Swiss luxury watchmaker Piaget said its sales in China may grow less than 10 percent this year, the slowest in eight years, as Chinese consumers take advantage of the stronger yuan and travel overseas to buy premium goods.
Piaget, which makes the $53,000 Altiplano Skeleton 1200S, is also tempering the pace of store openings in China, Dimitri Gouten, its Asia Pacific president, said in an April 27 interview from Shanghai. Sales may lag the “double-digit” growth rates since around 2005, he said. The watchmaker, which is owned by Cie. Financiere Richemont SA (CFR), has 20 boutiques in China and 50 points of sale in total.
“In the past eight years, we’ve been opening new stores in China,” Gouten said. “When you go from 20 point of sales to 30, 40, 50, very quickly, then the growth is very quick. Now you are in a more mature market, with less cities to open, of course growth won’t be as fast.”
The Chinese are increasingly going abroad to make luxury purchases instead of buying at home, where prices of items ranging from Prada bags to Louis Vuitton wallets are subject to higher taxes. China overtook the U.S. and Germany to become the world’s largest source of tourists last year, spending $102 billion in 83.2 million outbound trips, according to the China Tourism Academy.
Exchange rates are more favorable for Chinese venturing abroad, Gouten said. The yuan traded at a 19-year high against the dollar this month, supported by economic growth and a government seeking to boost domestic consumption.
A government crackdown on extravagant spending is having a limited effect on sales, as rising wealth supports demand, Gouten said. Sales growth of more expensive watches -- between HK$400,000 and HK$800,000 ($52,000-$103,000) -- was better than demand for watches costing about HK$100,000 this year, he said.
Total purchases by the Chinese, regardless of location, will still grow more than 10 percent in 2013, Gouten said.
Piaget plans to open boutiques in the southwestern cities of Chengdu and Nanning this year, along with three more points of sale in China, Gouten said.
The watchmaker plans to focus more on boosting jewelery sales and improving its after-sales service to customers in China, Piaget Chief Executive Officer Philippe Leopold-Metzger told reporters yesterday.
“When I look at the profitability of the China operation itself, it doesn’t really matter,” Leopold-Metzger said. “You need to invest a lot in China in advertising, brand building and stores, because you will get the benefit of it in China, and everywhere else outside with the Chinese.”
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