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18.12.2010

LUXURY AND FASHION GOODS AND SERVICES MANAGEMENT

TOPIC:

RICHARD MILLE’S COMMUNICATION STRATEGY IN CHINA

MENTOR: Jacques Molas

STUDENT: Daniela Milosheska

SKEMA Business School 2010

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TABLE OF CONTENTS:

1. LUXURY BRAND LAUNCHING IN CHINA……………………………………..3

2. RICHARD MILLE’S HISTORY COMPANY…………………………………….7

3. RICHARD MILLE’S MARKETING STRATEGY……………………………….9

ADVERTISING STRATEGY (usage of celebrity’s endorsement)……...10

RICHARD MILLE CURRENT DISTRIBUTION POSITION IN THE

ASIAN AREA……………………………………………………………….12

4. LAUNCHING THE BRAND IN CHINA………………………………………….13

5. MAIN COMPETITORS IN CHINA………………………………………………14

6. POTENTIAL CHALENGES………………………………………………………17

7. CONCLUSION……………………………………………………………………...20

8. SOURCES…………………………………………………………………………...21

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1. LUXURY BRAND LAUNCHING IN CHINA

Luxury is a vague concept, which is always closely related to constant evolution and

subjectivism. When I say vague, what I mean is that it cannot be defined with a general

explanation that is applicable for all individuals. It is a concept that mainly depends on the

structure of the carefully chosen materials, the core of uniqueness embezzled into the product

and highly dependent on the established brand perception. However, somehow throughout

the years, this term is used for defining an inessential, but desirable item or a state of extreme

comfort or indulgence.1

There is only one thing unquestionably true, when it comes to defining the term.

Luxury brands have been commanding unreasonably high prices, since the dawn of their

appearance with no clear functional advantages whatsoever. Mysticism has always been the

main ingredient around which the concept of luxury evolves. Dreams, vision and myths are

components, which constitute the core of a luxurious brand. Without their clear development,

there will be no luxury brand. They are the pillars and the backbone of each and every

product or service developed.

If you take the luxurious concept to be one of the company’s strategic plans, than it is

only understandable to limit your products and incorporate in them mystical elements, which

will justify the highly maintained prices. People want to be different and that’s the main drive

engine one should own when creating the ultimate machine to battle on the nowadays highly

aggressive and extremely competitive market field. Consumers will always be willing to

purchase something and spend extra money for an item, which offers them unique set of

characteristics such as premium quality, craftsmanship, exclusivity and reputation. This

offers the luxury market to separate itself from the other present markets in a way that it

perceives the consumption through hedonism and irrationality, therefore putting greater

emphasis to the personal satisfaction and the overall individual pleasure.

Ever since the luxury concept appeared, it has been connected with the European

consumers. Europe has been perceived as highly snobbish marketplace with educated

consumers who had great understanding of the cultural heritage behind the brand, its meaning

and its significance. Departing from that point on, Europe has always been the cradle of the

naissance of luxury brands, home for well - known luxurious brands which concepts are

highly dependable on the historical background. It seems like the European brands nowadays

are the most important and the most appreciated brands in the world. However, together with

the globalization came the urgent need for them to be present on different markets, which are

becoming more and more dominant and are contributing more to the company’s profit

margins.

1 http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf

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The luxury brands are tale as old as time, however it was not until 1900s when the

actual luxury term had been coined and shaped to gain more clear vision about its definition.

Its pace of growth had been extremely fast and throughout only one decade, the luxury

concept started to evolve from toddler into teenager, skipping the part of being regular kid in

between. Many brands had appeared and more and more consumers started purchasing them

for different reasons, among which the most important had always been the status-driven

component.

One century later, these luxury brands had reached its peak in their homeland so they

started to develop outside its boundaries, the most attractive markets for them being the USA,

the Japanese and recently China. With the increasing of the consumer spending power in

China, and the loosening of the government restrictions more and more luxury brands are

starting to target it as their next potential fruitful market.2 A survey done in 2006 had shown

the following results, according to which the Chinese consumer market has been evaluated as

being one of the most promising markets for luxury goods:

PICTURE 1: THE 2006 TNS SURVEY

SOURCE: http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf

The Chinese customers’ mindset is differing greatly with that of the European

customer. The majority of Chinese consumer who purchase luxury goods are never

purchasing them as symbol for their status, but are almost always relaying on what the item

2 http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf

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represents to them. Their reason behind purchasing this kind of products is to reward

themselves for their hard work and diligence.

