2013 Digital IQ Index: China - Watches & Jewelry Supplement

Excerpt Watches & Jewelry Supplement
To access the full report, contact membership@L2ThinkTank.com

February 22, 2013
SCOTT GALLOWAY
NYU Stern

Watches & Jewelry
Supplement China
© L2 2012 L2ThinkTank.com

Digital IQ Index®: China
Excerpt Watches & Jewelry Supplement February 22, 2013
Watches & Jewelry Supplement For Sole Use of: name@company.com

Ground Zero
In the 1950s, Mao highlighted three things every Chinese citizen should own: a bicycle, a sewing machine and a
watch. The watch industry has a long and storied history in China. Luxury brand Longines has been selling in
China since 1867. In the last decade a culture of gift-giving, and rapid rise in disposable income, has made China
the world’s fastest-growing watch market.

I n 2010, watches surpassed cosmetics and perfume
to become the largest luxury segment in mainland
China, accounting for 30 percent of luxury sales
totaling 20 billion RMB ($3.15 billion).1 Today, on average, a
Chinese millionaire owns 4.2 luxury watches.2 Sales growth
Watches & Jewelry: Year-Over-Year China Luxury Sales Growth

45%
2009–2012
Watches Jewelry

of luxury jewelry was a robust 22 percent in 2010 and 25 40%
percent in 2011. 3

Time Slows
2012 proved challenging. The economy cooled and the 25%
perceived link between corruption and luxury watches resulted 22%
in a 5 percent year-on-year sales decline in sales.4 Despite the 17%
uncertainty, Watch and Jewelry brands continue to open new
12%
locations and develop regional collections for China. Bulgari
and Tiffany & Co. opened four and six stores respectively last 5%
year, and lifestyle brand Hermès opened a dedicated watch
boutique in Beijing in July. The recent acquisition of high-end
Chinese jeweler Qeelin by PPR and the Chow Tai Fook/Baume 2009 2010 2011 2012 2009 2010 2011 2012
& Mercier distribution joint venture buttress international
brands’ commitment to the market. -5%

1. “2012 China Luxury Market Study,” Bain & Co., December 2012. Source: “2012 China Luxury Market Study,” Bain & Co., December 2012.
2. “The Chinese Millionaire Wealth Report,” Hurun Report and GroupM, July 2012.
3. 2012 China Luxury Market Study, Bain & Co., December 2012.
4. “Corruption curbs crimp luxury market,” China Daily, January 17, 2013.

© L2 2012 L2ThinkTank.com. For sole use of name@company.com. Circulation of the report violates copyright, trademark and intellectual property laws. 2


Abroad
Deft marketing in China could have a salutary effect on sales
in Hong Kong and Europe. With mainland prices for luxury Location of Chinese Luxury Watch Purchases
watches up to 161 percent higher, many purchases are made
5 2009 vs. 2012

abroad. Just 37 percent of Chinese luxury watch purchases Mainland China Hong Kong/Taiwan/Macao Europe Japan/Korea Southeast Asia Other Oversears

were made on the Mainland in 2012, down from 64 percent in
2009. Meanwhile, the European purchases exploded from 5
3% 6%
percent in 2009 to 25 percent last year.6 2% 3% 6%
5%
10%
The Digital Opportunity
37%
With 70 percent of Chinese luxury consumers beginning
their purchase online,7 digital is the tip of the purchase
2009 vs. 25% 2012
spear in China. However, many Watch & Jewelry brands 41% 64%
have not adapted their marketing efforts to the needs of
the increasingly global Chinese consumer. The category
51%
is hamstrung by torturous load times, anemic Sina Weibo
communities, poor visibility on search, and weak brand
buzz. Ninety-five percent of Watches & Jewelry brands
have international store locators, only half allow customers
Source: “Global Reach of China Luxury,” KPMG, January 2013.
to add products to wishlists. Merely three brands display
pricing (only Chow Tai Fook and Swarovski in RMB) and
less than a fifth feature China-dedicated customer service.
Although third-party BBS online watch forums are vibrant through Chinese B2C behemoth Tmall. The jeweler saw greater return on digital investments. Like the medium we are
communities, many brands are absent. online sales triple in the first half of 2012.8 assessing, out approach is dynamic. Please reach out with
suggestions to improve our methodology and findings. You
Evading E-Commerce Digital IQ = Shareholder Value can reach me at scott@stern.nyu.edu.
Fears of counterfeiting and theft, and struggles with This report is a supplement to our 2012 Digital IQ index®:
pricing have kept most Watches & Jewelry brands on the China and attempts to distill trends, best practices, and case
e-commerce sidelines. While foreign brands hesitate, Hong studies in the Watches & Jewelry category in China. Our aim is
Kong-based Chow Tai Fook is selling online, on its site and to help brands identify strengths and weaknesses and achieve Scott Galloway
Professor of Marketing, NYU Stern
Founder, L2

