Luxury Watches

Delivered March 22nd, 2018. Contributors: Ifeyinwa N., Lu J., Sara F. and

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Competitive Landscape - Luxury Watches

The yearly revenue of PrestigeTime, Hodinkee, and Jomashop are $3.7 million, $6.2 million, and $4.4 million respectively. PrestigeTime has 0.000095% market share, while Hodinkee and Jomashop control 0.0002 % and 0.0001% of the market respectively. Of the three companies, Jomashop has both the most expensive and least expensive watches in the range of $39 and $1,345,133. Product categories include brand, men's watches, women's watches, vintage watches, dial color, band type, color. However, Jomashop has varying product categories. Social Media — Facebook, Instagram, and Twitter is the major marketing channel for the three companies. The attached spreadsheet contains details on each of the companies.

Market Share Methodology

The latest report we found about the global watch industry was dated 2015 and contains no information about the luxury watches. We calculated the market share based on the global watch sales in 2015.

In 2015, U.S. made $11 billion in watch sales, accounting for 28% of the global watch sales. 

28% of X = 11 billion.

X, which is the global watch sales = 11 billion/0.28 = 39 billion

Market Share was calculated by dividing each of the company's annual revenue against the global watch sales in 2015 ($39 billion)

PrestigeTime: $3.7 million /$39 billion = 0.000095% of the market.
Hodinkee: $6.2 million / $39 billion = 0.0002% of the market.
Jomashop: $4.4 million / $39 billion = 0.0001% of the market.

CONCLUSION

In conclusion, the competitive analysis regarding the revenue, market share, prices, product categories, and marketing channels of PrestigeTime, Hodinkee, and Jomashop has been compiled in the attached spreadsheet.

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Luxury Watches - Demographics

 Millenials and Baby Boomers are the biggest demographic segments currently buying luxury watches. Growth is mostly seen in China, Russia, and the UAE where spending increased up to 70%. Luxury consumers spend 53% of their money on luxury goods in their home country, 26% abroad, and 15% at the airport. Luxury watches are the fourth most popular luxury segment with consumers, after fragrances, spirits, and vacations. The key purchasing period for luxury watches is December when watch sales are at 24.9% of the total annual units sold. By income cohort , watches that resonate the most with those with the highest income are produced by Patek. Rolex and Tag are most popular with those who make $150,000 and above.
LUXURY SEGMENT DEMOGRAPHICSWhile this first source we use is from 2015, it provides one-of-kind information regarding the luxury segment disruption that has been going on since 2014 and is still in progress. We later provide information that supports that the claims made in this source still hold now with more recent sources. However, we felt quantitative data quoted in this report was too valuable to omit.

 Demographic disruption is the biggest challenge the luxury market is facing since 2014, and this trend is expected to continue for a full decade until 2024. The largest market for this disruption is the US, as this market is currently the largest luxury market in the world, with sales of €64.9 billion. It is even bigger than the four next largest markets combined—Japan (€18.1), Italy (€16.1), France (€15.3) and China (€15). The shift is boosted by the fact that a generational shift in the demographics of the target market is currently going on, from maturing Baby Boomers (born 1946-1964) to Millennials (born 1980-2000).  Currently, both generations are equal in size, but their spending power is different.  Affluent Boomers have a larger amount of wealth to spend and are accustomed to the luxury lifestyles. However, Boomers don't care that much about luxury goods and are more focused on experiences. Millennials are yet to accumulate the majority of their wealth. As people tend to reach their highest income levels between 35 and 54 years of age, this means that Millenials are about to be stepping into this era of their life between years 2010 and 2029, when the Millennials will reach critical mass in the affluence window. 

According to Deloitte's 2017 Global Luxury Report, over last five years, consumer spending on luxury spending remained the same as the previous five years. Growth is mostly seen in China, Russia, and the UAE, where spending increased up to 70%. 

