Nicholas Gong: Facing Market Volatility with Dedication to A. Lange & Söhne’s Brand Essence

The once-booming Chinese watch market is seemingly entering a period of reflection after two years of explosive growth.

 

Swiss watch exports rose by 4% to 1.8 billion Swiss francs in August, as per the Federation of the Swiss Watch Industry, despite a July downturn. Yet, China sustained its decline with a 27.3% drop in August. Bain & Company’s Luca Solca attributes this to economic challenges, a shift of luxury watch spending abroad due to renewed travel, and middle-class consumer caution.

 

Even with this downturn, China remains a crucial market for Swiss watches, second only to Mainland China, with Hong Kong following, where a 29% increase in sales was noted in August, bolstered by mainland tourists.

 

This suggests that, contrary to luxury and premium brands' hopes, the Chinese market's potential remains, highlighted by a more discerning consumer base.

 

This shift underscores the relevance of the "Watches & Wonders" exhibition in Shanghai, where brands pivoted from vying for market share to fortifying their brand stories.

 

 

At the event, alongside new releases, brands like A. Lange & Söhne and Cartier leaned into their storied pasts. This focus was evident in the diverse and interactive booths, bringing the magic of watchmaking to life.

 

Open to the public, the exhibition attracted over 12,000 visitors, signaling its growing clout.

 

 

Social media buzzed, especially with live streaming and celebrity endorsements, as the Weibo topic for the event hit over 660 million views.

 

Despite a reduced brand turnout, the quality and exclusivity remained high. For the brands, the exhibition transcended just showcasing new watches; it was a chance for greater visibility to keep engaging the Chinese consumer.

 

Highlighting this was A. Lange & Söhne's giant LANGE 1 MOON PHASE display at the entrance, drawing eyes and underlining the brand's commitment to capturing attention through innovation.

 

In the exhibition space, A. Lange & Söhne drew attention to its signature LANGE 1 collection, unveiling the latest creations and their design inspirations, enabling visitors to immerse themselves in the brand's storied history from its foundation to its post-WWII renaissance. A. Lange & Söhne also introduced an innovative AR feature allowing guests to engage with a massive watch installation using their phones, providing an interactive gateway to discover the intricacies of the LANGE 1 moon phase watch.

 

A. Lange & Söhne also debuted the new platinum 950 LANGE 1 perpetual calendar watch, showcasing this sophisticated timepiece that marries the classic off-center dial arrangement with a perpetual calendar and moon phase display, complete with month ring, weekday, leap year, and day/night indications.

 

 

Alongside these novelties, A. Lange & Söhne exhibited three historic watches from its 1994 collection that marked its return to high-end watchmaking: the LANGE 1, ARKADE, and SAXONIA, illustrating the brand's dedication to precision craftsmanship and heritage. Live demonstrations by A. Lange & Söhne's watchmakers offered a window into the meticulous assembly process of their movements.

 

 

It's no secret that A. Lange & Söhne, a Richemont subsidiary, isn't as widely recognized in China compared to other brands that leverage celebrity endorsements for broader appeal. Instead, A. Lange & Söhne enjoys a celebrated status within connoisseur circles while maintaining a quieter profile among the general populace.

 

Yet, overseas, A. Lange & Söhne's esteemed history has translated into strong market performance in 2022, as reported by Morgan Stanley. The strategy for A. Lange & Söhne is clear: to translate its international acclaim to the Chinese market, seizing the potential within. Persistently introducing its identity to Chinese consumers is A. Lange & Söhne’s key strategy amidst the competitive landscape.

 

Therefore, ConCall engaged with Nicolas Gong, Managing Director APAC of A. Lange & Söhne, exploring A. Lange & Söhne's growth in China, the high-end watch market's outlook, and the competitive dynamics within the watch field.

 

 

ConCall: In the high-end watch market dominated by Swiss brands, what is the competitive advantage of A. Lange & Söhne, with its German heritage? What sets A. Lange & Söhne apart from Swiss brands?

 

Nicolas Gong: Although Swiss brands dominate the high-end watchmaking field, A. Lange & Söhne from Germany also boasts a very long history of watchmaking. Firstly, Ferdinand Adolph Lange established the A. Lange & Söhne watch factory in Glashütte, Germany, in 1845, which spurred the local watchmaking industry and trained a group of professional watchmakers. Secondly, unlike many Swiss brands, A. Lange & Söhne went through World War II, and thus it disappeared from the high-end watch world for over forty years until Walter Lange, the great-grandson of the founder, formally started the revival of A. Lange & Söhne in 1990. Lastly, A. Lange & Söhne embodies a distinct German artisan spirit, such as our commitment to the second assembly and our pursuit of rigorous balance, restraint, and harmony in our aesthetic standards.

 

A. Lange & Söhne's second entrepreneurial venture and phoenix-like rebirth have attracted many loyal entrepreneurial clients who have similar experiences and can appreciate the differences between A. Lange & Söhne and other Swiss watch brands.

 

 

ConCall: So, is this also the biggest difference in the user profile of the brand compared to others?

 

Nicholas Gong: True. Because our production is quite limited, with only a few thousand pieces produced per year, the number of users who can actually own a A. Lange & Söhne piece is relatively small. Moreover, from 1994 when A. Lange & Söhne officially returned to high-end watchmaking to today, our new watchmaking history is only nearly 30 years. So, in this relatively short period, many watch enthusiasts have noticed A. Lange & Söhne largely because they have found a strong emotional connection with the brand's spirit. At the same time, many outstanding entrepreneurs find resonance in A. Lange & Söhne's history of rebirth and revival. Therefore, overall, A. Lange & Söhne has a clearer and more distinct user profile compared to other brands: they are understated and know precisely what they want, and they also highly identify with Lange's pursuit of detail in craftsmanship. In a way, they wear A. Lange & Söhne not for show, but as if they have found a kindred spirit.

