12 Sept 2019
China’s Watch Market
I. Market Overview
According to the China Horologe Association, the watch and clock industry in 2018 was affected by the general economic situation, and production and sales weakened. Despite this, according to Euromonitor, overall sales of watches still rose by 7.3% to top RMB75.3 billion in 2018.
According to a survey of mainland middle-class consumers conducted by HKTDC Research in 2016, the top reasons that consumers wear watches are: ‘to bring out one’s personal taste and image’ (50%), ‘a liking for watches’ (49%), ‘as an accessory’ (48%) and ‘time telling’ (40%). A considerable number of respondents agreed that ‘wearing a watch would give an impression of maturity, stability and punctuality to others’, or that ‘wearing a watch would give a better image on business occasions’. Respondents also cited ‘rewarding oneself/making oneself happy’ (59%) and ‘attending special functions’ (40%) as major reasons for buying watches.
The HKTDC survey revealed that, on average, mainland consumers have three watches. Among male consumers, ownership of business watches was highest (69%), followed by casual fashionable watches (69%) and smartwatches (55%). For female consumers, ownership of casual fashionable watches was highest (83%), followed by smartwatches (55%) and business watches (51%). When buying watches, men are generally concerned with brands while women are concerned with style and design.
Distinctive style/design is a main factor luring consumers into buying a watch. The HKTDC survey showed that if a new watch brand was launched in the mainland market, 66% of consumers would be attracted by ‘distinctive styles/designs’, 63% would give more weight to ‘novel technology/function designs’, while 56% said that ‘suitable prices’ would be the most important factor in deciding whether to buy. Factors like ‘brand origin’ (43%) and ‘historical and cultural legacy’ (33%) also influenced consumers’ desire to purchase.
As mainland consumers develop more discerning tastes, they become more demanding of watches. Watches have gradually evolved from traditional timepieces with practical functions into trendy, decorative consumer items offering brand value. Watches mainly fall into four categories: work/business watches, casual fashionable watches, sports watches and smartwatches.
- Work/business watches: Consumers mainly wear these to work or to attend important functions, but may also wear them during leisure hours. They have become a kind of status symbol in the eyes of high-income male consumers.
- Casual fashionable watches: Fashionable in design, these watches mainly serve ornamental purposes, like necklaces and bracelets. They are popular with young female consumers and are mostly worn during leisure hours. Sometimes they are also worn to match business outfits.
- Sports watches: Students and sports enthusiasts are the main consumers of sports watches.
- Smartwatches: These watches have built-in intelligent systems and can perform different functions, such as voice calls, receiving and sending messages and emails, and playing music, using Bluetooth.
- Other types of watches include antique watches, multi-function watches and cartoon watches.
Watch makers have been developing new watches with functions such as mobile payment, health monitoring, and voice call, to tap the growing smart wearable devices trend. For instance, Apple has developed the Apple Watch which features an electrical heart rate sensor and fall detection function. The Golf GPS Watch launched by Garmin has the functions of automatic tracking of strokes and shot distance positioning.
Sales of smartwatches for children have also been growing in recent years. Parents are beginning to use smartwatches to monitor their children’s safety. Besides normal time display, these watches have GPS, voice call and SOS alarm functions. Parents welcome these products because they can use these functions to locate their children and find out if they are safe. A report of the International Data Corporation (IDC) reveals that 21.67 million children’s watches were sold in China in 2018, up 16.6% year-on-year. Of these, 4G-enabled smartwatches account for 38%. It is expected that 4G smartwatches will be the future trend in the children’s watches market.
According to the Consumption Report of China’s High-end Watch Market 2019, the mainland high-end watch market was valued at RMB19.4 billion in 2018, an increase of 20.9% over 2017. The post-1980s and post-1990s generations are the major consumers of high-end watches. More than 50% of those who have a watch priced over RMB5,000 are aged 26-35. In addition, the percentage of males having a high-end watch is 6% more than females. Mainland consumers buy high-end watches mainly to bring out one’s personal taste and image.
About 74.4% of imported watches are from Switzerland, Japan, Thailand, Hong Kong and Singapore, with Switzerland accounting for the largest share.