5. “Revisiting The Luxury Market In China,” Li & Fung Research Centre, March 2012 citing the
University of International Business and Economics in China.
6. “Global Reach of China Luxury,” KPMG, January 2013. 8. “Chow Tai Fook banks on e-commerce, 12 mln marriages per year,” Reuters, November 29,
7. Ibid. 2012.



About the Ranking
The Methodology

30% 30% 20% 20%
Site Social Media Mobile Digital Marketing
Localization of Site Features Brand Presence, Community Size, Content, Compatibility, Optimization, and Search, Digital Media, and Email Marketing
Technology: Load Time, Hosting Location and Engagement Marketing on Smartphones, and Tablets Efforts
Customer Service & Store Locator SNS: Mobile Site: Search:
Product Page Sina Weibo, Tencent Weibo, Kaixin, Renren, Douban Compatibility, Functionality, Transaction Traffic
E-Commerce & Checkout Page Size & Growth Capability Web Authority
Integration of Chinese Social Media Post Frequency SEO & SEM: Baidu, So.com, Google
iOS Applications (both iPhone & iPad):
Innovation: Product Customization, BBS/Microsites, Reposts & Comments
Availability, Popularity, Functionality Advertising & Innovation:
Category-Specific Functionality Tabs & Applications
Online & Offline Synergies, Cross Platform
Engagement Rate Android Applications:
Initiatives, Emerging Social Platform Adoption
Availability, Popularity, Functionality
Video Sites: (WeChat, Meilishuo & Mogujie, iQiyi, Jiepang) 
Youku, Tudou
BBS, Social, and Baidu Buzz:
Views
Mentions, Average Daily Searches
Number of Uploads
View & Subscriber Growth Email:
Viral Videos Frequency, Language, Content, Chinese
Social Media Integration

Note: Brands were scored based on effectivenees
on platforms they participate on

Digital IQ Classes
Genius 140+ Gifted 110–139 Average 90–109 Challenged 70–89 Feeble < 70
Digital competence is a point of Brands are experimenting and innovating Digital presence is functional Limited or inconsistent adoption of Investment does not
competitive differentiation. Successful across their site, mobile, traditional and yet predictable. Efforts are mobile and social media platforms. match opportunity.
multi-channel, digital campaigns; functional emerging social media platforms. often siloed across platforms. Sites lack inspiration and utility.
sites that cater to local needs; strong social
presence and integration across platforms.



Digital IQ Ranking
Genius
RANK BRAND DIGITAL IQ
GENIUS
Genius Chow Tai Fook
1 GIFTED
Cartier
Launched loyalty program in
AVERAGE
151 January 2012 across online,
offline, and mobile. Swarovski
Tiffany & Co.

CHALLENGED
Jaeger-LeCoultre
Van Cleef & Arpels
Chow Tai Fook Jewellry Group Raymond Weil
IWC Schaffhaunsen

FEEBLE
Bulgari
Omega
Rolex
Longines
Piaget
Montblanc
TAG Heuer
Hublot
Pandora
De Beers
Vacheron Constantin
Harry Winston
Baccarat
Patek Philippe

Launch of multichannel e-commerce
strategy boosts ranking.

