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HK luxury watch retailers cut prices to stay ahead
THE fallout from the Swiss Central Bank's surprise move in January to free the exchange rate between the Swiss franc and the euro continues to have reverberations in the world of luxury timepieces, this time in Hong Kong.
Major retailers in the Special Administrative Region of China have taken the first step to protect Hong Kong's position as the world's biggest watch market, after sales plunged by at least 40 per cent in the first three months of the year.
The drop, caused largely by customers abandoning Hong Kong for the cheaper eurozone, thanks to an euro no longer held high by the Swiss franc, left retailers in the former British colony with unsold stocks that reached an "incalculably high level" of six to 10 months for some brands.
"We are facing a grave crisis here in Hong Kong for the whole retail industry," some of the retailers said, in a letter dated April 14, to the Federation of Hong Kong Watch Trades & Industries.
The 11 signatories, which include the bosses of Emperor Watch & Jewellery, Chow Tai Fook and Global Timepieces, called on retailers to unify prices to become more competitive.
This would be "the first and most important" step, they said.
"We noted that for instance, the retail prices listed in other duty free countries like Guam and Dubai are lower than Hong Kong," the retailers said. "Therefore, we request that Hong Kong's retail prices be aligned with other duty free countries so that it is a fair game for all."
The retailers also appealed to the watch brands to "grant rebate to retailers to mitigate the effects caused by price differences and adjustments initiated by brands, applicable to all new and existing stocks".
Following the Swiss Central Bank's action in January, which led to a surge in the Swiss franc and a dip in the euro, big brands like Rolex, Patek Philippe, Cartier and Piaget have moved to adjust prices in major markets. Most have bumped up prices in Europe, while reducing them in the Asia-Pacific region, including Hong Kong.
The Swiss franc has continued to strengthen while the euro weakens - and this has made Hong Kong, whose currency is pegged to the rising US dollar, a more expensive market for Swiss luxury watches.
This is especially so for big spenders from mainland China who now, the Hong Kong retailers say, choose to shop in Europe and South-east Asian countries where prices are lower.
Michael Tay, co-group managing director of Singapore's biggest watch retail chain, The Hour Glass, said the "imbalances" between retail prices in Europe and Hong Kong have been all the greater because, on top of the retail price dislocation that followed the Swiss Central Bank's action, the Hong Kong dollar has also been appreciating against the euro in the past five years.
But in Singapore, where the currency has also been rising, watch retailers are not asking for a concerted move in the way their Hong Kong counterparts are doing - even when they complain of a soft market and there is a sharp fall in Chinese spending on pricey timepieces.
"It has everything to do with the contraction in the absolute number of mainland Chinese buyers consuming luxury goods," Mr Tay said. "The PRCs today are no longer prepared to pay what I define as 'The Chinese Premium'."
Yet Singapore retailers have not been hit as hard as the Hong Kong retailers. Exports of Swiss luxury watches to Singapore in the first quarter of this year jumped 14.8 per cent from a year ago to 279.3 million Swiss francs (S$402.2 million).
Shipments to Hong Kong fell 10.2 per cent to 871.7 million francs in the same period, according to the latest figures released by the Federation of the Swiss Watch Industry.
Instead of engaging in price busting, retailers here are expanding their reach beyond the exclusive high spenders to the "mass affluent market".
Sincere Watch - a Singapore luxury watch retail chain now owned by Pollyanna Chu, a wealthy Hongkonger - has recently launched SunTime Watch to go after this under-tapped market.
Cortina Watch, another local watch chain, has already opened a multi-brand shop outside the upscale shopping belts of Orchard Road, Raffles City and Marina Bay Sands. The shop in Chinatown Point in Chinatown, besides carrying high-priced brands, also offers customers luxury timepieces at more accessible prices.
Cortina is opening yet another multi-brand store in the re-developed Capitol Building.
The Hour Glass has also jumped on the bandwagon by acquiring Watches of Switzerland (WOS) in October last year, extending the luxury watch group's reach from Orchard Road to Tampines. WOS sells more of the brands on the lower end of the luxury watch chain.
Mr Tay said the purchase is part of a long-term plan to build a new customer base that will eventually migrate to the higher end of the chain, which The Hour Glass specialises in.