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Swiss watchmakers take aim at Chinese web retailers

  • Staff Reporter
  • 2011-07-21
  • 16:57 (GMT+8)
Luxury watchmakers Omega, Longines and Rado say that it's time for Chinese online retailers like Taobao to keep watch over the sale of fake products on their platforms. Picture: Omega's watch Planet Ocean. (Photo/Xinhua)

Luxury watchmakers Omega, Longines and Rado say that it's time for Chinese online retailers like Taobao to keep watch over the sale of fake products on their platforms. Picture: Omega's watch Planet Ocean. (Photo/Xinhua)

Omega and two other famous Swiss watch manufacturers, Longines and Rado, have recently taken Taobao, a Chinese-language online shopping website, to court for selling fake watches on its platform. A Chinese court held its first hearing on the case on Wednesday (July 21).

In a complaint, the Swiss watch manufacturer said fake Omega brand watches sold for as little as 898 yuan (US$139) each on the Taobao Platform, adding that a genuine Omega watch costs an average 37,000 yuan (US$5,729) in a physical store. The company said that no legitimate Omega retailer would agree to a price below 7,500 yuan (US$1,162), demanding that Taobao ban the sale of watches with prices below that mark on its shopping platform.

However, Taobao argued that this was an arbitrary price point and countered the Swiss company's claim that selling Omegas at prices below 7,500 yuan would risk infringing upon its trademark rights.

A reporter from Beijing Business Today newspaper said a recent search of Taobao's B2C (business to consumer) platform found no Omega brand watches selling for under 7,500 yuan, adding that the lowest price for any of the watches was 13,000 yuan (US$2,015).

Even so, the reporter said, that price was only about one-third of the 37,000 yuan physical market price fetched by genuine Omega watches.

In one sense, Omega's claims appear out of place at a time when many Chinese-language online shopping stores selling luxury goods offer sanctioned discount prices. Gucci and Burberry have offered discounts of 48%, while Coach and Fendi gave 64% discounts.

As more and more online shops sell products at prices far below those of the physical market, conflicts of interest arise between these web retailers and the traditional stores and manufacturers. This is especially true of luxury goods.

For example, the website Dangdang recently sold Tissot watches at a discount of 25%. This immediately prompted a strong protest from Tissot China, which responded by saying it would not provide any after-sale services for Tissots sold on the site.

In another example, Casio issued a strongly worded statement aimed at online retailer Jingdong Mall, which offered discounts to promote the company's watches, claiming it had never been authorized to sell Casio products. Such a statement amounted to telling the public that the watches sold by Jingdong were fakes.

Liu Hui, an analyst at Beijing-based retailer Zhao Yi, commented that "brand companies do not want their products to be sold cheaply. Besides, extremely low prices offered by online stores could also affect the operations of the physical companies."

Sill, neither Tissot China's refusal to provide after-sale service nor Casio's stern statement had any lingering impact on the online stores. The Beijing Business Today reporter found that Dangdang and Jingdong Mall were scarcely affected, as both continued to sell Tissot and Casio watches as usual.

According to a 2010 survey, nearly 43% of China's consumers said they were turning to online stores for their luxury goods, meaning the physical establishments selling these products are facing increasingly strong challenges from their digital counterparts.

Another analyst said that online stores have an inherent advantage in that they do not have to pay for storefront real estate, allowing them to operate on profits of 30%.

In contrast, the analyst noted, many physical stores of luxury goods must reap profits of more than 100%. Such a high-profit policy tends to place the physical stores at a disadvantage in competing with the web newcomers.

References:

Taobao  淘寶網

Liu Hui  劉暉

Zhao Yi  昭邑零商

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