M-commerce site and apps
for smartphone and tablet.



Digital IQ Ranking
Gifted, Average, Challenged, Feeble
Rank BRAND DIGITAL IQ DESCRIPTION Rank BRAND DIGITAL IQ DESCRIPTION
GENIUS
Gifted Feeble Chow Tai Fook

“Destinée” and “L’Odyssée” short film transcend GIFTED
2 110 9 66 Customer service is limited to webform Cartier
borders
AVERAGE
Richemont LVMH Swarovski
Tiffany & Co.
Average
CHALLENGED
Strong social, mobile, and digital campaigns, but Jaeger-LeCoultre
3 106 9 66 Popular Youku channel is bright spot
no e-commerce Van Cleef & Arpels
Raymond Weil
Swarovski The Swatch Group IWC Schaffhaunsen

FEEBLE
Bulgari
Chinese version of “What Makes Love True” lets
Omega
4 98 fans tag their initials on a Shanghai map, and 9 66 Icon is all but absent from Chinese social media Rolex
challenges consumers to write poetry Longines
Tiffany & Co. Rolex Piaget
Montblanc
Challenged TAG Heuer
UGC contest encourages users to upload Hublot
Product customization and mobile optimization Pandora
5 92 12 65 pictures of themselves trying on a Longines
moves brand up ranks De Beers
watch and drives traffic to stores
Vacheron Constantin
Richemont The Swatch Group Harry Winston
Baccarat
Patek Philippe
Page on iwatch365 BBS features product and
Contest on iwatch365 BBS for a trip to
6 88 heritage content and promotes brand’s social 13 61
Switzerland
properties
Richemont Richemont

Well-designed iOS apps feature advanced watch Partnered with Jiepang to drive traffic to in-store
7 84 14 58
finder and store locator, but are not in Mandarin photo exhibition
Raymond Weil Richemont

Custom tab on Sina Weibo promotes new Mobile version and app launching soon of
8 73 14 58
Beijing flagship store brand’s Hao Shi Zhi online magazine
Richemont LVMH



Digital IQ Ranking
Feeble
Rank BRAND DIGITAL IQ DESCRIPTION
GENIUS
Feeble Chow Tai Fook

Solicited questions via Sina Weibo for offline GIFTED
16 57 Cartier
Q&A with CEO
AVERAGE
LVMH Swarovski
Tiffany & Co.

CHALLENGED
Strong online design tool, but site lacks ability Jaeger-LeCoultre
17 55
to share products via Chinese social media Van Cleef & Arpels
Raymond Weil
Pandora Group IWC Schaffhaunsen

FEEBLE
Bulgari
Attracting buzz on video sites, but no brand Omega
18 41 Rolex
channel
Longines
LVMH Piaget
Montblanc
TAG Heuer
Hublot
Chinese Hour Lounge suffers from poor Pandora
19 40
engagement De Beers
Vacheron Constantin
Richemont Harry Winston
Baccarat
Patek Philippe
Flash-heavy site lacks basic functionality and
20 30
fails to render Chinese characters
Harry Winston

Sina Weibo page launched in May suffers from
21 29
infrequent posts and just over 200 fans
Baccarat