PICTURE 2: PURCHASING LUXURY GOODS AS A REWARD

SOURCE: http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf

The report also shows strong intention for the Chinese consumers to buy luxury

products in the next 12 months. However, the Chinese customers are still reluctant when it

comes to buying luxury products on credit. Regarding this point of view, they remain still a

little bit conservative when it comes to purchasing the luxury brand items on credit, the only

exception being jewelry.

PICTURE 3: INTENTION TO PURCHASE LUXURY PRODUCTS IN THE

NEXT 12 MONTHS

SOURCE: http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf

According to this survey, China’s market has a very big potential for nurturing the

growth of the luxury brands. People in China are getting more and more educated, therefore

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purchasing the luxury products for all the right reasons, like flawless quality for one, and not

for the general notion of wearing the brand to show their status. This is a market where the

luxury brands will be getting stronger and stronger as time passes, and for every company

that competes in this segment it is the obligatory venue for the disposal of their products.

This has been the reason behind the launching of Richard Mille’s brand in China, to

grasp the ever-increasing value and satisfy the customers’ hunger for luxurious, tailor made

products. This and the fact that Asia is the largest target market for luxury brands accounting

for more sales than any other region including Europe and the United States, makes China

extremely attractive country for launching luxury products.3This report also claims that half

of Switzerland’s $8 billion annual watch exports go to Asia, and China being the third largest

consumer market for luxury goods is the perfect place to launch an extremely innovative and

creative company such as Richard Mille. Also, the fact that the Chinese customers spend on

average $6.5 billion a year for luxury goods contributes even more for the attraction of

foreign luxury companies to enter the market.4 The future expectations for this market are

also optimistic, reaching sales of more than $11.5 billion, thus exceeding the USA market.5

“Market research by Euromonitor shows 80 million Chinese migrating into the

middle class bracket as of January 2007. By 2020, that number is expected to hit 700

million. White-collar urban residents earn upwards of US$ 12,500 a year. Though low by

American standards, this income level in Mainland China means an employee can scrimp

and save enough for a Gucci wallet, a Prada belt or a pair of Jimmy Choos.”6

Throughout this seminar paper, I’ll try to show how the Richard Mille’s brand is

coping with the Chinese market, why they’ve chosen China as their next move for expansion

and how they are trying to capture the attention of the Chinese consumer. The racing machine

on the wrist will has indeed become, in a short period, a drive engine for the company’s

flawless performance and establishment of perfect brand awareness.

PICTURE 1: RICHARD MILLE FOR WOMEN

SOURCE: http://www.visit4info.com/advert/Richard-Mille-Racing-Machine-Richard-Mille/73355

3 “Growing economy lifts demand for international brands”, China Daily, 4

th December 2004

4 http://brandchannel.com/features_effect.asp?pf_id=478

5 “Mainland taste for expensive grows”, South China Morning Post, 20 May 2005

6 http://brandchannel.com/features_effect.asp?pf_id=478

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2. RICHARD MILLE’S HISTORY

In 2001 a new promising, highly innovative and creative watch making company

decided to take the challenge to launch its first independent line of watches. Along with the

first year of the new millennium came the Richard Mille company. Up until 1998, Richard

Mille had been President of Maboussin Watch Company and CEO of the jewelry company.

His frustration with not having control over the creativity process had been always limiting

his performance. Therefore, his wishes had always been geared toward making his own brand

where he would have the absolute control over the creativity and will be given the chance to

incorporate his non-traditional business model to achieve (to put it in his own words)

“something totally original”. His vision was to create a new segment within the high-end

watch business and incorporate in it ultra high-end luxury. His model has two sides. On one

side, he wanted to focus on crazy development, technology and new watch culture. On the

other side, he had elaborated a very careful business plan not knowing the target market

exactly, but assured that he wanted to stay exclusive and not sell in high volumes.7

PICTURE 4: RICHARD MILLE

SOURCE: http://www.ravephotography.com.sg/section/printads/richard-mille-

singapore.htm

His passion for technical performance, cars and aviation had proved to be the essential

tools for his tremendous success. He transformed the traditional watch making by

manufacturing watches, whose components are all hand finished, but also come in limited

editions. This is what stimulated the enhancement of the brand awareness and launched it

among one of the most appreciated and most expensive brands for watches, nowadays.

