10 Dec 2018
Accessing the ASEAN Consumer Market: Watches and Clocks (Distribution Channels 2)
The watches and clocks markets in key ASEAN cities consist of various distribution channels, including watch specialist retailers, department stores, travel retailer/duty-free operators and private sales. Aside from brick-and-mortar retailers, e-commerce channels, including brands’ own websites, third-party marketplaces and social media, have quickly become a new force in the watch industry. For details of other distribution channels, please refer to “Accessing the ASEAN Consumer Market: Watches and Clocks (Distribution Channels 1)”.
Travel Retailers/Duty Free Operators
The travel retail or duty-free (DF) channel offers a unique retail environment in several ways: 1) Travellers at airports are captive audience; 2) Travellers regard shopping to pamper themselves on holiday; 3) Last chance for travellers to shop for gifts, and 4) Shoppers’ satisfaction from purchasing duty-free. Essentially, travel retail has often considered to be less affected by the macroeconomic situation and market competition in the downtown areas.
According to Dufry, the leading duty-free operator, global travel retailing is expected to grow to about US$67 billion by 2020, from an estimated US$45.7 billion in 2016. In the ASEAN region, the growth is expected to be more robust with the advent of increasing inbound and outbound tourists in major ASEAN airports.
DF shops can be found in airports, downtown as well as onboard airliners and ferries. Airports shops contribute most to the DF market. For many travellers, shopping for duty-free products, from perfume and whisky to designer bags and watches, is a part of their trips overseas. As travel retailing has grown in ASEAN, international watch brands have invested heavily to gain a foothold in the region's airports.
One of the challenges facing travel retailers is how to increase sales generated from passengers in the time before they embark on flights. Globally, the average time spent at an airport has been steadily reduced over the past years, according to Nigel Dolby, a commercial consultant to the airport industry. Because airport departure procedures, such as security and check-in, have become quicker, the time available to shop has remained at roughly 30 minutes. That may be sufficient for planned purchases but not enough to maximise the potential for impulse shopping, the biggest growth opportunity for travel retailing. In addition, today’s travellers are savvier and price-sensitive. As airport passengers can easily compare the airport retail offers before they buy, DF operators have to engage tourists and business travellers through shops designs, customer service and shopping experience.
Macro-economic conditions, such as exchange rate volatility also play an important role in airport sales, as DF shopping relies heavily on luxury goods spending. For instance, a rising Swiss franc against RMB will have negative impact on the watch sales generated from Chinese consumers. Recently, the price advantage of travel retailers has diminished due to the rise of e-commerce retailers, which offer cross-border fulfilment and increasing price transparency.
Major Travel Retailers/Duty-Free Operators in ASEAN
LOTTE Duty Free – The South Korea’s Lotte Duty Free, has over a dozen domestic branches, and seven locations internationally including Indonesia and Vietnam. It also operate downtown stores in Jakarta and Bangkok.
Heinemann Asia Pacific – a subsidiary of Gebr.Heinemann established in 2010. Headquartered in Singapore, Heinemann Asia Pacific has retail and distribution operations in 10 Asian countries. Globally, Heinemann operates duty free shops, fashion label boutiques under licence and concept shops at airports, aboard cruise liners and ferries.
King Power – The Thai key duty-free retailer has branches at major international airports and city-centre locations throughout Thailand. The stores offer a diverse mix of products from over 1,500 international and local brands. Watch brands carried include luxury classics like Breitling, IWC, Piaget, Omega, and fashion brands like DKNY, Folli Follie, GUESS, Superdry, and many more.
DFS Group – Established in Hong Kong in 1960, DFS Group is one of the world’s leading luxury travel retailers, offering products from over 700 brands through more than 400 boutiques. Its merchandising focuses on beauty and fragrances, fashion and accessories, watches and jewellery, wine and tobacco, food and gifts. In 2017, nearly 160 million travellers visited DFS stores. DFS is headquartered in Hong Kong and operates over 10 DSF and T Galleria shops in Cambodia, Indonesia, Singapore and Vietnam.
The Shilla Duty Free – One of the South Korean leading travel retailers, the company offers merchandise from over 500 international brands in fashion, jewellery, cosmetics and watches etc. It has opened the first overseas downtown duty-free store in Phuket, Thailand. As a joint venture with local Thai companies, the new store offers more than 400 brands spanning across cosmetics, fashion and accessories. The company also operates two Maison de Chronus watch boutiques in Changi Airport. Maison de Chronus is a luxury and fashion watch boutique offering a wide range of brands ranging from the contemporary to the ultra-luxe.