22 27 Digital investments do not foot to brand equity

Patek Philippe



Key Findings
Digital IQ Distribution
Feeble Watches & Jewelry
Nearly two-thirds of the Watches & Jewelry brands are November 2012, n=22
Feeble, and the category is the second weakest online in
luxury. Only Chow Tai Fook landed in the Genius ranks, and
64%
Cartier was the lone representative in the Gifted class.
Richemont outpaces Swatch and LVMH with the highest
14% 14%
multibrand enterprise IQ, largely because of Cartier’s “Gifted” 5% 5%
performance, but its digital efforts are siloed across the
organization, resulting in a 70-point disparity across seven Genius Gifted average challenged feeble
>140 110 –139 90–109 70–89 <70
brands. All LVMH Watches & Jewelry brands fell into the
Chow Tai Fook Cartier Swarovski Jaeger-LeCoultre Bulgari Montblanc Vacheron
Feeble category, with the average Digital IQ lagging the Constantin
Tiffany & Co. Van Cleef & Arpels Omega TAG Heuer
group’s Fashion and Beauty brands by 57 percent. Raymond Weil Rolex Hublot Harry Winston
IWC Schaffhaunsen Longines Pandora Baccarat
The biggest winner this year, Van Cleef & Arpels, rose Patek Philippe
Piaget De Beers
49 percent from Feeble to Challenged, with the launch of a
localized microsite and aggressive digital experimentation
on third-party BBS. Meanwhile, Hublot fell 38 percent, from
China Dispersion by Ownership
Watches & Jewelry Digital IQ
Challenged to Feeble, after failing to create brand buzz in
November 2012
China despite collaborations with Han Han, the most popular 140

Chinese blogger/writer, and soccer star Diego Maradona.

GIFTED
130
The brand’s Sina Weibo page has only 15,000 fans, far below
the category average of 65,000. 120 Range

110
70
AVERAGE

100

90
CHALLENGED

AVG IQ

80
75
Range Range

70 AVG IQ
1 25
66
60 AVG IQ

56
FEEBLE

50

40

30

Richemont The Swatch Group LVMH
n=7 n=2 n=4



Key Findings
Social Media
Watches & Jewelry brands are present on an average of
2.4 social platforms, with 59 percent on both Sina Weibo
and Youku. Eighty percent of the brands maintain a video
channel on either Youku or Tudou, and 18 percent are on
both platforms. Chow Tai Fook and Swarovski are active on
more than five platforms, while Patek Philippe and Vacheron
Constantin are the only brands with no social presence.

Social Media Adoption
Percent of Watches & Jewelry Brands Present on the Following Platforms
October 2012, n=22

82% 68% 32% 18% 14% 14% 5%
Sina Weibo Youku Tudou Douban Kaixin Tencent Weibo Renren



Key Findings
Mobile Chinese Mobile Site Implementation
Sixty-eight percent of Watches & Jewelry brands have iPhone
Watches & Jewelry
apps on the Chinese iTunes. While 63 percent of these apps October 2012, n=22
are available in Chinese, only half have been rated. Just four
brands have Chinese-language dedicated iPad apps, and all
of them have been rated 4 or better. Tiffany’s Engagement 23%
Non-HTML5
36%
Mobile Optimized
Ring Finder app is one of the few to gain traction with
Chinese consumers.
Android now dominates the Chinese mobile space,
controlling 90 percent of the smartphone market.9 However,
only 32 percent of Watches & Jewelry brands have an
Android app and just four apps are available in Chinese.
Chow Tai Fook’s Android app is the only e-commerce-
enabled app and it is widely distributed on five Chinese
Android stores. Seventy-two percent of Watches & Jewelry

36%
brands are mobile optimized or HTML5.
5%
HTML5 Broken site/Flash

Rated more than
150 times, Tiffany’s
Engagement Ring Finder
app is one of the few
to gain traction with
Chinese consumers.

9. “Analysys data: 2012Q3 China’s smart phone market Android system accounted for
90.1%,” Analysys International, November 13, 2012.



Table of Contents
Click Logo to Return

Click to Go To:

5 Methodology 9 Key Findings 20 Flash of Genius
9 Feeble 20 Chow Tai Fook: Multi-Channel Commerce
6 Digital IQ Ranking 10 Site: Limited Localization 21 Swarovski: Sparkling Secrets
6 Genius 11 BBS 22 Cartier: Chinese-Language Video
7 Gifted 12 Social Media 23 Bao Bao Wan: Clicks Not Bricks
7 Average 13 Sina Weibo
7 Challenged 15 Video 24 L2 Team
7 Feeble 17 Other Social Media Platforms
18 Search 25 About L2
19 Mobile



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