Extreme performance, reliability, high technical research approach and recruitment of the

best talents the industry has to offer are some of the main contributors for the perfection

manufactured by the RM company. For each model, manufacturers with the most exceptional

quality of workmanship, materials and ability and product affinity are chosen with the final

control over all aspects of the product always directly in the hands of Richard Mille.

7 http://www.elitetraveler.com/leaders_detail.html?lid=120

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The Swiss watch making industry is 5 century old. Taken this into consideration, the

competition is fierce and merciless, so in order to succeed one needs to have extremely

creative and innovative solutions, constant risk taking character and abilities to quickly adapt

to changes imposed by the fast pace the industry conducts. Having this in mind, Richard

Mille has chosen Geneva as the place for location of its headquarters, because his risk taking

oriented mindset wanted to alter the rules of the traditional watch making industry and

impose his own rules, which led him to huge success.

For him, it all started at the Basel Fair in 2000 with the revelation of his first model,

which testified for the creation of a revolution while behaving as an old established brand, but

acting as rebel. His experimental and wild risk taking nature led him to the creation of his

first watch the RM 001 – 1 with manual winding tourbillion movement with hours, minutes,

power reserve and torque indicator, as well as 23 jewels and only 17 pieces produced. His

inspiration to create this piece of marvel was drawn out of the Formula 1 racing cars. It also

uses similar materials used in the car making industry such as metallic and non-metallic

alloys, carbon Nano fiber, ceramics and silicium. Its price was set at around €120 000 an

average unit price.

His company was built on three pillars. First, he wanted to use the best technology

available and the most innovative solutions, no matter the cost. Second, he wanted to conduct

his creativity to please his eye and be comfortable to wear. Finally, the most essential part

was for his watches everything to be finished by hand.

“Both are machines with similar rules regarding their functioning, accuracy of

construction, and reliability. Each part of a high performance wristwatch…must fulfill its

task with a wide margin of security and resistance to shocks and stress exactly as would be

demanded of a high performance racing car.”8

PICTURE 5: RM TOURBILLION 001-1, THE FIRST WATCH

SOURCE: http://www.luxurybazaar.com/items/itemid_5421_RM_001-1_WG.html

8 http://richard-mille.com/en/home.php

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Currently, the company has 70 employees with Richard Mille as its CEO and head of

the design, controlling his own growth, as well as his image through closely monitoring the

production, the financial aspect, after-sales services, marketing and distribution. The brand is

present in more than 50 countries on almost all continents, except for Australia, with 24

models already developed and established, among which two are specially tailor made for the

world’s greatest champions in tennis and car racing, Felipe Massa and Rafael Nadal. Richard

Mille’s wristwatches are among the most expensive timepieces reaching prices above €500,

000. The least expensive one is around €30 000. One cannot help but think, not bad for only

10years old brand, not bad at all.

3. RICHARD MILLE’S MARKETING STRATEGY IN CHINA

It is commonly known that most Chinese consumers have low level of brand

awareness and even lower brand loyalty. This taken into consideration the marketing strategy

when entering the Chinese market should revolve around promoting and informing the

Chinese consumers about “luxury”, while emphasizing the reason behind the brand’s

extremely high prices to justify the premium they are commanding. While developing a

marketing strategy in China, the luxury-oriented companies are orienting towards print and

television advertising, as well as events, shows and customized lifestyle publications.

Meanwhile they are avoiding the word-of-mouth luxury promotion, as well as advertising

through low circulation print media due to its ineffectiveness.9

The strategies for entering the Chinese market with a luxury product are similar to

those when entering the European market. However, there are some things which are worth

mentioning when launching a luxury brand. For instance, the main difference is that window-

shoppers are more than welcomed to be present and see the displayed luxury products, while

luxury in Europe is more or less oriented towards the current consumers, the ones which are

holding the purchasing power and almost never towards those who might or might not gain

more money in the future.

Luxury brands adopt several strategies when they want to enter in China. First of all,

they are trying to bring the brand closer to their consumers, by offering custom made

products to satisfy their needs and wants. In this process the brands are mixing their signature

with the Chinese culture to make the brand more recognizable and gain greater affluence

among their customers. Another marketing strategy is moving their facilities to China in

order not only to decrease their costs, but also be more recognizable on China’s soil, taking

into account that most Chinese customers would want to see the “made in China” tag. Many

luxury brands such as Armani, Paul Smith, Hermes are starting to adopt this strategy. Luxury

9 http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf

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brands are also operating mega-store formats (often the largest stores for the brand) with

large ranges that have been shown to educate consumers about a brand and fuel an appetite

for spending.10

They also try to use local partners to make themselves known and closer to

the Chinese consumer.

