* Omega, Longines ahead of Rolex in China-World Watch Report
* Global luxury market to grow 8 percent in 2012 - analysts
* Recovery in Japan, US a surprise factor - Kepler Research
By Antonella Ciancio and Nathalie Olof-Ors
BASEL, Switzerland, March 7 China has
overtaken the United States as the country with the biggest
demand for luxury watches, giving Asia-driven brands such as
Swatch Group's Omega and Longines a tailwind against a
slowdown in Europe this year.
The World Watch Report, an online survey of more than one
billion internet users, also said the number of online searches
for watches fell in Germany and Italy, but rose in Japan.
"For the first time since the study was launched in 2004,
China surpassed the USA as the country exhibiting the highest
demand for luxury watches, representing 23 percent of all
watch-related searches," research firm Digital Luxury Group said
in its report presented at Baselworld, the world's biggest watch
and jewelry fair starting on Wednesday.
The debt crisis in Europe, which accounts for around 35
percent of global luxury goods sales, has spooked consumers, who
are cutting discretionary spending and trading down to less
expensive brands, analysts say.
"We and the market expect top line momentum to slow this
year on the back of weakening demand from local European
customers and a more difficult comparison base in the coming
quarters, as the sector laps an exceptional 2011 first half
performance," Credit Suisse analyst Rogerio Fujimori said in a
Fujimori said he expected global sales of luxury goods to
grow by around 8 percent in 2012, close to the sector historical
average growth, down from around 15 percent in 2011.
Kepler Research however raised its growth forecast for the
watch industry to 7 percent in 2012 from a previous 5 percent,
citing a stronger-than-expected comeback in Japan and in the
"Initial signs this year are of a slowing down in growth (of
luxury goods sales), but still the market expects a strong
year," James Lawson, director of international luxury market
research specialists Ledbury Research, told Reuters.
"However, the great unknown is still China - it has the
potential to surprise on the downside and cause another repeat
of the unsold stock mountains in 2009," Lawson said.
THE LIONS SHARE
China is the single biggest driver for the watch industry,
according to Kepler Research, which estimates Asia will account
for two-thirds of the luxury watch market by 2016 from little
more than 50 percent last year.
Omega, which makes around a third of sales in China, is
narrowing the gap with world leader Rolex for online purchase
intentions, the World Watch Report said.
World leader Rolex, which has a stronger foothold in western
markets, trails Omega and Longines in China, according to the
The U.S. luxury goods market is still the largest in the
world ahead of Japan and China but it grew at about a third of
China's rate last year, according to U.S. consultancy Bain & Co.
"We believe that the Chinese luxury goods market, including
Hong Kong and Macau, is going to be as a large as today's global
luxury goods market," Juan Manuel Mendoza, fund manager of the
$190 million Luxury Goods Equity Fund of Clariden Leu, which
will be integrated into Credit Suisse as of April, told Reuters.
China's demand for counterfeit watches is also diminishing,
the research said, confirming an increasing interest in quality.
However, if the overall luxury market is expected to do well
this year, the jewelry and watch sector has its weaknesses.
The wholesale-oriented watch industry is also exposed to
risks of destocking by third-party retailers in case of a
prolonged crisis, analysts say.
Rising gold and diamond prices - a trend likely to continue
this year - cooled purchases of high-end jewels and watches last
Swatch Group's decision to reduce its deliveries of
movements to third-party brands from 2012 is also likely to
affect smaller watchmakers without strong production bases.