Overall, luxury customers spend 53% of their money on luxury goods in their home country, 26% abroad, and 15% at the airport. The first big trend when it comes to luxury consumers is the fact consumers are shifting their spending habits to online shopping, and are more attentive when it comes to the digital experience. Currently, 37% of consumers buy their luxury products online.

The second trend is an increasing demand for personalization of products, such as monogramming or customizing. 

The biggest drivers of luxury consumption:
 88% of luxury consumers buy products because they are premium quality products
 82% of luxury consumers buy products because they make them happy
 75% of luxury consumers buy products because they are hand-made
 68% think it is a luxury to buy the latest trend
 63% like to buy luxury products others haven't heard of yet
 60% are impulse shoppers
 57% wear only luxury products
 56% buy luxury products because they like to show off their luxury goods

Countries that have the highest share of luxury consumption:
1. France (23.9%)
2. United States (21.3%)
3. Italy (16%)
4. Switzerland (14.4%)
5. China (8.9%)

 Thirty-nine percent of Ultra High Net Worth Individuals (UHNWIs) worldwide recently said that online privacy and security when it comes to shopping for luxury goods is an issue of concern for them. 
LUXURY WATCHES DEMOGRAPHICS SPECIFICSLuxury watches are the fourth most popular luxury segment with consumers, after fragrances, spirits, and vacations. They rank higher than apparel, home furnishing, and cars. Watches are the most popular luxury segment overall with Boomers, and fourth most popular with the GenX and Millenial generations.

All three generations use the following words to describe their desired watch purchases: quality, expensive, name-brand, and high-end. The Millennials' top luxury watches descriptions include the words best, classy, and money. The Gen Xers' like the most the words cozy, premium, style, unique, and valuable. Boomers rank the words desirable and overpriced as most sought-after words when it comes to luxury watches.

The key purchasing period for luxury watches is December when watch sales are at 24.9% of the total annual units sold. April and July are also months of high activity when 10% of the total annual value is sold. The remaining sales are divided equally throughout the year.

The five key features when it comes to the demographics of the luxury watches that the companies should be aware of are:
1. The quintessential self — consumers achieve fast and smarter self-actualization, and expect their products to be more exclusive than anyone else's.
2. V.I.D. or Very Important Data — consumers expect their watches to show off just how important they are according to the specifications of the product.
3. Premium redeemed — luxury watches should not be made in factories that exploit workers or be responsible for killing the environment. Social responsibility is crucial.
4. Extravagant economy — luxury is expected to be on demand.
5. Post-demographic luxury — the demographics have been disrupted and the lines of whom, where and when of luxury have been erased. Therefore, personalization is key.

When it comes to brands, the top preferred luxury watches brands are:
Rolex (13%), Hermes (8%), and Cartier (6%). If observed from a geographical standpoint, Rolex is overall the most popular brand, followed in the aggregate vote by Patek Philippe and Tag Heuer. By region, Rolex is less strong in Europe where Breitling is considered the second-most popular brand. By income cohort , watches that resonate the most with those with the highest income are produced by Patek. Rolex and Tag are most popular with those who make $150,000 and above.

According to a market research conducted in the UK that targeted only Rolex consumers, a typical Rolex owner is 68 years old and is a white male. 66% of people who own a Rolex are over the age of 65, and only 1.5% are under 35. Male owners outnumbered women by 2:1. The largest consumers of Rolex watches are company directors (7.2%), with managing directors close behind. More than 20% of Rolex owners have either manager or director in their job title.

 Tag Heuer is turning towards lower-income Millenials as their primary demographics. They are set to be the definitive affordable-luxury watch brand, opting to rather produce smaller watches which are less complicated to produce, and make a 1,000 of the same kind of those watches, than go for one-of-a-kind watch that hardly sells. 