 

ConCall: On the Chinese social media platform Xiaohongshu, there are many posts about A. Lange & Söhne watches, yet many users express that A. Lange & Söhne are hard to purchase and often require a long wait after placing a reservation at a boutique. The impression for many loyal customers is "money can't buy availability". Will the brand consider increasing production in the future? If the production can't meet the demand, is there a concern about losing customers?

 

Nicolas Gong: We certainly hope to meet our customers' needs as much as possible, but due to our strict control over craftsmanship and production processes, we cannot increase production while strictly controlling quality. Moreover, it takes over three years to train a watchmaker, so these factors have led to our current inability to significantly increase production. However, I believe that good products are worth the wait for our customers. In fact, many of our customers are getting to know the brand and the works better in this process, understanding the craftsmanship and time behind each piece, which allows them to have a greater sense of surprise and satisfaction when they receive their watch.

 

From this perspective, customers who know they have to wait a long time but still choose A. Lange & Söhne are very clear about what they want, and this waiting process also allows them to build a stronger connection with the brand.

 

 

ConCall: Are you satisfied with A. Lange & Söhne's brand awareness, sales performance, and retail layout in the Chinese market? If not, what areas will you deepen next? What are the strategic focuses for A. Lange & Söhne's development in the Chinese and Asia Pacific markets in the future?

 

Nicholas Gong: Over the past few years, A. Lange & Söhne's development in the global and Chinese markets has been rapid. However, since we returned to the high-end watch market only about 30 years ago, there is still much room for improvement in all aspects compared to other brands. In the future, our focus in the domestic market will be on providing customers with better product experiences and services. The number of stores is not important, and due to production constraints, we don't need too many stores. Therefore, our future focus in China and the Asia Pacific market will be to use well-located stores to provide better services and enhance the customer experience.

 

ConCall: Will the brand consider venturing into online e-commerce channels?

 

Nicholas Gong: We don't simply view online channels as a transaction platform; they complement our offline channels. As I mentioned, establishing a connection between customers and the brand is a long-term process—from getting to know the brand to liking it, then purchasing and waiting for the product to arrive, it's a lengthy process, and online channels can only provide an instant transaction process. So for us, online channels are more about providing an entry point for customers to understand the brand.

 

For example, we launched the A. Lange & Söhne WeChat mini-program so that customers can quickly understand the brand's philosophy and craftsmanship. We also invite users to participate in appreciation events and in-store experiences through online channels. By establishing a connection with customers in this way, online and offline channels are not separate for Lange but integrated.

 

 

ConCall: High-end professional watchmaking, watches from jewelry houses, high-end watches from traditional luxury brands like LV, and increasingly smart wearable devices are all strong players in the watch market. As a seasoned manager, how do you view the current and future competitive landscape of the watch market?

 

Nicholas Gong: Each brand has its own factors that allow it to survive and succeed. For example, if a jewelry brand develops a watch series based on its existing jewelry advantages, it has a significant edge. For A. Lange & Söhne, our craftsmanship tradition and heritage are our greatest competitive advantages. We will not sacrifice these traits to compete with other brands because that would mean losing our core values. Competition will always exist, so I think the key for each brand is to find its market position and advantages.

 

ConCall: According to a Bloomberg report, the price of watches from several leading brands has dropped to varying degrees in the secondary market, while some brands with previously moderate prices have seen an increase. Some headwinds in the market are the main reasons for this situation. Given the current challenging global economic environment, what is your macro perspective on the current development of the watch market? Have the market challenges faced by high-end watch brands, including A. Lange & Söhne, increased?

 

Nicholas Gong: Yes, they have. However, relatively speaking, the consumer recovery after the pandemic has had a strong push on the development of the high-end watch market. But the current situation is different from that of two or three years ago when the market just recovered from the pandemic because there is now much more uncertainty, and the development of the high-end watch market is still full of challenges. For brands, the effective way to cope with uncertainty is to stick to their core competitiveness.

 

At present, A. Lange & Söhne's sales are almost unaffected, and the reason we can grow against the trend is that we have adhered to our values, attracting many loyal users who truly like A. Lange & Söhne.

 

ConCall：

 

According to the latest reports released by Credit Suisse and UBS, by the end of last year, the total private net wealth of the global affluent population had shrunk by 2.4% to $454.4 trillion, marking the first decline in global private net wealth since the 2008 financial crisis.

 

It should be noted that the core customer group of high-end watch brands often comprises these high-net-worth individuals, but now with the increased downside risks of the global economy, they are becoming more cautious and rational in their consumption behavior. Bain & Company also pointed out in its report that the global luxury market is expected to grow by 13% this year, and the growth rate will slow to 11% in 2024, meaning that revenge consumption will be replaced by cautious and calm consumption, and the growth of global luxury consumption will continue to slow down and return to normal cyclical changes.

 

Therefore, facing a market full of challenges, even high-end watch brands at the top of the luxury industry cannot take it lightly. How to maintain their core competitive advantages is the key to overcoming difficulties. As Gong Yan told ConCall, "The uncertainty of the market environment needs to be countered with the certainty of the brand's products, craftsmanship, and values."