Shanghai: The future of luxury products remains strong as a communication tool and status symbol for people who strive to be different, says the head of a French multinational luxury goods conglomerate.
"Watches have become a fashion product, communicating to other people who you are," said Jean-Claude Biver, LVMH Group president of the watches division, at the Julius Baer Next Generation Summit in Shanghai last week.
Mr Biver believes luxury watches communicate status and eternity better than other goods.
"Luxury has an incredible future because people will never stop wanting to be different. It is what we all need besides love," he said. "The Beatles said 'All you need is love', and that is a tragedy because money cannot buy love, health or eternity."
Eternity comes not from money but rather respect of the arts and tradition, he believes, and in luxury is a link to eternity.
"A Swiss quality watch is nothing but eternity in a box. In a thousand years, you will be able to repair it. This is art and luxury. Will a smart watch be repairable in 10 years? Certainly not," said Mr Biver.
A smart watch will never be a luxury product because it has no eternity, he said. It is a computer on the wrist that will neither replace the fine craftsmanship that comes from a long tradition in the arts nor its role as a status symbol. A traditional luxury watch communicates the values of exclusivity, beauty and artwork.
Because luxury products are linked to wealth and the urge to be first or unique, luxury has no limit, said Mr Biver.
"The luxury market is still small, as the whole Swiss watch industry has a turnover of 22 billion Swiss francs a year," he said.
Asia remains an important region for Hublot, the LVMH-owned luxury watch group, though an anti-corruption crackdown in China has reduced demand. Mr Biver considers market consolidation healthy as it creates a good base to build on.
He added corruption is not limited to China, but it receives the majority of the headlines because of its market size.
LVMH views Southeast Asia as a priority market with the potential to exceed both Italy and France.
While the Thai market has proven lucrative for Hublot, Indonesia presents an untapped opportunity for the company. Its market is still underdeveloped because of taxes and Indonesians' preference for buying their luxury goods.
"Imagine the potential of Indonesia with over 200 million inhabitants and a new wealthy class developing over the next 50 years," said Mr Biver.
According to the Julius Baer Lifestyle index, which tracks the cost of living in luxury in Asia based on the price of 20 luxury goods and services in 11 cities across the region, the limited availability of high-end retail spaces should ease when infrastructure needs are addressed. In Bangkok the cost of luxury goods unrelated to the service sector are higher than regional average.
For luxury watches, the index uses the yellow gold Day Date II Oyster Rolex as a reference. In 2014, the average cost in the region is US$35,431 for the watch. In Bangkok, the price rose 3% to $38,010 compared with 2013, while in Jakarta, the price rose 3% to $32,673.
The report indicates price variability is relatively low across 11 cities in the region except Jakarta, where the price in local currency increased to stay relatively close to $33,000.