Is brand loyalty fading for China’s luxury watch buyers?

by Avery Booker

With leading luxury groups like LVMH and Richemont experiencing a slowdown in mainland China in recent months, all eyes are on hard luxury brands, particularly in the watch segment, to see how tepid growth and waning consumer confidence are impacting some of the highest-priced items in the luxury market.

Offering some insight into the state of the hard luxury market, Re-Hub’s Q3 2024 Compass Index identifies key trends and strategies brands can adopt to stay competitive in the year ahead.

Star power 

One of the most prominent trends highlighted by the Compass Index is the sustained impact of celebrity endorsements on consumer engagement. While partnerships with celebrities are far from new in China, the way these collaborations are deployed has evolved. Today, they transcend visibility, and are becoming deeply intertwined with a brand’s cultural narrative.

For instance, Boucheron’s decision to partner with Chinese actor Xiao Zhan, 33, in 2023 underscores the importance of aligning with influencers who resonate with local consumers. Xiao’s appointment as Boucheron’s global ambassador drove an immediate surge in revenue, particularly on Tmall, with the brand achieving remarkable 94% YoY growth in Q3 2024.

However, the real takeaway here is not the sales spike, but brands’ ability to tap local cultural icons who bring authenticity to their luxury narrative. Celebrity appeal strengthens the emotional connection between a brand and its audience, which is particularly crucial for labels looking to establish deeper ties with the Chinese market.

Brands such as Jaeger-LeCoultre (JLC) have also effectively used celebrity endorsements to maintain visibility and relevance. Partnering with actor and singer Jackson Yee, 23, JLC launched culturally significant campaigns such as its “Song for Chinese Valentine’s Day,” which generated over 1.3 million social media engagements.

While high-profile campaigns can create immediate buzz, brands must avoid the trap of relying solely on short-term engagement spikes. The challenge lies in converting these initial bursts of attention into long-lasting relationships with consumers.

Boucheron’s example demonstrates the importance of product innovation and strategic follow-up in sustaining consumer interest. After the initial success of its campaign with Xiao, the brand introduced new products like the Quatre Classique and Question Mark Necklace initiatives, ensuring that it remained top of mind with affluent Chinese consumers.

Jaeger-LeCoultre employed a similar strategy by spacing out its campaigns over time. Rather than relying on one large-scale activation, the brand followed up with a series of events, such as the Precision Pioneer Exhibition, which kept engagement levels high throughout the year.

This sustained approach highlights the need for brands to not only plan for short-term success, but also to think strategically about how to keep the conversation going beyond the initial marketing push. The key lesson here is that cultural relevance, amplified through the right celebrity partnerships, can drive short-term engagement and reinforce a brand’s long-term positioning in the market.

Harnessing UGC, data 

The latest Compass Index underlines how user-generated content (UGC) remains a critical tool for luxury brands, particularly in China, where consumers place a high value on community and social proof.

Boucheron’s 20th Anniversary celebration of its Quatre line illustrates how UGC can extend the life of a campaign. The brand witnessed a substantial lift in organic mentions, particularly from key opinion consumers (KOCs), whose posts garnered millions of engagements. The takeaway here is that fostering organic advocacy through UGC can enhance a brand’s authenticity and reach, particularly among younger, digitally-savvy consumers.

For Jaeger-LeCoultre, exclusive product previews and luxury dinner parties also generated significant UGC, demonstrating the importance of creating experiences that consumers want to share. Luxury brands can learn from this by designing campaigns that not only promote their products, but also offer moments of engagement that inspire consumers to create and share their content.

One of the most significant insights from the latest Compass Index is the importance of real-time performance tracking. By closely monitoring engagement metrics, luxury brands can adjust their strategies mid-campaign to ensure maximum effectiveness.

For example, Boucheron’s ability to maintain 94% year-on-year growth, even after the initial celebrity-driven spike, is a testament to its data-driven approach. By analyzing engagement data, the brand was able to refine its messaging and product offerings, ensuring that it remained relevant in an increasingly competitive market.

Jaeger-LeCoultre similarly leveraged data to optimize its campaigns, identifying which types of content generated the most engagement and focusing its resources on amplifying those efforts. This iterative, data-driven approach allows luxury brands to stay agile, responding quickly to changes in consumer behavior and market trends.

Challenges and lessons

A challenge that continues to affect luxury brands in China is the gray market, where unauthorized reselling can dilute brand value. The Compass Index highlights the importance of monitoring both official and gray market activity to understand consumer demand and the impact of unauthorized sales on a brand’s pricing strategy.

Brands like Boucheron and Jaeger-LeCoultre have taken proactive steps to address this issue, closely tracking gray market trends and adjusting their distribution and pricing strategies accordingly.

The key lesson for other luxury brands is to remain vigilant about the sale of their products outside official channels. By leveraging data to understand gray market dynamics, brands can take steps to mitigate the potential erosion of brand equity.

Key takeaways

• The Q3 2024 Compass Index reveals a deceleration in luxury sales, notably impacting high-end watch brands like Jaeger-LeCoultre and Boucheron in mainland China.
• Celebrity endorsements remain an essential driver of consumer engagement, as seen in Boucheron’s collaboration with Xiao Zhan.
• Data-driven marketing, including the effective use of user-generated content (UGC), has helped brands like Jaeger-LeCoultre maintain engagement.
• Brands should adopt a sustained strategy beyond short-term celebrity boosts, focusing on cultural relevance and consistent product innovation to deepen consumer loyalty and maintain relevance.
• The luxury watch market in China may see increased pressure to adopt more localized and data-driven strategies as economic headwinds and shifting consumer behavior continue to impact luxury consumption.