In continuation, I am going to concentrate on how Richard Mille’s brand in China

markets and communicates its timeless wristwatches. I’m going to focus more on their

advertising strategy, their worldwide distribution philosophy, as well as their current position

in the Asian market.

ADVERTISING STRATEGY (usage of celebrity’s endorsement)

Since this brand is very new, there aren’t a lot of materials regarding their advertising

strategy. Mainly, Richard Mille brand is promoting itself through print ads in magazines

closely related to the watch industry, as well as the luxury segments. They are simple,

emphasizing only the details of the wristwatch, and elements, which testify for the flawless

performance of the watches. A Richard Mille’s ad is always accompanied with simple tagline

“A racing machine on the wrist” which blends both his passion for racing, as well as

horology. This is same in each country, and China is no exception of that rule.

PICTURE 6: RICHARD MILLE PRINT AD (for men)

SOURCE: http://deadtreemedia.com/index.php/all-posts/look-at-this-effing-watch-from-richard-

millie-watches-look-at-it/

His passion for unification of the perfect materials with eye capturing design and

lightweight components has brought his idea to come into life. The resurrection of his

inspiration had contributed to realization of yet another project, but this time dedicated to the

10 http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf

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women. His dream to create wristwatches worth of praise and amazement led him to achieve

huge success. The determination and his risk taking nature, as well as the drive to always

invent and create something had led the brand to develop another category, which would be

inevitable part of the better half’s hand.

PICTURE 7: RICHARD MILLE PRINT AD (for women)

SOURCE: http://clipmart.net/ItemDetail.aspx?id=63de6500-3e83-4f54-ae07-ab778294e0bb

Recently, Richard’s obsession with racing had resulted with creating wristwatch for

the Brazilian Felipe Massa, the Ferrari’s driver for F1 racing team. In 2006, the model made

for Felipe Massa was unveiled on the Basel show under the name RM006FM tourbillion. The

beauty and contrast of the materials, strength of the screw, hands and all its movements make

the Richard Mille an exceptional and out -of-the-ordinary object even at entry level. 11

This

watch was a radical innovation because it was the first watch to use a carbon nanofibre base-

plate, a highly stable isotropic composite material. Created for person who takes its

adrenaline for breakfast, this watch was made to withstand violent acceleration and braking

and to cope with extreme exposure to vibration.12

“It survived two seasons without any need for maintenance. It was perfect when it

was checked after two years. Formula1 driving, subjects it to everything that is bad for a

watch. “ Richard Mille

PICTURE 8: FELIPE MASSA AND RICHARD MILLE

SOURCE: http://www.thewatchpress.com/f1-drivers-and-their-watches/

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http://www.thewatchquote.com/Richard-Mille-RM011-Felipe-Massa-No_6321.htm 12

http://richard-mille.com/photo/pdf/media/en/00%2024%20Watch%20World%20-%20Autumn%2009%20-%20Richard%20Mille0001.pdf

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Through choosing its ambassadors carefully, Richard Mille always proves just how

much quality and attention is embodied into his designs and justifies the high premium prices

its wristwatches command. This model can be found for $47,000 for a simple automatic right

up to $495,000 for the Tourbillon Chronograph Diver.

On April 5th

, 2010, Richard Mille took another risk, to develop watch which would be

wearable for a tennis player on a regular basis, while playing on the tennis field. He chose

Rafael Nadal as his ambassador. The legend has it that at first Nadal was given to wear

heavier watch, which he declined to bring with him on the playfield. However, Richard gave

him right afterwards the watch he developed which weight was only 20grams. The watch

contains carbon-composite as well as titanium and lital, lithium alloy containing aluminum,

copper, magnesium, zirconium (materials used in many lightweight aircraft applications).

The watch will be limited to 50 pieces at a suggested price of $525,000. 13

PICTURE 9: RAFAEL NADAL AND RICHARD MILLE

SOURCE: http://www.adglitz.com/category/video-ads/

Richard Mille’s motto is always defined through the words “Concept that define the

components and not the components that define the concept”. Therefore, this celebrity

endorsers are contributors which are helping the brand to promote itself in China and

everywhere else in the world.

