Retailers boosting online presence and opening stores to capitalize on rising popularity of genuine high-end watches.

Photo: oivietnam.com 

The watch market is seen to have significant potential in Vietnam as some local retailers have expanded their product categories to boost growth and foreign rivals from China are also finding opportunities to penetrate into the market.

New segment, new growth

Vietnamese jewelry retailer PNJ recently announced the opening of the 22nd PNJ Watch store, joining others in Hanoi, Ho Chi Minh City, and Binh Duong province. The retailer has piloted watch projects during the five past years and has now officially penetrated into the VND17 trillion ($733 million) market.

“After a period of observing the market, we recognized it has substantial potential,” a representative from PNJ told VET. “The market is currently in turmoil, with many watches lacking clear origin or being non-genuine products brought into the country by hand. With the prestigious and long-standing brand of PNJ, we are helping consumers buy fashionable, genuine watches with guaranteed quality at very reasonable prices.”

In its five years in the watch business, PNJ has recorded handsome business results, revealing a need to promote watches and satisfy the needs of customers who love fashionable, prestigious, quality products, according to the PNJ representative. Fashion watches range in price from VND1 million ($43) to VND150 million ($6,465).

“The official watch market in Vietnam is worth about $1 billion, excluding counterfeits and products brought in by hand, which is quite substantial,” Mr. Tran Thai Son from the Analysis & Investment Advisory Department at Viet Dragon Securities Corp (VDSC) told VET.

“PNJ’s leadership is clearly determined to expand in the watch segment rather than selling in moderation to explore the market, as previously. Understandably, because of its cross-selling strategy with jewelry, PNJ needed to try selling watches at stores with high jewelry sales first to see how well the market received them.”

PNJ possesses advantages in a large network of jewelry stores, which can save on space and staff costs when selling larger volumes of watches, a modern retail management system and huge amount of customer data, a reputable brand, given the appearance of many counterfeit goods, and cross-selling high-end watches with expensive jewelry, Mr. Son said.

While PNJ spent five years piloting this new business model, the Mobile World Investment JSC (MWG) spent just a few months on its pilot. As at August 31, it had 85 watch stores, compared to 42 at the end of July.

The company began its fashion watch business as a shop-in-shop model in March, with initial sales of only a few hundred. Six months on, more than 100,000 watches in different styles have been sold, with an average price of some VND1.3 million ($56), at its thegioididong (TGDD) and DienmayXanh (DMX) stores, for revenue of over VND250 billion ($10.7 million). The company plans to increase its store numbers to about 200 by the end of this year.

Doji, another jewelry brand, also joined the market last year. It is taking cautious steps, however, in the new playing field, distributing certain watch models.

Expectations

MWG’s ambition is to reach 500 watch stores by June 30 next year. Mr. Doan Van Hieu Em told VET that the company predicts the watch market value will increase three-fold in the time to come. As fashion watches are considered accessories, demand is only going to rise, he added. “The market is very profitable,” he said. “We don’t see any risks as we have many strengths to succeed.”

Though the new segment contributed little to PNJ’s total revenue, the retailer nonetheless plans to invest in building and maximizing its store network and human resources this year and to 2021. Online watch sales account for 20-25 per cent of total revenue each month and are rising. “We believe we are on the right track and will see a breakthrough in terms of revenue and profit in the next couple of years,” the representative said.

Mr. Son commented that PNJ’s online channel combines sales on the website and advertising on social networks. PNJ watches appear more frequently on Facebook than MWG’s, indicating that PNJ identifies the channel as an important avenue while MWG will still rely on bricks-and-mortar stores. This is one of the differences between the two retailers. 

After meeting with leaders from both, VDSC saw that PNJ repeatedly emphasized that it will focus more on the online segment and spend more on advertising PNJ brands on social networks and websites. The number of stock-keeping units (SKUs) at PNJ stores is quite low, and many models are only sold online. At MWG, meanwhile, all models are available at physical stores, he added.

One of the reasons PNJ decided to promote the watch business is because the market is still quite large and there is enough space for a few large retailers to develop. “The fact that MWG has stepped up its investment in the market proves our position is correct,” the PNJ representative said. “It is also a good sign for consumers, because it is difficult to find genuine and prestigious fashion watch suppliers.”

The size of Vietnam’s watch market may grow as large retailers such as PNJ and MWG consolidate the current fragmentation found in the market, Mr. Son predicted. Growth may not be high, though, especially as smartwatches are increasingly useful and can replace traditional watches. Authorities’ control over smuggled and goods brought in by hand would also benefit genuine watch retailers.

Chinese companies told an international watch exhibition held in early September in Ho Chi Minh City that Made-in-China watches, with diverse designs and materials and reasonable prices, will find a foothold in Vietnam. According to the Guangzhou Watches Association, many Chinese manufacturers are planning to relocate to Vietnam, where they can find great opportunities.