October 18, 2015
by Ariel Adams
Georges Kern, CEO of Schaffhausen, Switzerland-based IWC watches, stands up from our table to deliver a welcome speech for a room of guests invited to dinner after the first day of Watches & Wonders 2015 here in Hong Kong. Known for quick, sharp remarks, and a realistic vision of his company and the luxury watch space, Kern spares no time addressing what he feels are the primary things his colleagues should be thinking about in terms of Asia and the watch industry that has fared so well in the region, and yet now faces a new set of growth, sales, and economic challenges.
Kern promises that a brand like IWC is in it for the long run. He is refreshingly candid about the issues facing his business and that of his colleagues. China has been rapidly decreasing its spending on luxuries of all kinds – watches included. The still-special region of Hong Kong as a result is suffering from a weak retail market once made gloriously robust by pools of Chinese mainlanders who came in with “suitcases full of cash,” looking for ways to offload cash into less easily “seized” assets or exotic European goods which promise to make them appear more successful, sophisticated, and of course, sexy.
Economic instability and a huge reduction in spending on “gifts” for and by political figures accounts for much of the reduction of spending on luxury goods that has plagued Hong Kong and China for the last couple of years. Mr. Kern assures everyone that not all is actually bad in China and that sales overall are still good. While there is a continuous deep level of appreciation for fine watch making in Chinese-speaking cultures, Kern advises skeptics to consider that the “China bubble” was never meant to last and that economic activity isn’t terribly depressed, but rather back to “normal.” Myself and colleagues nod our heads in agreement because despite the lack of flowery poetic assurances, Mr. Kern is absolutely right.
Where watch industry leaders like Mr. Kern succeed is not only in their acknowledgement of reality, but in their development of plans and strategies to adapt to it. The watch industry is sometimes painfully conservative in its application of ideals, acceptance of new concepts, and its approach to productivity. These qualities actually help the industry continue to produce many stunningly beautiful timepieces, but they don’t help the luxury watch industry survive in modern times. What does keep the industry going is the efforts of a handful of smart, charismatic men and women who protect the values of the watch industry while thinking outside of the box and adapting to a world which may love watches, but does not actually need them.
Not needing, but rather wanting something is a hallmark characteristic what I define “luxury” to be. Timepieces must be desirable, but also cater to the needs and demands of consumers. The near-term success of the Asian watch market – just like that of the rest of the world – relies on the watch industry being there in a way that consumers want with products that they can’t help but demand. This, for me, is the tone which set the opening of Watches & Wonders 2015, and will guide brands in these complex markets now and into the future.
Watches & Wonders is a watch and jewelry trade show organized by the same people who each year put on the Geneva-based SIHH in January. Watches & Wonders began a few years ago as a leg into the East, offering both retailers as well as customers (and collectors) a more local event to attend that doesn’t require a flight to Switzerland. Only a few years old, Watches & Wonders is interesting and important enough that the FHH, the organizers of the event, have decided that international media should be there to report on their activity.
For aBlogtoWatch, each time we travel to Asia, it becomes an illuminating journey. Hong Kong is the first place I ever traveled to where I felt less than alone in my love of watches. Stores and advertising dedicated to fine timepieces are literally everywhere. It’s a watch-crazy culture, and anyone who has ever felt a lack of interest from their peers when it comes to fine timepieces need only travel to this important Chinese city to fit in. Hong Kong is not just about people showing off massive amounts of wealth in timepieces, but rather a quickly developing market for true aficionados who love, collect, and admire timepieces in a way rivaled by few other places.
Hong Kong as a market actually sells around as many timepieces as the entire United States each year, and is in the top 10 locations where readers to aBlogtoWatch come from. What people need to know about wearing a watch in Hong Kong is that, by nature, these are items that must say something about the wearer. There is almost no tolerance among the educated or successful for crappy timepieces. If you wear a watch it should be a good watch, and if you don’t wear a watch you should have a damn good excuse for why.
This means that people aren’t at all afraid to use their watches to show off a little. It is common for the average person to spend more money on a timepiece – per capita – than probably anywhere in the world. The pressure is so high that it is said Hong Kong locals actually consume a huge number of fake luxury goods (read about the most common fake watches and their stories here) just to keep up appearances at times. This is a place where your waiter has a nice (real) Rolex and your taxi driver might have a timepiece you are envious of. You can imagine that within such a context, wearing diamonds or other flashy embellishments is not at all frowned upon or even uncommon.
I say this because more than ever, here in Hong Kong, wearing a timepiece for men with diamonds seems to make a huge amount of sense. Back at home in the United States, you need to be a very special kind of person to wear a watch with diamonds. In fact, many dedicated watch lovers in America wouldn’t dream of dressing up a fine and complicated “horological mechanism” with precious stones. Yet here in Hong Kong, the world’s biggest watchmakers all take their most impressively complicated timepieces and add even more to them by decorating their cases and dials with diamonds and other precious stones.
“When in Rome,” right? I have to say that while I am here in Hong Kong, the idea of wearing diamonds seems imminently appealing in a way that I’ve never experienced elsewhere. You need to be in the culture a bit, but after a few days, it starts to seem like a very appropriate way to spend money. At the Cartier booth, we tried on the highly expensive and limited edition (of something like five pieces) Ballon Bleu Vibrating Diamonds completely set with diamonds all over the case and with a dial that has diamonds actually mounted on small springs. This causes the dial diamonds to move about in a fascinating way, clearly designed to add some additional sparkle and visual interest. You really can’t read the time, but this is one of the few timepieces where I really don’t care. Forget about the several hundred thousand dollar price of this timepiece for a moment, and consider the genuinely fun statement such a design offers to the wearer.