 The biggest problem luxury watch companies have when it comes to identifying customers and customer demographics is the lack of direct contact with the customer. Luxury watch companies work through distributors and retailers, "which makes it hard to connect with their customers and react to trends."
WOMEN'S LUXURY WATCHESFashion houses, such as Chanel and Hermes, are more popular choices when it comes to women's luxury watches as they are "better equipped to target powerful women, who are more and more acting like men in their search for watches." 

Today, women are buying luxury watches because of the precious material, diamonds, aesthetics, but also because of the craftsmanship and technical expertise. More and more women are buying mechanical watches.

Women tend to go for big, high-quality brands. The most popular watch brands when it comes to women consumers are Rolex, Cartier, Bulgari, Chanel, Dior, Faberge, Tom Ford, Hermes, Ralph Lauren, and Louis Vuitton.

The female watch market consists of two segments: "feminized, reduced-size men’s watches and designs original to women, some with mechanical movements and some with quartz movements. In general, women are interested in the overall design of a watch. They want something nicely made that looks good."

 In China and other Asian markets, there has recently been a big shift from women’s sports watches to mechanical watches because of the perceived prestige value.
MEN'S LUXURY WATCHESThe sale of men’s luxury watches represented 48% of units sold and 59% in terms of value.

The four most-quoted reasons why men buy watches are as follows:
"1. A replacement for a lost watch
2. A gift to a loved one
3. A keepsake intended for the next generation
4. It marks an achievement, a victory, a milestone,"

The three typical male buyers of watches have the following profiles:
1. Ages between 25 and 45. The man who is on his way up and has an active lifestyle. They buy TAG Heuer for the brand name, with Omega as a general most popular choice. Ball Watch is bought for the night-life, Nomos because of the minimalist styling, and Grand Seiko because of the finish.
2. Middle-aged consumers who are successful and comfortable with their achievements, however, they still have more to accomplish. They opt for Rolex and Panerai for the brand. Popular choices also include Alexander Shorokhoff, Jaeger-LeCoultre, Bucherer, Chopard, Ulysse Nardin, IWC, Cartier, Audemars Piguet, and Vacheron Constantin.
3. Customers over 65 who are at the apex of their career, and care only about relaxing and enjoying their life. The go-to brands for this demographic are Patek Philippe, Breguet, Laurent Ferrier, and Speake-Marin.

The most popular size for men is the mid-size model, that ranges from 40 to 43 mm. 
CONCLUSIONToday, women are buying luxury watches because of the precious material, diamonds, aesthetics, but also because of the craftsmanship and technical expertise. The four most-quoted reasons why men buy watches are because they are buying a replacement for their previous watch, they are buying a gift for their loved one, they want a keepsake for the next generation, and they are marking an achievement.

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Luxury Watch Industry - Marketing

Millennial shoppers are more likely than other generations to purchase luxury items online and via mobile devices, and they are strongly influenced by social media content and recommendations from trusted friends and family. Baby boomers are also social media-savvy consumers, but they are more reachable via print advertising than younger generations. Male baby boomers tend to prefer print ads, followed by smartphone emails, radio ads, and text messages. 

In China, one of the largest luxury markets in the world, shoppers tend to gravitate to social media and online shopping, while also traveling abroad to make purchases. Russian shoppers are influenced by social media and television advertising, while UAE luxury watch consumers tend to shop in retail establishments where they receive personalized attention. 

MARKETING CHANNELSOur previous research identified the millennial and baby boomer generations as the top demographic focus for luxury watches, specifically noting that older men are prime consumers. It also found that China, Russia, and the UAE are the global regions where luxury spending has seen the highest growth. So this response will focus on the marketing channels that reach these demographic areas.

— Luxury item marketing channels 
According to Deloitte's 2017 Global Powers Luxury report, millennials (23%) are slightly more likely than Gen X (21%) or baby boomer (22%) shoppers to purchase luxury items online via computer, while they are significantly more likely to shop online via a mobile device (19%) than Gen X (14%) or baby boomer (6%) consumers. But baby boomers are the most likely to shop in a physical store (72%) over millennials (58%) or Gen X (66%). 

