It is no secret that the past year has been tough for the Swiss watch industry, with retailers’ woes deepening and large luxury watchmakers issuing profit warnings that signal no immediate relief from the slump.
However, Leo Poon Kam-kee, general manager of TAG Heuer Greater China, sees a silver lining. The three markets which he oversees, Hong Kong, China and Taiwan, have defied the downturn.
“The three markets added up have double digit growth,” he said. “We saw strong growth in China and Taiwan. The growth for Hong Kong, to be frank, was almost flat. Our traditional watch sales went down a little bit, but the Connected smartwatch helped us a lot.”
“Swiss watch exports to Hong Kong dropped by one-third last year. So the fact that our domestic sales managed to remain flat meant we were gaining huge market share.”
TAG Heuer and parent company – the LVMH Moet Hennessy Louis Vuitton group which also owns Hublot and Zenith – have done well in a difficult year.
TAG Heuer’s sales in China have grown more than 10 percent, compared with a decline of more than 10 percent only two years ago. Meanwhile, the watches and jewelry division of LVMH recorded four percent growth in the first nine months.
To put those numbers into perspective, LVMH’s two major competitors – Richemont, which owns Cartier, Piaget, Vacheron Constantin and seven more luxury watch labels, and Swatch, which controls Breguet, Blancpain, Omega and others – fared less well.
Sales of Richemont and Swatch went down by 17 percent and 11.4 percent respectively.
Poon and his boss Jean-Claude Biver, president of the LVMH watch division and chief executive of TAG Heuer, have been instrumental in defying the odds.
Biver is considered a legend as he has bought and revived two dying labels, Blancpain and Hublot, and later sold them at a profit. He was also responsible for putting an Omega on James Bond’s wrist.
Poon and Biver came to know one another when they were working for the Swatch Group a decade ago. They both joined TAG Heuer in 2014, spearheading a strategic revamp to rejuvenate the label.
Biver had the vision that TAG Heuer should woo men under 35. He proposed a new strategy, offering affordable sports watches priced between 1,000 to 3,000 euros to meet their spending power.
Poon’s departure from Tudor, the parent company of Rolex, surprised many as he left two well established watch labels to join one that had failed to excite Chinese shoppers for years. TAG Heuer entered China in 2000.
“It was a new challenge to me,” Poon said. “I knew a lot could have been done with the brand to make it perform better. It was a top label across the world, it should have worked in China. What I needed to do was to correct the mistakes that had previously been made.”
“I was lucky because it was around the same time when top-end luxury brands became affected by the anti-graft campaign in China. Gifting, which used to account for half of the sales, disappeared overnight. So personal use was all there was left.”
In the past year, Poon has been busy drumming up the noise about TAG Heuer. His team held 142 marketing events, including sponsoring the Rugby Sevens and the Formula E, and signing up basketball player Jeremy Lin as brand ambassador.
In China, TAG Heuer has opened 25 new retail locations, and became the first foreign watch brand to partner with the China National Space Administration. It will serve as the timekeeper for China’s expedition to Mars.
But the game changer was the Connected smartwatch launched last December. The HK$11,700 timepiece, modeled after the label’s iconic Carrera mechanical watch, is the only genuine and fully digital smartwatch ever produced by a Swiss watchmaker.
It sold 50,000 pieces last year. And with talk of a big update to be announced at the Baselworld watch fair in March, the brand is hoping to triple its smartwatch sales this year.
“We had hesitations about the smartwatch – whether it would cannibalize the mechanical watch market. Interestingly, we found that 90 percent of the buyers were first time TAG Heuer customers. Thus, we gained new clientele. It surprised us too,” Poon said.
Smartwatches will continue to be a trend to look out for. Another is that consumers will continue to remain price sensitive.
“All brands have come to terms with the reality – it’s a consumer market, not a supplier market anymore,” said Poon. “So you will see more brands bringing their new watches down to a reasonable price level.”
The article first appeared in the Standard on January 13, 2017.