The Swiss watch industry represents 50% of the global watch industry. However, Switzerland only produces 2.5% of the global quantity of watches. What causes such an imbalance? The country is the home of luxury watchmaking experts. Some of the finest timepieces are produced there. According to Mazars reports, the Chinese luxury watch market is growing quickly. Longines is one of the most popular brands in China. Since its market entry in the 1970’s, Longines China features strategies to ensure its development. Nonetheless, recent events, such as the Coronavirus impact, raise questions about the future of the brand in China.
From the creation of the brand to the success of Longines China
Longines: Tradition as a cornerstone
Longines has a long history. In 1832, Auguste Agassiz founded a factory of watch assembling in St. Imier, Switzerland. His nephew Ernest Francillon, became manager and transformed the production in the 1860’s. He created the brand Longines. Since then, Longines helped aviation pioneers like Charles Lindberg. The pilot was wearing a Longines watch during the first direct flight across Atlantic in 1927. Also, the brand served as an official timer of prestigious sports events, including the Olympic Games. For the past twenty years, the brand focused on elegant sports like gymnastics or tennis. This effort match with the brand slogan “Elegance is an attitude” and its following path of heritage.[Source: Longines.com–Charles Linderg’s watch reedition]
The 1970s: an uncertain era for the company
This era was particularly difficult for the entire Swiss watch industry. It is known as the “the quartz revolution” Many watch companies had to close. The Japanese watch industry made a technological gap. Seiko created its first quartz movement in 1969. It was a new way of thinking the entire watch industry. Mechanicals and automatic watches have low autonomy. It takes nine days to make the most high-end watch today, but it is usually around fifty hours. To recharge it, you have either to just wear it or to turn the crown. A quartz watch can operate for month without being recharged. The apparition of Japanese quartz watches on the market during the 1970 injured the Swiss watch industry. To endure this uncertain decade and survive Longines joined the SSIH, which became the giant Swatch Group in 1998 with brands such as Omega, Blancpain and many.
Longines is now one of the biggest brands of the Swiss industry
Nowadays, Longines is in the top 5 of the most profitable Swiss watch brands. One of its biggest competitors in China is Rolex. According to Swatch group statistics, Longines made a profit of 1.81 billion dollars in 2018. Only five swiss watchmakers sell more than 1 billion at retail annually. The brand is No.1 on the price range between 1000 – 3000 euros. The brand keeps its traditional DNA and do not want to produce smartwatches. Mr. von Känel is the current CEO of the company. He has been in the company for fifty years. He joined the company in 1969. His mission was to make Longines No.1 on the range price between one and three thousand dollars, an entry level price for the Swiss luxury watch market. A new focus of the brand is the Chinese luxury watch market.
Longines in China, the golden market
Longines’ China market entry
The market entry in China began as early as the 1970s. It is one of the first Swiss brands to settle in the country. The Chinese name of Longines China is “浪琴”. In this era the Chinese luxury watch demand was not that important compared with today. The boom of Chinese luxury consumers arrived in 1990s. There are right now 12 official stores and around 400 retailers in china. The brand is also online with its Chinese website.[Source: Longines.cn – The Chinese website of Longines]
Around 700 thousand watches are sold there every year. It is a strategic country for the brand. Contrary to other watch brands, more than 50% of their consumers in China are women. The brand features interesting developing strategies. Longines China deployed strategies to ensure its development in the country, the brand needs to protect and increase its Chinese brand image.
Understanding Chinese uniqueness
Longines made interesting moves in their Chinese development. The company tried to adapt with the unique aspects of China to improve their relations with Chinese luxury consumers. They developed watch per pair offers for couples. Longines China knows the importance for many couple of the country to match their outfit. The brand surfs on this trend on the Chinese luxury watch market. Also, Mr Von Känel stated that good relations with the central government have always been useful. The CEO made around 300 business trips in the country to tie respectful relations. Hence, Longines is everywhere in China. It is important for the company to understand how the Chinese luxury market really works.