Opportunities Presented by Travel Retailers/Duty-Free Operators
The continued rise in tourist arrivals and passenger spend at ASEAN airports makes travel airport shops an ideal retail channel for luxury watch companies to achieve better sales and brand engagement. As such, many watch brands strive to include travel retailers as a key part of their distribution strategy in ASEAN.
That said, travellers are becoming more discerning when shopping at airport stores. According to DFS Group, Chinese consumers' recognition of luxury brands is getting more mature and they are moving away from ostentatious displays of wealth. Consumption behaviour is changing from a "herding" effect to a pursuit of personal style. More and more Chinese high-income consumers are looking for less flashy and more understated goods as well as subdued statements of luxury. In response to these changes, travel retailers will focus on brand and assortment enrichment. They will complement point-of-sale strategies with high-impact marketing tactics, such as:
- Creating innovative product displays
- Developing "travel exclusive" offers to stimulate purchases based on scarcity
- Delivering great in-store experience – combining the store environment, merchandise mix and customer service
These retailers have set a priority to seek exclusive products for their airport shops as a way of driving purchase and ensuring travellers feel like they are getting their hands on something that is not available outside of the airport environment. This drive for more exclusivity within the travel retail channel offers an exceptional opportunity for emerging watch brands with original design concepts. Hong Kong watch brands and traders can partner with DF operators to provide exclusive watch collection or limited editions to gain inroads into the travel retail market in ASEAN.
Brand owners/suppliers and DF operators normally partner on profit sharing basis. If the product does not sell, the DF operator will ship it back to the brand owner/supplier. The share of the sales revenue is the key consideration of a DF operator. Generally, it is between 60% and 70%. In cities with higher operation costs like Singapore, DF operators’ share is close to 70%. However, this does not mean that the suppliers will keep the remaining receipt. First, they may need to pay for the agent who helped to connect with the DF operator. In addition, there could be the costs for sales, cashier and stock management personnel. Before the deal is signed, watchmakers and suppliers must get the price structure correct in order to run a profitable business.
Despite experiencing rapid expansion over the past few years, business-to-consumer (B2C) e-commerce penetration is still less than 5% of total retail sales in ASEAN. For one thing, the region encompasses a broad range of ethnicities, languages, consumer preferences and regulations. Underdeveloped infrastructure and lack of familiarity with digital payment is another key constraint. Cash-on-delivery (COD) transaction, varies from country to country, but still accounts for 50-90% of e-commerce transactions in the region.
E-commerce in ASEAN is Reaching an Inflection Point
According to The Dieloitte Swiss Watch Industry Study 2017, the industry consensus two years ago was that monobrand stores would be the most important sales channel for the next five years. However, in 2017, for the first time, online authorised dealers are considered the most important channel for the next five years. This is a huge shift in thinking that will require the industry to adapt to a new way of doing business in a short time frame.
In the ASEAN market, the recent entry of Chinese tech heavyweights, such as Alibaba, JD.com and Tencent may help the region reach its vast potential for e-commerce. The most notable examples are Alibaba’s investment in a controlling stake in Lazada and the joint venture between JD.com Inc. and top Thai retailer Central Group. These are expected to foster the development of digital payment and logistics for B2C e-commerce in ASEAN.
Countries with relatively more developed telecommunication and logistics infrastructure, such as Malaysia and Thailand, are expected to experience faster growth in e-commerce over the coming years. In Thailand, the government is proactively pushing for e-payment adoption via the “Promptpay” scheme and use of QR codes. On the other hand, Indonesia has a high long-term e-commerce potential given its large and rapidly growing middle class and young consumer market. Moreover, living in gridlocked Jakarta traffic sometimes makes consumers spend more time on the internet and more exposed to online media.
The Digital Transformation of Watch Brands
The watch industry has been slow to adopt e-commerce. Among luxury watches, TAG Heuer was one of the very few early adopters of e-commerce, opening its own online boutiques in 2013. Today in ASEAN, many high-end watch brands that are part of a larger multinational group and mid-tier watch brands have begun to sell through their own websites and at the same time try to reach new customers through popular third-party marketplaces like Lazada, Zalora, Bodying and Reebonz. In addition, some brands are tapping into local distribution channels of e-tailors like Central Online and MAP by PT. MAP Boga Adiperkasa (MAP Group). It has become increasingly apparent that developing an e-commerce and digital channel is a top priority for watch brands that wish to harness the potential of the vast online customer base and to build brand awareness as the digital market develops in ASEAN.
Major Online Platforms in ASEAN
The e-commerce scene in ASEAN is fragmented and only a few regional players have a substantial presence in the region.
Lazada – Lazada offers a wide selection of products and has presence in six ASEAN countries – Indonesia, Malaysia, Thailand, the Philippines, Singapore and Vietnam. There are more than 155,000 local and international sellers as well as 3,000 brands listing on the Lazada platform.