Given the fact that there are only two shops opened in China, there isn’t any

advertising campaign specially made for the Chinese market. However, taken into

consideration the notion that is a French brand, the Richard Mille’s wristwatches enjoy high

brand awareness among the Chinese consumers.

RICHARD MILLE WORLDWIDE DISTRIBUTION POSITION IN

THE ASIAN AREA

Richard Mille’s company is 80% owned by banks, Richard Mille and friends, 10 % belongs

to Renaud & papy Cie (Ch) Audemars Piguet watch Sa subsidiary Cie, and another 10 % is

owned by Valgine SA (Ch) Swiss watch manufacturing Cie. It’s a company, which strives for

perfection and flawless design of wristwatches. Throughout 9 years of its existence, they are 13

http://hypebeast.com/2010/04/rafael-nadal-richard-mille-rm027-tourbillon/

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constantly focusing on creativity and handmade concept, so it’s only natural for them to open

flagship stores all over the world. As Richard Mille said in an interview, he wanted to control

everything from the process of creativity to the actual deliverance of its watches. Their main

factory is in Geneva, because as they claim they want to have only the best the industry has to

offer. Unfortunately, I couldn’t find any more information, since the company is relatively

new.

On the Asian market, the Richard Mille company is present in Singapore, Shanghai,

Beijing, Hong Kong, Indonesia, Japan, Macao, Malaysia, Taiwan and Thailand. In

Singapore, this brand is prominently located at the entrance to The Shoppes at Marina Bay

Sands. The store was designed to be an area of luxury, peace and exquisite style, utilising

precious woods, fine leather and engraved glass. The entrance boasts a glass facade, where a

watch is engraved on three layers of glass projecting a three dimensional feel to all visitors.

In Singapore for the Formula 1 Singapore Grand Prix, the brand ambassador Felipe

Massa was present for the launch event and official opening of the space, where 250 guests

were invited to explore and discover the unique feel of the venture.14

4. LAUNCHING THE BRAND IN CHINA

In 2009, Richard Mille decided to take another leap this time in China. The optimistic

predictions for Chinese elite consumers and the promises that China’s market will become

one of the leading markets in luxury contributed even more to the general notion of Richard

Mille’s company that it finally came the time to launch its brand in the Promised Land. Taken

into consideration that the purchasing power of the Chinese consumers hadn’t been

diminished at all by the global economic crisis, it was only natural that the next strategic

move would be brand’s launching on the Chinese soil.

“By 2020, there will be 350 million people in China who are in the position to buy a

luxury watch.”15

His first flagship store in China was opened in the Beijing’s five star Legendale Hotel

in September 2009. Same as the store in Singapore, this time Richard Mille had taken Jackie

Chan for its ambassador with whom he had cut the ribbon of its brand new store. It seemed

like using the celebrity endorsement had really worked out for this brand and it was one of

the smartest ideas to use as a promotional tool.

“The flagship occupies 260 square meters of space at this platinum 5-star hotel that

represents European elegance and luxury in the heart of this capital of the People’s

Republic of China. With such a prime address and grand interiors, Sparkle Roll Group

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http://luxurysociety.com/articles/2010/11/ten-of-the-latest-luxury-retail-openings 15

Georges Kern, chief executive of watch maker IWC

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Limited, the exclusive dealer of Richard Mille in PRC, invested HK$45 million in building

this flagship in Beijing”.16

PICTURE 10: RICHARD MILLE’S FLAGSHIP STORE IN BEIJING

SOURCE: http://chinaluxculturebiz.wordpress.com/2009/09/22/luxury-watchmaker-richard-mille-opens-flagship-store-in-beijing/#more-1321

Another venue was Shanghai. Due to unavailability of information I couldn’t find

anything on the internet for this store, since it’s very recently launched. However, I just

wanted to mention it because it plays an essential part of the Richard Mille brand’s presence

in China.17

5. MAIN COMPETITORS IN CHINA

When asked whom in his opinion is his competition he says: “By creating this

concept, one of my wish was to avoid competition. Moreover, I am convinced that it was

compulsory to bring to the dealers additional business and not make clones of existing

brands”.

However, even though maybe not conventional competition, the kind of competition

we all know as fighting over who will get the biggest market share, or whose products may

conduct premium prices, the company still has what is known as indirect competition.

