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Returning to a place that is exciting, bold, and indeed still very new for one is always a real eye-opener – in September 2014, I had my first opportunity to visit the Hong Kong Watch & Clock Fair and as such, for the first time, as well, to discover its peerless host city. Exactly one year later, I was eager to return and to see for myself, now with a more trained and critical eye, what had changed over the last 12 months. Because we are aBlogtoWatch, I will save my remarks regarding the wonderful city of Hong Kong for the time when I launch my travel blog – but only after I have grown three extra heads and pairs of hands to be able to see to all the watch-related stuff that is of much higher priority. Without further ado, let’s see what the unique – and massive! – 2015 Hong Kong Watch & Clock Fair had in store for us.

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The entry hall of the Hong Kong Convention and Exhibiton Center – some 20,000 buyers, exhibitors and visitors have flocked through here during the five days of the fair.

Hosting 780 exhibitors and some 19,600 buyers from across the world over the course of five days, the fair grew a little bit in numbers over last year. I had the chance to spend three days attending, and while one would think that is plenty, in reality, it is nowhere near enough to visit all exhibitors – or even all parts of all halls, for that matter. This is, partly, also because there were a number of press events arranged to help us connect with those the organizers deemed noteworthy – and indeed, such events meant a much more efficient way of spending our time there than ramping up the miles running across the some 54,000-square-meter Hong Kong Convention & Exhibition Centre.

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The watch industry arguably is one of the more slowly moving/reacting/changing industries today, especially as far as consumer goods are concerned. We have been seeing truly incredible advances in cars and telecommunication devices over the last few years – just think about how global markets have shifted and how some countries have emerged from “meh” to highly regarded competitors (Korean car manufacturers are a very fitting example). With watches, and especially mechanical ones, such shifts are less rapid, and that is especially true when it comes to nations and regions stepping up as new and notable competitors. Still, and maybe this is partly because I have been spoiled by witnessing the swift changes and developments of other industries, I was curious to see by just how much the Chinese watch industry has managed to close the gap on its competitors.

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Some select exhibitors were given the opportunity to present their brand vision to the audience through these moderated “open chats”

Don’t get me wrong: when it comes to sheer volume, and hence also cost of manufacturing, China leads the pack and leads it by far – and further below, we’ll look at some genuinely fascinating statistics (that may sound like a paradox, but trust me, they’ll be eye opening). But – and this is probably the most important development in the Chinese watch industry of recent years – for ages (read: since the mid-1900s), China has been home to a large and, of course, steadily increasing number of OEM manufacturers. OEM manufacturers, in case you have not heard the term before when shopping for replacement parts for whatever you needed to fix, means Original Equipment Manufacturer, or, in short: supplier.

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Kentex Pilot, with a high-quality dial, steel case and Japanese quartz movement, priced at around $250.

Such companies have been working as suppliers, making cases, straps, buckles, and even movements and parts of movements, dials, hands, and basically anything else that you can imagine. In some instances, larger groups or holdings have taken shape, companies that eventually owned all manufacturing facilities which, altogether, could produce basically every component one would need to make a watch.

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The Peacock Double Tourbillon, with decorated plates and bridges. The caliber functioned, though we cannot confirm its accuracy or reliability.

In recent years, a trend has taken shape: some (and again, an increasing number of) Asian OEM manufacturing companies possessing a diverse range of watch component manufacturing facilities have started to want to have a go at launching their own brand – or, in most cases: brands. Now this is very interesting because, although they have possessed the capacities allowing them to make a watch from scratch, seeing so many of them wanting to harness those capacities in a way that would help them start a new brand is indeed a very recent development… and this is where the fun starts, and also where I was expecting to see the most progress – and, sort of didn’t.

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It comes as normal that when starting a new brand, one first asks oneself: “what is my target audience?” “What is the niche or major market I am aiming for?” When on the first morning, I was paging through the Hong Kong Watch & Clock Fair magazine, I was expecting to see ads and content from Asian watch brands that wanted to have more presence and are running at full throttle – otherwise, they would not have their ads and articles in the fair’s magazine, dear Watson.