China’s Watch Imports
|Value (US$ million)||Share (%)|
Source: Global Trade Atlas
China’s imports of watch products in 2018:
China’s Imports of Major Watch Products in 2018
|91011100||Electric wrist-watches with mechanical display and precious metal case||55||62.2|
|91012100||Mechanical wrist-watches, automatic winding, with precious metal case||263||38.3|
|91012900||Other mechanical wrist-watches, with precious metal case||72||-7.3|
|91019900||Pocket-watches & other mechanical watches with precious metal case||0.3||-84.4|
|91021100||Electric wrist-watches with mechanical display only||780||18.6|
|91021200||Electric wrist-watches with opto-electronic display only||68||51.3|
|91021900||Other electric wrist-watches||120||19.1|
|91022100||Other mechanical wrist-watches, automatic winding||1,272||17.4|
|91022900||Other mechanical wrist-watches||22||23.8|
Source: Global Trade Atlas
II. Market Competition
China has become the world’s largest manufacturer and exporter of watches. There are six major production areas in the country – the Pearl River Delta region, Fujian, Zhejiang, Jiangsu, Shandong and Tianjin, each with its own fairly complete processing chain. The Guiding Opinions on Accelerating the Promotion of Own Brand Building in China’s Watch Industry published in early 2015 stated that Tianjin, Guangdong (Shenzhen) and Shandong (Yantai) will be designated as major areas for brand-building and serve as models in influencing other areas.
The Chinese high-end watch and clock market is now dominated by Swiss, Japanese and German brands, while the low-end market is mainly the domain of domestic brands. Mainland enterprises can enter the high-end market through researching and developing their own products or acquiring an overseas brand. In recent years, for instance, there has been a mid-range company which has acquired a Swiss brand and moved into the high-end market.
Some domestic brands have done quite well in securing market share in spite of strong competition from foreign rivals. Leading domestic brands include Rossini, Ebohr, Tian Wang and Fiyta. In 2018, the China Horologe Association endorsed the establishment of the Chinese Tourbillon Manufacturing (Dandong) Base in the city of Dandong. Moreover, a Chinese brand watch movement was certified as a ‘chronometer’ by the Glashutte Observatory in Germany, signifying that China’s production technology and craftsmanship in mechanical watches have gained international recognition.
Watches have become fashion accessories and changes in consumption patterns have also broadened the market for fashionable timepieces. This is as true for specialist brands as it is for general brands. The former includes Casio, Swatch and Tissot while the latter include Armani, Louis Vuitton and Gucci. The marketing strategy of fashionable watches is to launch a few hundred new models each year as fashion accessories for different seasons.
Currently, slightly more males than females buy high-end watches. As more women are buying luxury watches thanks to the growing opportunities for women to move up the corporate ladder, there is considerable market potential for ladies' watches in China.
III. Sales Channels
Another China watch industry report pointed out that as the pace of urbanisation quickens, people in places other than the big cities have quickly amassed wealth. Possibly as a result, consumption of high-end watches is expanding from first-tier cities to second- and third-tier cities. Meanwhile, the principal consumers of high-end watches in first-tier cities are no longer locals, but people arriving from second- and third-tier cities. High-net-worth individuals in first-tier cities tend to make such purchases outside the mainland.
Imported brands usually work with mainland companies to market their products. By setting up dedicated counters in department stores and high-end malls, they can make full use of existing sales channels to expand. This is the principal means adopted by most mid-range and high-end brands.
Opening specialty stores to attract new franchisees is another major sales channel for imported brands, as well as a strategy for achieving diversification in marketing. This can also provide consumers with more products to choose from and with better after-sales service.
Low-end watches have basically been relegated to small shopping centres and wholesale markets. For example, there are many wholesale watch markets in the vicinity of the Guangzhou Railway Station West Road, Guangzhou Railway Station South Road and Huanshi West Road. The Shenzhen Watch and Clock Components Market is a major supply base for Chinese watch and clock enterprises.
The internet has become an important channel for the sale and marketing of watches. Consumers can buy watches that are great value for money through C2C online stores and B2C e-commerce platforms like flagship stores on Tmall and official brand websites. Merchants can establish and promote their brands using the B2C mode. Vertical (industry-specific) B2C websites have also gained popularity in recent years. Consumers can shop online at websites such as Wbiao. As e-commerce platforms are becoming more mature on the mainland, industry experts addressing the 12th China Watch & Clock Summit Forum have called on mainland watchmakers to capitalise on the internet to expand sales.
