2004-01-20 10:43:52
OMEGA's hands point to China's market
  Author: LU HAOTING,China Business Weekly staff

The watch on your wrist tells more than time - it reveals who you are.

At least, that is what Shen Tie, 27, has always believed.

That is why he spent more than 2,000 yuan (US$240.96) last year to buy a Tissot, to celebrate his promotion at Siemens.

"Chinese people traditionally get excited about watches," said Kevin Rollenhagen, vice-president in charge of OMEGA's business in the Chinese mainland and Hong Kong.

Since 1601, when Matteo Ricci, an Italian missionary, offered two striking clocks as a tribute to the Chinese emperor during the Ming Dynasty (1368-1644), possession of western clocks and watches has been a symbol of wealth and social status for many Chinese.

"I believe China will become OMEGA's largest market in a few years," Rollenhagen said last week at the ribbon-cutting ceremony for OMEGA's flagship store in downtown Beijing.

The 117-square-metre store is located in the Grand Hyatt Beijing on Wangfujing, Beijing's premium shopping district.

To date, OMEGA has 14 flagship stores in major Chinese cities, accounting for more than two-thirds of the company's total flagship stores around the world.

"Opening a flagship store isn't a cheap investment. It involves rent, decorations, staff training and special watch-care equipment," Rollenhagen told China Business Weekly.

"But it is worthwhile, because all our shops in China are making really good profits.

"It might not be a wise market strategy for our business in the United States, but it is definitely successful in China."

OMEGA's sales network has been extended to 74 Chinese cities.

That's impressive. But don't forget, OMEGA is not alone.

In many Chinese cities, you can easily find luxury watches - such as IWC, Rado, Rolex and Tudor - priced above 10,000 yuan (US$1,204.80).

The buyers are not "lao wai;" rather, China's nouveau riche.

Shenzhen Watch & Clock Association statistics indicate 300,000 watches priced above 5,000 yuan (US$602.40) are sold in China every year.

One-third of those watches are sold in Shanghai.

An increasing number of world-leading watch manufacturers will come to China now that tariffs on imported watches are falling, industry experts predict.

Tariffs on imported watches ranged from 20-30 per cent before December 2001 when China joined the World Trade Organization (WTO).

Last year, the tariffs ranged between 13.2-17.15 per cent. This year, they will fall to 11-15 per cent.

Rollenhagen said OMEGA will not lower its standards and enter the mid-range watch market, even though the sales volume of such watches, priced between 1,000-6,000 yuan (US$120-723), account for more than 35 per cent of the sales volume of watches in China.

"The market for luxury goods is growing very fast in China, due to the restructuring of the country's economy," Rollenhagen said.

"Some Chinese get very rich, and they buy such items to show their social status and personalities."

Those people are generally between the ages of 20 and 40, they earn more than 10,000 yuan (US$1,204.80) per month, and they have large bank accounts.

"Even though these people account for only a tiny proportion of China's population, their purchasing power, for luxury goods, is huge," Rollenhagen said.

"A person basically needs just one bed. But for luxury items, he might buy as many as he wants."

OMEGA isn't selling a mere timepiece, it is selling a design, a culture and a lifestyle, Rollenhagen said.

A flagship store with a warm, comfortable shopping environment helps OMEGA promote its culture and better communicate with its customers, he said.

OMEGA's first flagship store in the world opened in Zurich, Switzerland, in December 2000. OMEGA opened its first flagship store in China in 2002.

The newly opened store in Beijing features a comprehensive range of OMEGA products - including some special collections that are only available at the company's flagship stores, such as the newly launched Constellation "Double Eagle" and the Speedmaster Ladies' watches.

(Business Weekly 01/20/2004 page1)

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