Peace Mark Holdings, Hong Kong's largest timepiece maker, will invest HK$300 million (US$38 million) to HK$400 million (US$51 million) in opening 30 luxury watch stores in the mainland over three years.
The company formed a joint venture (JV) with two US firms Touneau and International Watch Group last month to conduct its mainland expansion, Kevin Tsang, Peace Mark's chief executive officer, told China Daily.
The company holds a 65 per cent stake in the JV, which has a share capital of US$15 million.
Hong Kong-listed Peace Mark, which earns money by manufacturing timepieces under a number of international brand names, regards the JV as a springboard to access the mainland's consumption boom.
Watches to be sold in the luxury stores will be priced around 10,000 yuan (US$1,250) each, a level that has become affordable for wealthy consumers in the mainland.
"These days you can see a lot of mainlanders coming to Hong Kong to buy expensive watches such as Rolex," Tsang said. "So why not open stores in the mainland and enable them to buy at home?"
Peace Mark has opened two luxury watch stores in Shanghai prior to the formation of the JV, and it would open the third in Beijing, probably by the end of the year, Tsang said.
There are more than 10 cities on Peace Mark's expansion list, including Harbin and Shenyang.
Each of the new stores will cover 5,000 square metres and cost HK$13 million (US$1.67 million), but that will not tighten the company's cash flow as it has raised HK$290 (US$37 million) earlier this year from equity market, Tsang said. That amount of money is enough to sustain 20 stores.
Foray into luxury markets comes after Peace Mark's mainland retail arm TimeZone, which targets mass markets, has proven successful.
Currently, Peace Mark has 640 sales points in the mainland and has established its reputation among ordinary consumers.
Tsang hopes the mainland market will account for 30 to 45 per cent of the company's turnover at a time between 2006 and 2007.
The company reported a turnover of HK$999 million (US$128 million) from April to September in 2005, up 16.1 per cent on a yearly basis.
Peace Mark's mainland expansion is also the latest move of Hong Kong manufacturers to take the advantage of Closer Economic Partnership Arrangement (CEPA), a free trade pact-analogue signed between the Chinese mainland and Hong Kong in 2003.
"All but for CEPA, we would have still stuck to our old strategy of exporting to European and US markets, instead of making big forays into the mainland's consumer market," Tsang said.
Under the pact, made-in-Hong Kong goods are exempted from tariffs in entering the mainland. Peace Mark, although having no its own brands, can enjoy the treatment so long as it remain 30 per cent of its manufacturing processes in Hong Kong.
Source: China Daily