Shopee – Watch brands that can be found on Shopee Mall (managed sellers) include Casio, Michael Kors, Fossil and Daniel Wellington. As for now, Shopee does not charge listing fee or commission from transactions. It has presence in Singapore, the Philippines, Malaysia, Thailand, Indonesia and Vietnam.
Zalora – Zalora is one of the leading online fashion platforms in ASEAN. It houses a handful of mid-end watches brands, such as Casio, Fossil, Daniel Wellington, MVMT, offering trendy items at a competitive price. To cater to the region's diverse tastes, Zalora localized its websites and services, from having Vietnamese-speaking customer service operators to offering Muslim products for shoppers in Malaysia and Indonesia.
Zilingo – Singapore-based Zilingo is a fashion and lifestyle marketplace that aggregates small sellers onto a single proprietary seller platform. Besides fashion items, it also sells lifestyle products such as watches, sports and beauty products. It carries watch brands like Alexandre Christie, Casio, Fossil and Jam Tangan, normally priced from US$20 to US$200. It enables merchants to upload and manage their inventory in any language and using any currency. Major merchant services offered include payment options, order tracking, and refund collection. Zilingo currently has offices in Thailand, Singapore, Indonesia, Hong Kong and India. Listing products on Zilingo is free. Based on product categories, Zilingo charges a commission from 10% to 20% on the value of orders. Also, sellers are required to add at least five SKUs, pay pick-up and delivery charges for every order.
Reebonz – The Reebonz platform offers an extensive collection of new and pre-owned luxury bags, accessories, watches, jewellery and shoes from top designer labels, with guaranteed authenticity. The platform brings customers to the world of private sales, with exclusive members-only deals. Reebonz targets customers in the Asia-Pacific region with its business operations in Singapore, Malaysia, Indonesia, Thailand, Hong Kong, Korea and Australia.
Bobobobo – An online retailer where shoppers can find exclusive brands. Targeting young, urban Indonesians aged 18-35, the site stocks not only fashion items, but any aspects of a trendy lifestyle. Bobobobo currently houses more than 1,000 online merchants. It offers a range of analog and digital watches, from US$100-US$600.
Bodying – It offers a wide range of branded timepieces, such as Rado, TAG Heuer and Guess. It continuously updates its inventory with new brand lines and models. Watches are sourced from either the watch manufacturer or authorised distributors, as well as other agencies in the manufacturer's distribution channel. The online store has fulfilment centres around the world, including the US, UK, Germany, Singapore, Australia, Malaysia and Japan.
Watch Studio – The online watch store provides customers a wide variety of watch styles, from formal to casual. Watch Studio is a licensee of famous brands including Aigner, Elle, French Connection and Titan. It also has a retail network throughout Indonesia.
Onemalltime – a Hong Kong-based online marketplace that offers women’s and men’s watches of diverse styles as well as branded fashion items. The most popular watch brands from the marketplace are Mini, Catorex, Elysee, Lambretta, and Moog Paris. The bestsellers among ASEAN consumers are watches priced around HK$1,000 (approximately US$130) and German mechanical watches of a few thousand dollars. Orders are fulfilled from Hong Kong and take 7-14 days to reach the buyers.
|Major Online Platforms in ASEAN|
|Platform Website||Major ASEAN Markets|
|Lazada||Indonesia, Malaysia, The Philippines, Singapore, Thailand and Vietnam|
|Shopee||Indonesia, Malaysia, The Philippines, Singapore, Thailand and Vietnam|
|Zalora||Indonesia, Malaysia, The Philippines, Singapore, Thailand, Vietnam and Brunei|
|Zilingo||Bangkok, Singapore, Indonesia|
|Reebonz||Indonesia, Malaysia, Singapore and Thailand|
|Onemalltime||Singapore, Malaysia, Thailand, Indonesia and Vietnam|
Selling on Marketplaces
Lazada – The key regional online platform. A seller who wishes to list on the marketplace must submit business paper and/or valid documentary proof of authorised distributorship. The marketplaces constantly monitor product information provided by the sellers to ensure that the items on Lazada comply with all laws and regulations, and to combat the problem of counterfeit merchandise proactively.
Lazada’s online merchants do not have to pay listing fees, they pay a commission (the commission rate will be based on the product category) based on the transactions. Lazada provides sellers with business management and distribution tools, for businesses of all sizes. Sellers will need to stick a standardised label on the parcel and deliver it to one of Lazada’s sorting centres in Asia (Hong Kong, Shenzhen, and Korea), Lazada’s cross-border logistics team will take care of the rest, which includes export and import documentation, customs clearance and last-mile delivery. In general, cross-border delivery takes three days, but if the product is already in the local warehouse, it will only take one day. Today, a shipment pre-alert is often sent to the customs several days prior to the expected arrival date. This notice allows the customs time to prepare for the arrival.