As noted in our previous report, baby boomers are most likely to shop for luxury items in their home country (65%). Some 33% of millennials like shopping abroad for these items.

— Marketing channels, by generation

Millennials:
Social media is an important marketing channel for reaching millennials with 90% of this generation active on Facebook. Millennials are "247% more likely to be influenced by blogs or social networking sites," according to data gathered by Hubspot. An undated Goldman Sachs report states that millennials are more influenced by social media than older generations when making purchasing decisions. Some 34% of millennials say they like a brand more when it uses social media, and they are more likely to make a purchase online. A 2018 Cerulli report also notes the importance of social media in marketing to millennials. Nearly half of all millennials are also willing to share positive experiences with a product via social media, especially when financially incentivized in some way. A 2017 Forbes article also touts the benefits of social media and the word-of-mouth advertising opportunity it provides, via reviews and influencer marketing.

While millennials are interested in quality, price is a more important purchasing factor for this generation than others. They also research products extensively, using multiple channels to conduct their research. 

Millennials trust friends and family (89%) over brands, and they are more trusting of user-generated content (84%), such as customer reviews, on a brand's website.

As noted previously, millennials are more likely than other generations to shop via a mobile device. Therefore, mobile ads are a must when engaging the 85% of millennials who own a smartphone.

A full 84% of millennials say they do not trust traditional marketing mediums such as magazine ads or radio commercials. But they are more accepting of ads when viewed during free content (75%) than paid content (46%). On social media, they would rather see native content, such as photos of products being used in some natural way. In terms of traditional marketing, when away from a computer, millennial women are most influenced by print ads, while millennial men gravitate to emails received via their smartphones. Text messages are also popular with both men and women of this generation.

Millennials are also known for multitasking while watching TV. While they are not as likely to change the channel during commercials, they are more likely to be surfing the internet or checking their social media channels while watching TV. So marketing across channels is a wise decisions.

Baby boomers:
In terms of traditional, non-digital marketing, baby boomers (both men and women) are most influenced by print advertising. As a generation that grew up reading, they want to read full ad text, not the acronyms or shorthand text, which might be welcomed by younger generations. Among men of this generation, a top luxury watch demographic identified in our previous research, the top non-computer marketing channels are print ads (57%), email via smartphone (25%), radio ads (25%), text messages (21%), and in-person conversations (16%). They also have a high response rate to direct mail. 

 Facebook is the top social media channel preferred by baby boomers with 90% of them preferring it over Instagram. Pinterest and Twitter are the next most popular channels. Male baby boomers largely ignore online banner ads (89%), social media ads (76%), and search engine ads (76%). However, only 48% ignore newspaper ads, suggesting this medium may be effective in reaching this demographic.

In terms of content marketing, baby boomers prefer written blogs and video content. They gravitate to news and weather content the most with Fox News, Bloomberg, and the Weather Channel topping their list. 

Baby boomers rely heavily on company websites (61%) when researching products to purchase with email the next (26%) most popular method.

REGIONAL MARKETING CHANNELS— Marketing to Chinese consumers

China is considered the biggest market for luxury products. In a February 2018 article, Chris Neff, the Asia Managing Director for Chopard, a Swiss luxury watch brand, states that there are two types of luxury shoppers in Southeast Asia: those who are already sophisticated luxury consumers and those who are early in their exploration of luxury products. He notes that it is crucial to educate this emerging group of luxury shoppers, though he does not suggest how to do so.

China is the largest e-commerce market, globally, and Chinese consumers are likely to purchase foreign products online. China has entirely different social media channels than Western countries. In China, WeChat is the top social media channel with 700 million users, and Weibo is China's answer to Twitter. Video platforms, such as Youku, Tudou, Iqiyi, and Sohu are also popular. 

