The Swiss watch invasion of China, hailed as the new fashion and luxury superpower, could be curbed by new laws introduced in the last quarter of 2012 which bans TV and radio advertising of luxury watches as gifts. It’s a move that could potentially threaten the marketing methods of Swiss watch brands.
The ban follows increasing demand from China’s president in waiting Xi Jinping to tackle luxury gift giving in the professional sectors, over concerns that high-end watches act as potentially bribe inducing incentives on business deals, as has been exposed in a spate of recent cases.
The latest figures show that last year the Swiss exported a breathtaking US$21 billion worth of luxury watches to China, and many Chinese businessmen and politicians can be seen sporting expensive brands, sometimes way beyond their financial means, including favourites Patek Philippe, Vacheron Constantin and Rolex.
One notable case, exposed by vigilant micro bloggers, involved Shaanxi province safety official Yang Dacai, who was caught on camera smiling at the scene of a bus crash which killed 36 people. Web users also found pictures of him wearing a series of luxury wrist watches that an expert told the China Daily newspaper were worth more than $40,000 (£25,000) in total. A campaign against him ended in his dismissal.
Watches priced above US3,500 saw a 22% rise in exports even though the Swiss franc soared to a record high against the euro in August before the Swiss government moved to contain its over-heated appreciation.
However, despite the move to ban watch advertising in China, the genie is out of the bottle, and the watch is truly out of its luxurious box. The appetite for luxury in China is likely to remain insatiable. Last year 60% of luxury watches purchased by wealthy Chinese were made not in China but overseas, where the selection is thought to be better. Not only that, but domestic demand for luxury products is being held in check because of steep import tariffs and consumption taxes, which can make luxury goods fully 72% more expensive on the Chinese mainland than in Europe.
Customers from the Chinese mainland spent up to US$7.2 billion on luxury goods abroad during this time last year (Chinese New Year) with Europe their top destination, the World Luxury Association has claimed.
China’s spending on Swiss watches on a gross domestic product per capita basis is about six times that of the U.S. and almost double that of France partly because of gift-giving.