The past years saw an unprecedented growth in the watch industry of mainland China. Supply was abundant for watches of all shapes and sizes, including a number of branded items.

China's wide range of watches and its aggressive market development efforts have captured the attention of consumers. The wide array of designs complement the price range to capture all market segments. Watches carrying international brand names are being introduced in the China market, with prices ranging from tens of dollars to tens of thousands -- some even costing millions.

The watch industry has gone a long way since the days when watches were regarded as an important element in a wedding or a fashion statement instead of its important basic function. It was China's economic and social reforms that raised the consumer's maturity and brought about rapid development to China's resuscitated watch industry.

The dark ages of China's watch industry

The early years of reforms in China saw the Hong Kong watch manufacturing industry starting to migrate northward into the mainland in the 1980s. This led to significant changes in the industry and trade. Joint-venture manufacturing and assembly of watch parts became popular industries. Electronic quartz watches were introduced and made their mark in the mid-range market. These were followed by the launch of various imported and world-renowned brand-name watches that caught the consumers' natural curiosity towards novel products, thus creating a sense of excitement to China's watch market.

There was growing concern, however, from Chinese watch manufacturers about the effect that the entry of imported watches to the market will have on locally-made ones. Four major price cuts were effected between 1981 to 1987 in order to remain competitive, but this move proved to be detrimental to the local watch industry, with China-made watches being regarded as cheap products. It was an uphill climb to recovery, with companies either closing shop or exporting their products in areas not dominated by international brands. There were some though who tried to beat the odds by continuing production.

Getting back on its feet

The temporary setback served as an eye-opener to China watch manufacturers to shed their "closed-door" attitude towards importation. This led to a series of design innovations and quality improvements as part of their effort to reform and strengthen their industry. What used to be competition between companies and factories became cooperation to get China's watch sector out of the slump and on the road to recovery.

Watch production saw major improvements in the late 1980s and the silver lining finally appeared by the 1990s. Demand shot up because of the renewed interest of consumers in the new and innovative designs of China-made watches. Manufacturers in Shanghai even produced a watch to commemorate Mao Tze-dong's 100th birth anniversary, which caught the attention of astute watch collectors.

The success of the watch industry in the post-reform era did not escape the attention of the business community. A year ago, Shanghai Sanlian Commercial Group, which specializes in watches, invited a group of 38 light industry manufacturers to display their watches in an exhibition at Shanghai Manhattan Plaza. The 760 high-quality China-made watches on display mirrored the years of improvement and restructuring to come up with products that meet international standards. In Beijing, Tianjin and Shanghai, the market for brand name watches is starting to expand.

China's watch market today carries imported, joint-venture and China-made watches. It enjoys the advantage of having an abundant supply and broad distribution channels, with the retail sector experiencing an increase in demand from both local and foreign enterprises.

Many shopping complexes have been built in recent years in large cities like Beijing and Shanghai, and statistics show that in 1991, there were a total of 94 large-scale department stores and corporations which posted annual sales output exceeding Rmb120 million, and in 1995 at Rmb624 million. Today's figures are undoubtedly higher and in these new stores, watches are among the basic products.

The rapid expansion of the retail industry in China resulted in the spreading of sales not just to one store but to many. Similarly, on the production side, reports show that state manufacturing enterprises numbering 39 before has ballooned to over five hundred today. The continuous increase in import of watches to China has put joint-venture and assembly enterprises under constant development, and private/individual enterprises in direct competition.

Supplies and distribution channels have risen although consumer demand has been decreasing although the watch industry's total sales was kept at breakeven this year.

This may seem, to some people, as an indicator that the industry has become extremely competitive, but in fact it also points to a slow-down of the market. The retail segment has overheated, and new suppliers have flooded the market. There is a clear case of over supply, marking intensified competition between brand name watches in the China market.

'Quality' becomes the by-word

Thus the main focus of China's watch market today has shifted from "quantity" based in a planned economy to "quality" based one of a market economy. Also significant is the fact that from once being a "sellers" market, watches are now a "buyers" market. Therefore, current trends are not on fast growth but on improving quality and special features to corner a share of the market. An increasingly affluent lifestyle, especially in the urban areas, has ensured rapid product improvement. A large segment of these consumers own more than one wrist watch, and the product is in keeping with their lifestyle.

In their pursuit of overall quality, China's watch manufacturers focus on the aspects such as the public image of the enterprise; building the brand; support services; features, design and style; reasonable pricing; and the overall value of the product. These are the important elements that determine whether or not the product makes a good impression on the consumer in China. Some world-renowned brand names go through an extensive pre-launch exercise of positioning, advertising, setting up retail and service networks etc. Only then is the product opened up to the consumer. In recent years most of these big brand name watches have sold reasonably well despite being very high-priced. For example, Heng Da Li Clock & Watch Company in Shanghai has sold over 2,000 pieces of four of the world's top watches in 1996 worth about Rmb 30 million.

Some of China's local brands like Candino, Titono, Enicar, Citizen, Fiyta, Tianwang, Rossini, Roman, Shanghai, Bao Shi Hua, Diamond, and Junque, Jingda have also worked hard on improving quality and positioning of their brands to corner a fairly sizeable chunk of the retail market.

However, on the other end of the spectrum are the cheap products that imitate big brands. It is this segment of the industry that create havoc in the market-place by churning out low-priced, high-volume imitations. Fortunately these products have been lagging in the market and are largely rejected by consumers.

The retail market for watches and clocks is largely dependent on factors like trust in the store, post-purchasing services and warranty, brand positioning and advertising etc. All these factors are indispensable in ascertaining whether a store can obtain a market share. This, however, varies from region to region throughout China.

In recent years, the watch industry in cities like Shenzhen, Shanghai and Beijing has undergone much change. More companies now indulge in increased level of promotion, taking part in exhibitions and the like in order to improve interaction with various segments of the industry, both within China and abroad. Shanghai Sanlian Commercial Group has identified Shanghai as its watch-manufacturing center, which is also a major market for retail sales. Today the Group has set up the Shanghai Professional Watch Center, which houses a trading, exhibition and shopping center under one roof. All in all, more China companies are moving toward meeting high standards in product innovation and quality as well as meeting the competition in a bid to establish a firm hold on the vast market for watches and clocks.

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