Though slightly dated, a 2014 report on Chinese luxury shoppers states that 60% of shoppers relied on social media or online platforms that provide user recommendations as primary sources of information when making luxury purchasing decisions. Another 60% said they enjoy browsing luxury products online. Chinese luxury consumers like shopping abroad with 97% preferring to travel overseas, especially to Hong Kong or South Korea. However, the majority (90%) research their purchases ahead of traveling and 38% know which products they will purchase before they travel. Chinese consumers connect luxury goods with quality and design with quality ranking as the main reason (45%) for a luxury purchase. Most Chinese luxury shoppers purchase from a retail establishment (26%) or duty-free airport store (24%). Only 4% prefer to shop online for luxury items.

Baidu is the top search engine in China, holding 70% of the market. Having a company website that is designed for China (language, domain, hosting) and optimized for Baidu is essential to marketing efforts. 

Online discussion communities are also popular among Chinese consumers. Brands such as Apple and Samsung have had success by engaging consumers in discussion channels such as Tianya, Mop, Douban, and Zhihu. Fashion channels such as Mogujie and Meilishuo may be beneficial to the luxury watch marketer.

 Television and newspaper advertising remains effective with older Chinese consumers. CCTV and regional television are popular, as well as the I.E. People Daily and 21Jingji newspapers. The subway stations and bus stops are also filled with advertising.

— Marketing to Russian consumers

While I found no data specific to luxury shoppers in Russia a consumer profile from Santander Trade Portal found that television and social media advertising are particularly effective in Russia. While Russian consumers are not particularly enamored of the shopping experience in general, they are educated, sophisticated, and brand-loyal shoppers. 

Social media reaches about 70% of the Russian population. Vkontakte is the most popular channel with 90 million users. Instagram (39 million), Odnoklassniki (30.5 million), and Facebook (21 million) are next in line. Facebook, Twitter, and Instagram have a higher urban following, while Odnoklassniki and MoiMir have a more rural following. Facebook users tend to be more educated that users of Odnoklassniki and MoiMir.

Yandex is the largest Russian search engine with 56 million users. With product- and service-focused platforms, such as Yandex.Slovari, Yandex Maps, and Yandex.Money, it is considered a top advertising platform. 

— Marketing to UAE consumers

Relatively little data was available regarding United Arab Emirates (UAE) marketing channels. However, an interview with Hind Abdul Hamied Seddiqi, the Chief Marketing and Communications Officer for Seddiqi Holding, provided some useful targeted data related to luxury watch marketing in the UAE. Seddiqi states that their Ahmed Seddiqi & Sons group accounts for "90 percent of all Swiss watch brands" in the UAE. Their watches range in price from AED 700 to AED 5 million. She notes the importance of building a relationship with luxury consumers so they become repeat shoppers. From this interview, it seems that most UAE luxury watch consumers shop in retail establishments where personalized customer service is key. However, Seddiqi states that online, social media, and video marketing are going to be crucial in 2018. Seddiqi uses both digital marketing and traditional advertising methods, such as print media, and outdoor advertising. 

An infographic created by a design firm DubaiMonsters indicates that newsletters, mailing lists, online advertising, search engine optimization, blogs, and social media are important tools in marketing to UAE consumers. Facebook and Twitter are the top social media channels, and retail is the second-highest rated industry in terms of Facebook fans in the UAE. An impressive 94% of UAE marketers believe social media influencers are an important marketing tool. Some 43% of marketers spend between $1,000 and $10,000 on influencer marketing campaigns. 

CONCLUSIONIn conclusion, millennial shoppers want to buy products online and via mobile devices, and they trust friends, family, and user-generated content the most. Baby boomers are also social media savvy, but they are influenced more by print advertising than other generations. China's luxury consumers like to buy online or travel abroad when shopping, and they are influenced by social media. In Russia, social media and television are the top advertising media, while UAE luxury shoppers like the personal attention they receive at retail establishments.