Companies such as Royal Oak, TAGHeuer, Cartier, Patek, Parmigiani, which also appear to

be listed as his favorite brands are among his indirect competitors.

Royal Oak is a watch brand, which belongs to the Audemars Piguet company

established in 1875. At the moment, they are present on the Chinese market in Beijing,

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https://amsprd0102.outlook.com/owa/attachment.ashx?id=RgAAAABqvkaQvr7QR5zn0sUOH9gvBwB%2bOzMxW45JRYb8xg7kpBHvAAAAAD2GAADSU6tDLJrYTrgzSDAizwdEAAAAAur3AAAJ&attcnt=1&attid0=BAAAAAAA&attcid0=X.MA1.1293494122%40aol.com

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Changchun, Dalian, Harbin, Jinan, Ningbo, Shanghai, Shenzhen, Suzhou and Xian. They’ve

always been geared towards making the most exclusive wristwatches, as well as the most

innovative. Their scope however is limited to developing high efficiency, shock resistant and

lubricant free operation for their watches.

PICTURE 11: ROYAL OAK’S WATCH

SOURCE: http://www.geekwatches.com/audemars-piguet/audemars-piguet-blue-royal-oak-

chronograph-watches-mens

In 1884, the Breitling company had been established to promote flawless watch

designs other than those currently present. Its philosophy for the development of the watches

was precision, and sports spirit incorporated into the timepieces, which will measure the time

passed between one occurrence and another. In 1892, the first factory was founded to make

watches for professional and private usage. Reliability, performance and functionality were

and still are the top priorities and the main pillars around which the brand had developed. In

1914, with the appearance of the wristwatches, Breitling also invented the separation button

between the functions start, stop and restart, therefore bringing the first chronograph

pushpiece into life, which they’ve developed further on to separate the starting and the

stopping function from the resetting button controlled by the crown. This patented innovation

made possible to multitask and perform several different tasks at one. Later on, the brand

expended to setting chronographs into the airplanes the aviation used and earned the title

“Official Supplier to world aviation”.

PICTURE 12: BREITLING LOGO

SOURCE: http://f4buz.com/watches/breitling.html

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This brand is still today at the forefront of technology and design and has been known

ever since as the world’s chronograph specialist. They’ve also earns the famous COCS

recognition for reliability and precision. Nowadays, the company is still family owned even

though it is present in almost every part of the world. Its watches are priced above €5, 000 per

piece and are one of the most exclusive timepieces in the world. In China they are present in

Anshan, Baotou, Beijing, Dalian, Hangzhou, Harbin, Huhehaote, Kunming, Nanning,

Ningbo, Sanya, Shanghai, Shenyang, Shenzhen, Taiyuan and Xian.

PICTURE 13: CARTIER’S LOGO

SOURCE: http://vectorlogo.blogspot.com/2009/08/cartier-logo.html

Another indirect competitor is Cartier. Cartier is a jewelry specialized company

whose establishment began in 1847, by Louis-Francois Cartier in Paris. Ever since its

appearance the brand had been closely related to royalties with the first purchase done by

Princess Mathilde, Napoleon’s niece in 1856. Throughout the years many royal families had

purchased their jewelry from Cartier, therefore making the brand one of the most expensive,

relating it closely to highest degree of excellence. In 1888 the first jewelry bracelet watches

for ladies were created, and in 1904 they’ve created the first wristwatch specially produced

for the Brazilian aviator Alberto Santos Dumont.

PICTURE 14: CARTIER’S FIRST WRISTWATCH

SOURCE: http://cartier.watchprosite.com/show-forumpost/fi-886/pi-3905411/ti-622586/

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In 1909, they’ve patented the folded buckle for wristwatches and the rest that

followed is a history. Ever since then their flawless performance and usage of the most

expensive materials had been basic pillars upon which the brand had built its empire. Its least

expensive watch is priced at around €5, 000. In China this brand is present in 41cities among

which Beijing and Shanghai.

6. POTENTIAL CHALENGES

There are few potential challenges, which affect the companies who want to enter the

Chinese luxury market. In this seminar paper I’m going to focus on the challenges which are

directly related to this company and might represent potential obstacles for the development

of the brand.