Diamonds are perhaps too closely associated with the taste preferences of the Asian watch market because they tend to overshadow some of the more “serious” reasons why we love timepieces. Watch lovers tend to think of a timepiece’s appeal as a function of their carefully made movements and refined design aesthetics. What they don’t always consider about the typical luxury watch buyer in Asia is that these same values apply. They just also want their finely made and complicated watches with diamonds and even more art.
Chinese consumers are huge fans of artistic and wealth density, and are aggregators of things that they find value in. Having a watch that is complicated is great. Having a watch that is refined is fantastic. Having a watch that conveys wealth and success is fortune. So why not look for complicated, refined, luxurious watches? That is how many of the Chinese tend to approach luxury timepieces, for better or worse. Not all of these “combined appeal” watches are successful, but at least you know why such timepieces exist and where their demand comes from.
While brands like Vacheron Constantin and Piaget are masters of offering ultra-low production classically designed art watches, brands like Richard Mille (the only non-Richemont Group company at Watches & Wonders so far) offer the same types of gloriously art-heavy timepieces but, in ultra-modern form. Million-dollar watches never looked so “million-dollar” as they do when they are designed for picky Asian consumers always looking to be wowed.
I should not, however, focus entirely on watches meant for the few. While luxury watch shows tend to focus on unique models with elaborate designs, the bread and butter of the watch industry is more high-volume products which are sold in quantity to consumers who may be able to spend only a few thousand dollars on a watch versus many times that. It would be easy to mistake a place like Watches & Wonders as a show for buyers who represent the 1% of the 1%, but that wouldn’t be entirely true. Even though such special customers are present en masse, Watches & Wonders is still about selling luxury watches to more than just a few people. Otherwise, having a big and expensive trade show wouldn’t be necessary. Brands could simply hold private meetings in a luxury hotel for a few days and call it a show. No, Watches & Wonders is about making a splash, because at the end of the day even today’s biggest watch makers are interested in selling $20,000-and-under watches to a larger portion of the population.
How is this audience being served at Watches & Wonders, and how (if at all) do the new products that were debuted at Watches & Wonders serve the regional audience in Asia? While Watches & Wonders is in Asia, it isn’t really about products made just for Asia. One timepiece, however, really epitomized what brands should be making to appeal to Hong Kong customers – and it came from Montblanc. In an 18k red gold 39mm wide case with diamonds on the bezel, and a few more on the dial as some of the hour markers, the Montblanc Meisterstuck Heritage Spirit Date Automatic ref. 112144 comes with a pretty reasonable price of $11,500. Without diamonds, the same watch is $7,700. On paper, this dress watch looks pretty nice with luxury appointments and price that is much less than a lot of the competition.
Why is this Montblanc Meisterstuck so emblematic of Watches & Wonders 2015? Because it combines value as well as the types of timepieces that have traditionally done so well in Chinese markets. Timepieces such as this might not be common, but it does show a genuine understanding from the most important big name watch brands of what is required to succeed in today’s market.
It is an aBlogtoWatch tradition to recap major watch shows with top 10 lists and similar groupings of the products that we feel you as consumers should know about. The reason we aren’t doing one for Watches & Wonders is because the show – at least this year – was less about releasing copious amounts of new products, but rather about brands being able to assert themselves with specially made piece unique watches and low-production ultra-luxury pieces. These tend to make poor items of top 10 lists, namely because if you wanted one, they would probably be already sold.
So what we will do instead is take the next few months to spend more time on some of the top models we saw here at Watches & Wonders 2015, and to give some extra attention to those rare “volume watches” from the major brands which we look forward to seeing in stores soon. One of my favorites was the IWC Portofino Hand-Wound Day & Date (look for a hands-on article soon) which is actually the first Portofino model I’ve ever liked. I appreciate the interesting in-house movement, handsome size, and refined timeless looks. I also quite liked the Jaeger-LeCoultre Geophysic Universal Time that combines a world timer with a new movement that features a novel balance wheel system, as well as a “true seconds” (dead beat seconds) indicator hand.
Such mainstream men’s watch offerings at the show were, nevertheless, rare. We expect to see more new releases such as those at SIHH 2016 in January. I keep thinking about the incredibly beautiful “modern museum” creations from brands like Cartier, Vacheron Constantin, Piaget, Jaeger-LeCoultre, and Roger Dubuis. These companies create the fantasy of what owning a luxury watch can be like for aspirational buyers, and satisfy the demanding needs of the top regional customers.
I continue to find the Chinese and neighboring watch markets to be among the most fascinating in the world not only because of their size but also because of their appetite. China has almost single-handedly spurred the watch industry to innovate in so many ways, both in terms of technical complexity and design, because the customers simply demand it. China keeps Switzerland on its toes – which, at the end of the day, is a special benefit of the relationship between the two countries.
For the time being, Hong Kong is still China’s most powerful and important gateway to the West. Hong Kong is an ideal setting to showcase European products for the Asian world in a consumer-friendly and exciting way. As stubborn and slow as Switzerland is sometimes as perceived by the rest, at least they understand that for their luxury business to keep relevant, they need to go where the customers are – and make a case for crafts, history, values, and aesthetics. This is exactly what Watches & Wonders is all about.