Digital marketing : a key point of Longines’ strategy
Digital marketing is the new key of success in China to improve Chinese brand image. Between 2015 and 2018, most of luxury brands doubled their digital budget. Longines China put an emphasis on digital marketing. The brand settled a partnership with Tmall since 2017 to increase its digital brand image. Chinese luxury consumers most of the time go online to see product and then buy it in store. This is call “ROPO”: research online and purchase offline. According to BCG statistics, the ROPO phenomenon is much higher in China compared with other countries. Digital marketing is important for Longines China to improve its visibility.
Longines China: Pursuing heritage and adapting with the future
Heritage is one of the keystones of the brand. The company is always following the origins of the company, a value which inspires Longines’ sponsorship with people or events. Mr. Von Känel underlined the importance of ambassador for Longines: “They transform simple watches into emotional object”. Especially in China where key opinion leaders called “KOL” have influence amongst Chinese luxury consumers. Luxury brands started to work with KOLs, sensing the potential. Zhao Liying is a famous Chinese actress who became ambassador for Longines. She is very elegant and displays this important value for the brand.[Source: Longines.com – Zhao Liying, a Longines ambassador]
Moreover, the company is sponsors the “Longines China tour” annually. It is a horse grand prix in several city of the country. The company raises its Chinese brand image, following its motto of “elegant sport”. With its partners and sponsorship, Longines China highlights the importance of heritage for the company.[source: Behance.net – Hong Kong Longines masters By Riccardo Guasco]
Impediments that are weakening Longines China
Fake products, a plague to luxury brands
China is one of the main counterfeits producers. The quality of fake products is increasing astonishingly. As for every brand, counterfeits are an important problem for Longines China. According to the Foundation High Horology, around 40 million fake watches are product annually. The company hired spies to track down fake outlets. The brand is also working with Chinese customs agency. Fakes are dangerous for the brand image of the Company. The brand will appear less trustworthy. It is one of the reasons why Chinese luxury consumers do not want to buy online. When they purchase in official stores, they are sure that products are not fake. Moreover, Longines Cartier is losing selling because of counterfeit products.
The Coronavirus and the future for Longines China
The Coronavirus impacted the Chinese economy and raised questions about the future of the entire Swiss industry. China is the largest market for the company. Some issues there directly injure the entire Swatch group. On their presence in China, the company cancelled some sponsored events. For instance, Hong-Kong Longines Masters 2020 had been cancelled. These events are important for the Chinese brand image of Longines China. Also, sales of Longines are mainly made in China. Thus, if Chinese luxury watch market is ill, the company will suffer from it.
Are luxury watch brands too dependent on China
According to the watch market expert Olivier Muller, watch companies are too dependent from China. If the Coronavirus continues to impact the economy in the future, Longines will lose its principal source of profit. Moreover, there is an impact on the production. Both Longines factories in Switzerland and their Chinese subcontractors are closed. Not only the company stores but the entire production line closed. How will Longines able to fulfill the Chinese luxury watch demand? 2020 will be a drastic year for the company.
The Coronavirus raises questions about the company management. Even if, in the past it was profitable to invest a lot in China, the situation of Chinese market dependence is dangerous.
China is the most profitable market for Longines
To conclude, Longines has a long history of tradition since its origins in St.Imier. It is now one of the top 5 swiss brands. The company was one of the first to start on the Chinese luxury watch market in the 1970s. Today China is the most profitable market for Longines. This is also an important factor in the production line with many subcontractors. Longines is completely dependent of the country for its growth. The Coronavirus is challenging the company both on the production and the Chinese luxury watch demand. 2020 will be a difficult year for the company and the entire Swatch group. Should Swiss watch companies rethink their strategy with China?
You can also view here our analysis of the entire Swiss luxury watch market in China
Author: Enzio Cacciotto