I. THE CHINESE CUSTOMER’S SEGMENT

This aspect shows how the mindset of the Chinese customer works and how different

types of customers purchase differently. Currently in China there are four types of luxury

oriented consumers. First, there is the traditional business elite. This type of consumers are

typically male and over 35, holding senior positions within domestic companies or

government agencies and have extremely well established network of business people. Their

tastes are extremely developed and sophisticatedly oriented. Their buying habits have been

geared more towards enjoying luxury experiences, rather than purchasing the obvious

luxurious products.18

This type of consumers should be the potential target market of the

Richard Mille’s company in China, taken into consideration that they are not purchasing to

show their status, but want to be surrounded by high quality products.

The second type of consumers are the so called “new luxury shopper”. They are

most likely the first generation in their family to have achieved this kind of status. People like

entrepreneurs, business people and celebrities are most commonly representatives of this

group. In a recent survey it had been shown that Chinese luxury shoppers spent considerably

more money than those in the United States and Europe. Taken this into consideration and the

fact that they are more willing to spend their income on luxury goods, than save it, this group

purchases the luxury products to suit their lifestyle. They might appear as attractive for

Richard Mille’s company, but in my opinion this kind of customers are highly unreliable,

since they might easily switch to the “next big thing” on the market, the next hot brand. On

the other hand, this segment is highly educated about the luxury products, and can easily

18

http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf

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recognize the counterfeit products, as well as distinguish those that are manufactured in

China, because they simply know when something is fake or real design.19

The third segment is represented by the emergence of the “empowered women”.

These women are highly independent individuals who are making money on their own and

are both equally economically and socially autonomous. Representatives of this cluster are

the business women, the celebrities and the newly independent rich wives. Given the fact that

Richard Mille’s DNA is strictly related towards achieving the highest performance through

speed relevance and technical perfection especially towards men, this might not be a segment

where they should focus. On the other hand, this company has watches, which are

particularly made for the ladies they might want to target this segment market too. In my

opinion it will be good idea if they acquire female ambassador for the communication of their

watches, such as Danica Patrick. This might greatly affect the female segment, by portraying

strong, independent woman who is not only good looking, but has the same courage a male

has.

The “little emperors” are individuals who are only-children entering their teen years

and early adulthood. Since they don’t have any siblings, they are pampered by their parents,

as well as their grandparents. Moreover, studies have shown that half a typical urban Chinese

family’s disposable income is spent on, or by its youngest member.20

They are children who

even though they know what they want, they expect that best but they also are not shy about

demanding it. They are highly luxurious-educated, brand-savvy, but in some cases, they are

also spoiled children whose loyalty can easily be replaced with temporary loyalty by other

brand. In my opinion, these are the people who should be avoided by Richard Mille’s

company, because even though they might represent bigger part of the consumer spending,

still they are not permanent people with already established, clear brand awareness, but their

age testifies for the lack of luxurious experience and therefore their unreliability.

II. IPR REGULATIONS

The intellectual property rights regulations in China represent the most serious

problem the luxury companies face nowadays. According to the U.S. Embassy in Beijing the

piracy rate in China remains one of the highest in the world, with almost 20 percent of

consumer products being counterfeited. The Chinese government has made inroads in

establishing an effective and complete law system regarding IPR protection in order to

strengthen the enforcement, supervision and inspection of such laws. However, the most

19

The Luxury Institute, www.luxuryinstitute.com 20

“The Emperors’ new designer clothes” Bangkok Post Business, 18 January, 2006

19

serious issue relating to IPR lies in the enforcement and penalty at the local level because

jurisdiction is diffused throughout many government agencies and offices.21

The brand awareness is new to the Chinese customers due to the fact that the IPR

regulations is a current practice. However, the Chinese Government is taking step further in

addressing the issues streaming from the fake products, by exercising strict rules in the

implementation of the IPR protection. This could be a problem of great magnitude for the

Richard Mille’s company, although when asked in an interview Richard Mille says that he’s

not concerned with this issue, since the Swiss watch production cannot meet the global

demand for structural reasons, mainly linked to qualified workmanship.22

III. INEFFECTIVE ADVERTISING AND MEDIA

Many luxury brands are placing their advertisements in internationally renowned

magazines, but in China they often find the message lost due to the overloading and

overflowing with information. It is usual that the luxury newcomer is barely noticed. This is

the reason why luxury companies are adopting more and more direct communication, to get

closer to the customers and show them that they really matter. Even though Cartier had never

used the direct communication in order to develop on the Chinese market, they were required

to advertise themselves on TV, as well as print. This particular challenge is costly for those