Physical stores (department stores, large shopping malls and specialty stores, etc) are the main watch buying channels for consumers. According to the HKTDC survey, 84% of consumers said they would buy watches in physical stores. The main reasons cited are ‘genuine products guaranteed’, ‘trying on in person’ and ‘after-sales service guaranteed’. However, of the respondents who had bought watches via physical channels, 79% indicated that they would shop online if they found a watch to their liking; and the survey found that the price range they were willing to pay was RMB4,000-6,999. Only 21% of respondents said they had reservations about buying watches online and probably wouldn’t give it a try. Of respondents who had bought watches online, the main reasons for doing so were: ‘more choices in brand/style’, ‘low prices’ and ‘convenient/delivery available’.
The Guiding Opinions on Accelerating the Promotion of Own Brand Building in China’s Watch Industry stressed the need to continuously expand the market for multi-tier consumption and gradually implement the strategy of internationalising the watch industry. Steps will be taken to develop e-commerce and other new models of sales and foster and spread the watch culture through the establishment of watch museums and collections, the development of watch industry tourism and other means.
IV. Import and Trade Regulations
In a move to further liberalise the market and meet consumer demand, as of 1 July 2018, the State Council lowered the most-favoured-nation (MFN) tariff rate on 1,449 imported consumer goods for daily use, including watches, garments, shoes, headgear and household electrical appliances.
The import tariffs of selected watch products in 2019:
Import Tariffs of Selected Watch Products in 2019
|91011100||Electric wrist-watches with mechanical display and precious metal case||8|
|91011910||Electric wrist-watches with photoelectric display and precious metal case||8|
|91011990||Other electric wrist-watches, with precious metal case||8|
|91012100||Mechanical wrist-watches, automatic winding, with precious metal case||8|
|91012900||Other mechanical wrist-watches, with precious metal case||8|
|91019100||Electric pocket-watch & other watch, with precious metal case||8|
|91019900||Pocket-watches & other mechanical watches with precious metal case||15|
|91021100||Electric wrist-watches with mechanical display only||10|
|91021200||Electric wrist-watches with opto-electronic display only||15|
|91021900||Other electric wrist-watches||8|
|91022900||Other mechanical wrist-watches||10|
Source: Customs Import and Export Tariff of the People’s Republic of China 2019
Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs. According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. Details of CEPA tariff preference, including origin criteria, are available here.
To further facilitate the importation of Hong Kong goods into the Mainland with zero tariff, the Mainland and Hong Kong recently signed the Agreement on Trade in Goods under CEPA to provide exporters with a flexible option to choose between the existing Build-up method and introduced new Build-down method when calculating the value added to the products in Hong Kong. More details are available here.
According to the National Technical Committee on Watches and Clocks of the Standardisation Administration of China, the working group responsible for drafting the Specifications for the Limitation of Harmful Substances Found in Watch Components Having Direct Contact with People's Skin has already completed and submitted a draft. Since the harmful substances named in these specifications concern people's health, these rules will likely become mandatory standards for watch-making to protect the interests of consumers.
According to the China-Switzerland Free Trade Agreement which came into effect on 1 July 2014, China will ultimately apply zero tariffs on 84.2% of all imports from Switzerland. Among these imports, tariffs on Swiss watches will be reduced by 60% over the next 10 years and by 18% in the first year. Since the agreement does not cover import-related taxes, VAT and consumption tax, the price of Swiss watches is not likely to drop significantly.
The Standardisation Administration of China has promulgated a series of industry standards to regulate the development of the watch industry.
The Methods of Evaluation of the Battery Life of A Battery-Powered Watch (GB/T 32485-2016), which came into force on 1 September 2016, specifies two methods for determining the battery life of a battery-powered watch as well as the labelling methods for manufacturers and sellers to inform customers.
Horology – Procedure for Evaluating the Accuracy of Quartz Watches (GB/T 33724-2017), implemented on 1 December 2017, specifies the procedures for evaluating quartz watches, both individually and in batches, as well as the relationship between the measurement of accuracy and the accuracy grades set by manufacturers.
The Technical Standards on Instructions for Use of Watches and Clocks, implemented on 1 July 2019, specify the principles, basic requirements, main content and presentation format in compiling instructions for use.