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Andy Chen

Luxury watch seller revises growth plan, aims to add 40 stores
No one knows better than Zhang Yuping about the race  to  expand business in the world's fastest-growing economy.
'Time is simply not enough, the market keeps pushing you,' said Zhang Yuping, founder and chairman of the mainland's biggest luxury timepiece retailer, Xinyu Hengdeli.
To stay ahead,  Hong Kong-listed  Hengdeli, which now has 148 outlets,  has revised its original expansion plans in the mainland and aims to add at least 40 stores annually, double an earlier target, through acquisitions.
'If the market grows  50 per cent and we grow only 30 per cent, that's not acceptable,'  Mr Zhang said.
Other retailers, including Hong Kong-listed Peace Mark (Holdings), are also in a hurry to expand networks.
Hengdeli, which sells big brands  such as Longines, Omega, Rolex and Tudor, also  plans to tap markets for other luxury products  including pens, leather goods and jewellery.
The group announced at the weekend the acquisition of a 90 per cent equity stake in Omas, the Italian specialist in handcrafting and distribution of fine writing instruments for an undisclosed sum. The acquisition  launched Hengdeli's ambitious plan to grow its operations globally through geographical expansion of existing businesses  and acquisitions of prestigious global brands.
Omas, based in Bologna Italy, was acquired by LVMH in 2000.
Mr Zhang said  Hengdeli would hold a controlling stake in the venture which would open stores soon. He declined to give further details. The mainland, the third-largest luxury market after Japan and the United States, is expected to become the second largest by 2015, buying 29 per cent of the world's total luxury goods.
According to accounting firm KPMG, high-end watches are the fourth most wanted luxury goods in the mainland after clothes, cosmetics and perfumes. While bullish about the nation's consuming power, Mr Zhang said there were also challenges.
'Demand from the market is much greater than we expected, so we have to squeeze time to  grab development opportunities and maintain our market share,' he said. 'I always don't have enough time to work.'
Mr Zhang has led  Hengdeli, which  had only 51 stores at the time of its initial public offering in 2005, to  become a gateway partner for foreign luxury watch brands eager to establish  a foothold in  premier and second-tier mainland cities.
The company aims to bring the total number of watch outlets to at least  160 by  the end of the year.  with the cost of opening each new store ranging from six million yuan to eight million yuan.
Mr Zhang, who was a watch trader in a Guangdong state-owned enterprise for more than a decade, described  Hengdeli as a 'highway' for foreign luxury watch giants.
'Given the extensive sales network, resources and personal connections  Hengdeli now enjoys, it is a highway for foreign big players to enter the mainland market,' Mr Zhang said.  'Of course, it's a two-way choice.'
Hengdeli is allied with the LVMH Group, an arm of the world's largest luxury products group - Moet Hennessy Louis Vuitton - Swatch Group and Richemont Group to sell 20 brands in the mainland and Hong Kong after the acquisition of the Elegant Group last year.
First-half net profit through June surged 123.8 per cent to 145.39 million yuan from 64.95 million yuan a year earlier as sales climbed 111.7 per cent to 1.92 billion yuan from 907.7 million yuan.
The retail business  accounted for 69.8 per cent of the six-month turnover, up from 50 per cent a year earlier, while the wholesale business  made up 28.8 per cent, down from 49 per cent.
Mr Zhang said  future growth  would rely on upgrading  its brand mix  in major cities to widen the range of average selling prices.
Hengdeli stores have three categories, with its Elegant shops offering watches with average selling prices  of 40,000 to 50,000 yuan,  its Prime Time stores  selling timepieces priced at 15,000 yuan, and Temptation  offering watches at 4,000 to 5,000 yuan.
Xinyu will also seek development opportunities in Singapore, Taiwan and Macau.



Hengdeli in frantic race to expand retail reach