who want to enter the Chinese market, especially in cities such as Shanghai and Beijing, the

two cities where Richard Mille had established their base. However, taking celebrity

ambassadors such as Massa and Nadal, the company had clearly shown that they are not

saving on advertising. Complemented by heavy clutter and difficulty in reaching targeted

audiences, building brand equity can be costly exercise.23

IV. BRAND POSITIONING

Many brands, which want to develop their global presence into the Chinese market

find in the hard way that success in China is not only due to the opening of many retail stores,

but it is heavily dependable upon product, presentation, packaging, promotion, distribution,

merchandising and advertising. Investment in marketing, public relations and retail networks

eventually pays off to strengthen the brand position and increase the brand awareness.

Given the fact that Richard Mille is a company recently launched on the Chinese

market, they haven’t been putting strong emphasis on their communication campaign in

21

“The complex trade in luxurious fakes” The Financial Express, 30 April, 2006 22

http://www.thepurists.com/watch/features/interviews/MilleApr02/index.html 23

Doctoroff, T; Billions: Selling to the New Chinese Consumer, 2006

20

China. I’m sure as the years progress they would orient more towards heavier marketing of

their watches, but right now their location is their most powerful weapon.

7. CONCLUSION

There’s a common opinion that circles around when talking about the Chinese

consumer which says that when a Chinese consumer buys, he or she always thinks how the

thing bought will be usable. This is the simple mindset of the consumers in China. Once you

understand Chinese people and their customs to buy, you have firmly grasped the market and

can achieve high volumes of sales.

Even though the attention of Richard Mille is not that oriented towards achieving high

volumes, but more towards achieving endless perfection by making its watches for selected

customers, they still want to be successful on the Chinese market, and success is nothing

without the profit. Therefore, the establishment of the brand as luxurious and the association

in the consumers’ mindset must be flawlessly pictured and presented on the market which is

targeted.

The backbone of the watch industry is the natural tendency to specialization and

flawless craftsmanship. Richard Mille’s company specializes in tailoring each and every

piece according to the individual’s requirements. The ability to deliver the highest tolerance

and hand finish with superlative materials, makes the brand extremely attractive not only for

the Chinese luxuriated people, but for everyone who is a consumer within this segment. The

skill and the capacity of each partner to develop new approaches contributes to the

uniqueness the brand possesses. All of this segments complemented by the presence of

passion and holistic attention to every detail strengthen the brand awareness as well as the

brand loyalty. Taken this into consideration, the future seems blindingly bright for this brand

on the Chinese soil.

.

21

8. SOURCES:

1. http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf

2. http://brandchannel.com/features_effect.asp?pf_id=478

3. http://www.europeanfinancialreview.com/?p=1250

4. http://www.elitetraveler.com/leaders_detail.html?lid=120

5. http://richard-mille.com/photo/pdf/media/en/00%2024%20Watch%20World%20-

%20Autumn%2009%20-%20Richard%20Mille0001.pdf

http://www.companiesintheuk.co.uk/ltd/richard-mille-europe,-middle-east-and-africa

6. http://www.internationalwatchclub.com/richard-mille-watches/

7. http://www.richardmille.com/

8. http://www.lta.org.uk/Watch/AEGON-British-Tennis-Series/AEGON-

Championships/News/2010/Nadal-Watchmaker-Richard-Mille-To-Be-Official-Timer-of-the-

AEGON-Championships-2010/

9. http://www.timezone.com/library/tzints/200501149146

10. http://richard-mille.com/photo/pdf/media/en/2007-07-

11~1912@ROBB_REPORT_NY_(PRESSE_DES_U_S.pdf

11. http://www.luxury-insider.com/Current_Affairs/post/2009/08/28/Richard-Mille-Opens-

Largest-Store-in-Beijing.aspx

12. http://www.worldtempus.com/en/news/top-news/detail/article/1254473585-richard-mille-

sponsor-at-the-race-of-champions/

13. http://www.articlesbase.com/business-articles/richard-mille-rm-021-tourbillon-aerodyne-

watch-1319385.html

14. http://www.europastar.com/news/1004013588-richard-mille-beijing-flagship.html -

15. http://www.visit4info.com/advert/Richard-Mille-Racing-Machine-Richard-Mille/73355

16. http://www.thewatchquote.com/Cartier-W6900651-PdN.htm

17. http://www.thepurists.com/watch/features/interviews/MilleApr02/index.html