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It is on these pages – and then walking through the halls of the fair and meeting the exhibitors with an open eye for such things – that one gets a clinical and fascinating insight into the difficulties that come with establishing a brand and creating an image. Seeing a large number of newcomer brands being launched – in the majority of occasions, by supplier OEM companies – helps pinpoint the key and most common issues, and hence to find what appears to be a challenge that, for the time being, not even the massive Chinese watch industry can convincingly overcome.

A stellar example is the Bonja Kingdom Millennium “Middleeast (sic) Royal Aristocracy Brand.” I just love it – when the motto of a brand is the definition of what it is selling and/or who it wishes to sell to. Can you imagine: “Audemars Piguet. The maker of the expensive timelessly elegant steel sports watch.” Or “Rolex. Watches that appear to have been around forever, which explains why we know what we do.” Or “Louis Vuitton. We make recognizable luxury luggage; and some nifty watches too.”

No. Instead, for Audemars Piguet, it’s “To break the rules, you must first master them”; for Rolex, it’s “The Rolex Way”; and Louis Vuitton doesn’t even care to say anything. Sure, it is unfair to compare the painstakingly established images of historical brands with priceless goodwill to totally newcomer companies – but it is interesting and educational, which explains why we care. And it is also here where the Chinese watch industry falls behind just about everyone else for the time being.

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Bringing luxury to the masses – a frequently encountered mission statement when it comes to more high-end Chinese watch brands; with varying levels of success in realization.

But, or rather: butI suggest that you play around a bit with the idea of having successfully branded major Chinese luxury brands – which I feel will inevitably and gradually emerge over the next ten years. The best analogy I can imagine is that of someone learning a new language: you have most of the tools at hand (you can read, pronounce the words, etc.), but at the beginning, you don’t quite get how to build up a sentence, let alone to frame your thoughts in a unique and powerful way. These brands are toying around with a new language and once they speak the language of branding and marketing more fluently, they will have closed one of the greatest gaps that presently exists between them and where they wish to be.

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The Standard Watch, making cheap and cheerful watches for the young – rather clearly inspired by the Swatch design DNA

Still, if there is one aspect where I have witnessed important and constant development, that would have to be the efficiency and intelligence with which Chinese brands pick their niche. In the larger scheme of things, there is a fascinating mixture of imitation, and also of creative new designs. For the former, what you see just above is a prime example: the Standard Watch (…or Swatch, if it wasn’t downright obvious) actually is one of the best imitations I have seen in a long time, as the quality was good, the designs were creative and consistently bold, while the prices were, of course, well, extremely cheap. I visited the booth in an effort to learn more about the brand, but Chinese brands remain very cautious (to put it mildly) when it comes to communicating with the press – more on this a bit later.

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As for bold new designs, the Q-Tek reversible watch is a fitting example, with a quick release system that allows the wearer to quickly reverse the case, which actually comprises two small automatic movements – and two distinctly different faces, with a car-racing-inspired front on one side, and a skull face on the other. Quality of execution was refreshingly good and so was the reliability with which this relatively new system functioned.

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There also remains a fair bit of “spray and pray,” which translates into what sometimes appears to be a random selection of style elements from famed watch designs. The No. 7 watch with a Corum Bridge-inspired movement layout, topped off with a random screw-down or Roman numeral bezel and a vintage Rolex bracelet is a prime example of how there is one thematic idea (see-through), which then fails to be built into something coherent and complete. In many cases, it feels as though someone experimented with designs, but as opposed to keeping them on the drawing board, they actually have the capacity to make them – and see what “sticks.”

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On a much more positive note, Hong Kong-based Memorigin is one of the torchbearers when it comes to showing what steady and strong development looks like both in building a brand and its image, and also with regards to quality of design and execution. They only manufacture tourbillon watches – clearly the niche they were aiming for at the time of setting up the company – but they successfully managed to consistently refine their designs and improve in quality of construction.

As far as branding is concerned, they do official licensing with Marvel on Transformers, Ironman, and other franchises, and create original and bold designs to really make the most of the co-branding. Just look at the new-for-2015 Ironman piece above and the responses it received on our Instagram account, with nearly 200 comments. All this is to show that not all is lost – in fact, the exact opposite is true: some are already breaching through the glass ceiling that appears to be holding back many other Chinese brands who are yet to put the delicate puzzle of branding, design, originality, and good quality together.