Shopee – It takes only few steps to register on Shopee. The platform allows sellers to organise their inventory and measure their online store’s performance with Shopee’s Seller Assistant feature, accessible on a mobile phone. Sellers may face numerous competitors who may be selling the same product, and for the same reason, customers are bound to be more careful in selecting the merchants. Shoppers can look at reviews, ratings and whether they are from Shopee Mall (managed sellers) or ‘preferred’ sellers who meet certain criteria.
According to Shopee, successful sellers are those who proactively study the local market trends and select the right products with competitive pricing. Good customer service when handling in-app chats with buyers is also crucial. Customer reviews and ratings are effective ways for buyers to know if a seller is trustworthy.
Today, new developments in social media, like “buy buttons”, near-field communications, and mobile wallets, allow sellers to set up shops through social media where urban ASEAN consumers spend much of their time. Consumers can shop within the social media platform without visiting the seller’s website.
With the high mobile phone penetration in ASEAN, the fact that the ASEAN consumers are reluctant to give financial and personal information online, and less than 30% of the population (except Malaysia and Singapore) using either debit or credit cards to make payments, the potential for shopping via social networks in the region is clear.
In Thailand, for instance, nearly half of online shoppers make purchases through social media, making it the biggest social commerce market in the world. Kerry Express in Thailand suggested that 65% of its deliveries are associated with C2C transactions, representing mostly social commerce. Social media allows e-commerce merchants to reduce conversion friction, shrink the path to purchase, and increase sales passively.
MVMT Watch, which offers classically designed watches for a fraction of what high-end pieces cost, started off as a crowdfunding campaign in 2013. While Facebook is MVMT’s largest source of traffic, Pinterest – the image-sharing social platform, is the company’s fastest growing traffic generator. The company’s Promoted Pin campaign resulted in higher conversion rates and average order values than other traffic sources. Watch brands can make reference to the success of MVMT if they carefully plan and execute their social commerce strategies.
|Major Differences between Selling via Marketplaces and Social Media|
|Marketing and Promotion||Marketing tools are available for merchants (at a fee)||Through word of mouth or buy ads from social media|
|Typical Payment Methods||Dictated by marketplaces||Cash-on-delivery or bank transfers|
|Logistics||Logistic programme offered by marketplaces||Flexible, mostly through 3PLs|
With increasing numbers of new collectors and enthusiasts, the watch collecting market has expanded rapidly in some key ASEAN cities over the past few years. Despite the macroeconomic fluctuations, the watch collecting market remained largely unaffected. Collectible watches have always been the focus of just a special elite group, composed of the most experienced and educated horological connoisseurs who recognise investment opportunities by assessing the watches design, rarity and provenance. More recently, with more refined local tastes, private sale events have received rising interests. Many guests attending the events are between late twenties and early forties, who are willing to spend and invest on their first collectible watch.
To satisfy the appetite of ever-increasing watch collectors, premier watch importers, distributors, retailers, and auction houses regularly host private sales of collectible watches to engage an audience of watch aficionados and collectors. These events could be a party, a luncheon or gala dinner. The private sale showcases rare collectible vintage and modern timepieces that celebrate superior craftsmanship, design and creativity. Watch experts are often invited as speakers at the events to give tips on watch collecting, such as what to look for in buying a vintage watch as well as market trends. Guests then can ask questions and engage the speakers in discussion.
A host of luxury watches private sales in Thailand, Official Azimuth imports two Swiss brands. One of them is Manufacture Royale that produces an incredibly limited number of watches a year, targeting watch collectors. Another brand Azimuth, an avant-garde Swiss made timepiece. The company regularly hosts private sale events where about 100 guests are invited for a gala dinner or cocktail reception. Each guest pays around THB5,000 (circa US$150) to attend the event.
Christie’s, an international auction house, recognises that collectors are seeking to buy a timepiece outside of auction season. The auction house established Christie’s Watch Shop, a bespoke one-on-one private sale service where watch specialists work with watch collectors to source timepieces. Watch Shop specialists are available for appointments and hold private selling exhibitions worldwide.
PMT THE HOUR GLASS organises Private Salon Sales in Thailand and Singapore twice a year. Guests enjoy discounts of up to 70% of the retail price. At times, the private sale events are combined with wine-tasting sessions and live music performances.
 The Dieloitte Swiss Watch Industry Study 2017
 PromptPay is an interbank mobile payments system launched in Thailand on 27 January 2017. PromptPay is one of several initiatives under the Thai government’s National E-payment initiative, which began to take shape in December 2015.
 World Bank: The Little Data Book on Financial Inclusion 2018.
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