Not many CEOs would spend 24 days traveling across China to intensely study the emerging market but Michel Nieto, head of Swiss watchmaker Baume & Mercier, did just that.

During that trip four years ago, the 42-year-old Nieto visited a dozen cities experiencing Chinese lives and communicating directly with retailers, VIPs, and Chinese artists.

Based on the research, the company and CEO got to know the Chinese market, its product preference, way of communicating and sales network.

The company immediately found a major partner Xinyu Hengdeli Holdings Ltd, China's largest luxury watch distributor. With the joint effort came the right products, a local "ambassador" and new outlets.

Nieto's effort paid off. The company's current sales turnover in China is 27 times higher than four years ago.

The brand actually started business in China at the beginning of the 1980s through local dealers, but it did not invest in high visibility and extensive market research.

The company has just made another big move, by opening its first direct-invested boutique in China, based at Beijing's Central Place. The store, 50-50 owned with its partner Xinyu Hengdeli, is the second boutique the brand has opened in the world. The first is in Dubai, and a third one will also be in Dubai within the year. Over 99 percent of the firm's global distribution is through local dealers.

"Our next (boutique) destination will be Shanghai," says Nieto, who has worked in the watch industry for 19 years and has extensive experience in designing and manufacturing as well as marketing.

Nieto's decision was based on the sales through its existing 16 points of sales in Beijing. "Beijing's sales are slightly better than Shanghai, plus the Olympics are coming, and we want to make presence here."

If the Beijing shop proves to be successful by making back its original investment within three years, the company will open another one in Shanghai, the CEO says.

Selling over 100 different watches at prices ranging between 10,000 and 150,000 yuan, the role for the Beijing shop may not be as important for sales as serving as a show room to enhance visibility and brand awareness, the firm believes.

In the meantime, the company says it is making "big investments" in "communication" with Chinese consumers involving celebrity endorsements and a huge budget for advertising in traditional media, such as magazines, newspapers, TV as well as Internet campaigns.

Its most effective network here are the 40-50 shop-in-shops of 30-40 square meters each. "Our business model is to have shop-in-shop. I prefer the environment to other brands," Nieto says. Baume & Mercier globally has 300-400 shop-in-shops.

Although Baume & Mercier produces expensive and complicated watches costing 600,000 to 1 million yuan, its focus in China is selling entry-level products, or those between 10,000 and 40,000 yuan, the CEO tells China Business Weekly. "Our target is to reach a large quantity of people, who want to have their first luxury watch, when they move up to middle class."

"There are millions of customers in China, so I prefer to stay in that range to bring volume. It is our global strategy to target the middle class who want to approach luxury," Nieto says. The US market, which accounts for 25 percent of its global turnover also sees high sales volume in entry-level products, as does Europe.

Since 1830, Baume & Mercier has been one of the very few brands only focusing on watches, rather than other accessories. The firm has already finished its designs for collections for the coming three years. "I am just consistent with our strategy and not influenced by others," Nieto says.

The company recently launched its ilea line in China targeting "luxurious and active" women.

(China Daily 06/23/2008 page3)