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Earnshaw remains another positive example, and we are highlighting the piece above not for its hugely original design (it clearly is merely a thoughtfully conceived, nice-looking tri-compax chronograph), but for the manufacturing capabilities that it implies. Released as a “halo piece” for the brand to show what they can do when they allow themselves to move to a slightly higher price point, this watch contains an original ETA 7750 movement inside a well made steel case, with a decent looking dial and strap, and will retail for somewhere around $700 or so. Clearly, not a money-making machine for Earnshaw, this Swiss-Made piece is more to show what can be achieved at well below the $1k mark – and how much potential there is when it comes to delivering quality at extremely competitive prices. Even for a couple hundred dollars more, this would sell like hot cakes – while the limited run of just 100 pieces for this one will more than likely sell out in no time.

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Now, having glanced into the diverse world of Chinese manufacturers, witnessing some of the shortfalls and also what is actually possible to achieve, let’s take a look at the industry from a bird’s eye view. China and Hong Kong are cumulatively responsible for around 80% of the world’s watch exports – by comparison, Switzerland accounts for 2-2.5%. That means that at current pace, it takes almost half a century for the Swiss watch industry to churn out as many watches as China produces in a year. Just one more figure to illustrate the sheer size of the industry: the total number of watches produced annually by the Chinese watch industry is estimated by most sources to be around 1.2 billion units.

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By contrast, Hong Kong and China’s cumulative watch production in value is about half of that of Switzerland – some food for thought there. After doing the math, one would be led to believe that, on average, Swiss watches are about 80 times more expensive than their Chinese counterparts. In reality, the average export price of a Swiss watch is right around $800, from Hong Kong it is around $21, while from China the average price is a mere $3.

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I was genuinely looking forward to the International Watch Forum, an invitation-only event where the leaders of the world’s more important watch industry associations meet to report on the economic performance of their respective regions, as well as to discuss the more pressing challenges that they are facing. Hong Kong is the world’s largest importer of complete watches by value and the second-largest exporter of complete watches and clocks. In 2014, the city recorded US$10.8 billion worth of imports and US$10.3 billion of exports, a 4.2% growth over 2013. The first two quarters of this year brought a 4% decline in exports, while Hong Kong’s watch imports dropped by a whopping 10% – thanks to anti-corruption laws preventing expensive gifting, and hence strongly affecting luxury watch sales.

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Consolidation in growth has been widely reported from all major markets, two exceptions being Japan, reporting a very strong 16-18% growth in value since 2009, and Russia, with a steep decline as a result of the 30% depreciation of the Rubel. Switzerland topped out at around 22 billion Swiss francs, as Asia’s share in all Swiss watch exports dropped from 53% to 51% – and further decrease is forecast for the rest of the year.

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An interesting question to the heads of the Watch Industry Federations was about the issue of the smart watch – and their replies brought up two interesting stories. The first concerned the tax-evasion tactics used by smart watch manufacturers, as both China and Russia mentioned how the Apple Watch and the Samsung Gear were imported as communications devices and not as watches, hence avoiding the burden of taxes and import fees – and keeping them much closer to the price point of comparably well-made quartz watches; while offering incomparably greater functionality.

Secondly, and this is more of a fun anecdote than anything else, is what a major Russian retailer told the representing federation: reportedly, the renowned watch retailer reached out to Samsung as they wanted to carry the Galaxy Gear, and the Korean company’s response was that they don’t think the watch retailer is smart enough to carry the smart watch.

In closing, the primary take-away message is one that has been – perhaps decidedly – omitted from the round table discussion of watch industry leaders, and it concerns the speed, efficiency and quality of the transformation of Chinese OEM manufacturers into established mid-range to higher-end brands. After having met with several dozens of brands and seen countless products from a wide range of prices and quality of execution, one thing that became apparent is that there is a steady pace of improvement both in terms of branding, design, and execution.

The gap between Chinese watch brands and their Swiss counterparts varies to a great extent, but overall the industry is going through a very interesting period of transformation, as a new industry, that of the well-built Chinese mechanical timepiece, is taking shape… And the Hong Kong Watch & Clock Fair provides an invaluable look into this world, and for that we are looking forward to attending again. hktdc.com


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