyst at Zuercher Kantonalbank.

Bucherer's six-story flagship in Lucerne gives visitors from China greeting cards in red envelopes called hongbao that are supposed to bring luck. A sign at the entrance lists some of the 20-plus languages spoken by sales staff, while display cabinets describe watch features in Chinese.