More Hopeful: The 2020 Outlook for the Watch and Clock Market

The HKTDC Hong Kong Watch & Clock Fair is the largest timepiece event in the world. The HKTDC conducted face-to-face interviews with 501 buyers and 338 exhibitors [1] at the 2019 Fair in order to obtain the industry’s view of future market prospects, new product trends and the latest developments in e-tailing.

The survey results showed that industry players are more hopeful about sales prospects over the next 12 months. Despite a list of widely shared concerns such as the subdued global economic growth, the slowing Chinese economy and the increasing operating costs, the industry are confident about the potential of smart watches in driving sales and the product development strategy of “going smart – interactable with smart devices” as a trump card in the year ahead.

More Hopeful for 2020

Compared with last year’s survey results, respondents are more hopeful with regard to sales performance in the year ahead. 33% of buyers and 30% of exhibitors expected the overall sales to increase in the coming 12 months, compared to 21% and 19%, respectively, last year.

Chart: 2020 Market Outlook (Watch and Clock)

Both buyers and exhibitors saw no end in sight to rising cost. 43% of buyers and 46% of exhibitors expected their sourcing prices or production costs to increase, while only 8% of buyers and 9% of exhibitors surmised a decrease.

However, when asked about the retail price of their product, 60% of buyers would see it remain unchanged and only 33% of them predicted an increase.

With regard to the FOB selling price, 65% of exhibitors expected it to remain fairly static, while 24% anticipated an increase.

Slowing Global Economy

Looking forward, a majority 55% of buyers and exhibitors were concerned about the slowdown of the global economy.

For buyers, the next most tricky issues include the slowdown of the mainland economy (46% of buyers), the increase in operating costs (43%) and the changing global trade relations such as rising protectionism and trade barrier (37%).

Exhibitors, on the other hand, are more disturbed by the increase in operating costs (38% of exhibitors), the slowdown in mainland Chinese economy (34%) and the keen competition within the industry (34%).

Chart: Expected Major Business Challenges in 2020 (Watch and Clock)

Sino-US Trade Dispute

Regarding the likely impacts of the Sino-US trade conflict, 70% of buyers and 58% of exhibitors expected a negative impact on watch and clock exports, compared to 44% and 50%, respectively, in the previous survey.

This is in line with the expansion of the coverage of the US Section 301 tariffs to include most watch and clock (of HS chapter 91) products. While certain mainland China-origin timepieces have already been subject to 10-25% additional tariffs imposed by the US, more watch and clock items are set to fall victim to the US tariffs by 15 December 2019. For the latest update, please click here.

Chart: Expected Impacts of Sino-US Trade Conflicts on Watch and Clock Exports

Smart Watches’ Popularity Persists

When comes to the most popular product category for the year ahead, 36% of buyers and 25% of exhibitors believed that smart watches would continue to be the market leader over the next 12 months, followed by automatic self-winding watches (22% of buyers and 23% of exhibitors).

Chart: Most Popular Watch Category

When asked about the highest growth potential in their respective markets, 46% of all respondents voted for fashion watches, followed by leisure watches (41%) and smart watches (38%).

The respondents who backed fashion watches expected the average retail price to be HK$1,567, an increase from HK$1,347 last year. This year’s smart watch makers were also more optimistic about the retail price, with the average elevated from HK$1,615 in the previous survey to HK$1,904 this year. However, those who believed in leisure watches saw a slight drop in the retail price from HK$1,201 last year to HK$1,176 currently.

Chart: Greatest Growth Potential by Product Type (Watch and Clock)

Optimal Product Development Strategies

Buyers and exhibitors shared similar views with respect to the most optimal product development strategies.

Buyers were confident that “going smart – interactable with smart devices” (61% of buyers) would continue to be the way forward for product development in the coming year, followed by “collections that align with current season’s fashion trends” (46%) and “mix and match watches” (45%).

While exhibitors also backed “going smart – interactable with smart devices” (37%) and “collections that align with current season’s fashion trends” (32%), they believed more in the “limited edition collections” (31%) as the next to follow.

Chart: Top Product Development Strategies (Watch and Clock)

E-tailing Remains the Way Forward

The digital channel continues to gather steam for watches and clocks sales. According to this year’s survey, 61% of buyers and 53% of exhibitors were already engaged in e-tailing business. Among those who were not, 27% are planning to start selling online within the next two years.

Of those companies who currently or will be engaged in e-tailing, 52% would use the channel to sell leisure watches, followed by fashion watches (50%), smart watches (33%), and sports watches (19%).

On sourcing, 56% of those currently engaged in e-tailing business sourced their products from Alibaba, followed by Amazon (48%) and eBay (31%). On average, e-tailing currently accounted for 27% of their total sales revenue and is expected to grow by 11%, on average, in the next two years.

Chart: Preferred Sourcing Platforms for E-tailing Business (Watch and Clock)

China’s Market Potential

In all, 58% of buyers and 62% of exhibitors had sales activities in mainland China. Both buyers and exhibitors were more cautious about sales prospects than last year, with 37% of buyers and 40% of exhibitors expecting sales to grow over the next 12 months, compared to 45% and 43%, respectively, in the previous survey.

Chart: Mainland China: Growth Prospects (Watch and Clock)

Of those 190 respondents expecting rosier sales in the mainland, 80% of them based their optimism on stronger market demand. On the other hand, the bearish were most concerned about sluggish demand (59%) and intensive competition (45%).

Mainland Development Strategies

Overall, buyers and exhibitors will take a similar approach to develop or strengthen their presence in mainland China. Most of them are planning to set up or expand retailing/wholesaling networks in the mainland, while some would also use e-commerce and source more “made-in-Hong Kong” watches.

It is also noteworthy that 67% of all respondents agreed that being more fashionable and stylish is a competitive edge of Hong Kong-branded watches.

Chart: Mainland Development Strategy (Watch and Clock)

Profile of Respondents

Of the 501 buyers surveyed, 50% of them were based in Hong Kong, 14% from mainland China, 10% from Asia (excluding mainland and Hong Kong), 8% from Western and Eastern Europe, 7% from North and South America, and 11% were from other regions.

Of the 338 exhibitors surveyed, 55% of them were based in Hong Kong, 33% in mainland China, 7% from Asia (excluding mainland China and Hong Kong), and 5% from other regions.

[1] HKTDC Hong Kong Watch & Clock Fair was held from 3-7 September 2019.

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