A.     Market Analysis

There was an impressive development of Swatch group watches sales in the year 2000. The sales were 1CHF 4263 million (USD 2688 million), up 17.6% against in year 1999.. The other distribution channels also saw their business prosper. In the year 2001, despite difficult economic and political conditions, the Swatch Group Ltd. 2achieved a modest rate of organic growth of 0.7% in local currency. From the fourth quarter of 2001 onwards, there was a weakening of financial markets in the USA since the terrorist attacks. However, a remarkable increase in Swiss watches demand on the Mainland China was noted “3 China is a very hot market. Everybody has their eyes on it,” Hong Kong Watch Importers’ Association president Durf Hefti said.

“3Hong Kong outperformed the United States to become the biggest Swiss watch import market in January 2002, when watches worth 121.2 million Swiss francs (HK$556.31 million) were shipped, a 4.2% increase compared with the same time last year”, TDC economist Wing Chu said. In 2001, China became the third-largest destination for Hong Kong’s Swiss watch re-exports, just behind South Korea and Japan.

Apparently, there is a high demand of Swiss watches in the Mainland China but it may still take some times for the online business to lift off in this market. First of all, credit card payment is not very popular, and the RMB is not a universal accepted currency. Besides, Chinese customers habitually shop by looking at, listening to and touching the products. In general, they feel it is indirect and unsafe to shop online. Besides, postage to China may take longer especially to some inner provinces or small villages.

However, it does not mean that ZiWatches will abandon this market. It can cooperate with some physical watches shops operate in China, either by exchanging banner advertisement with them on the Web site or increase revenue by issuing discount e-coupon for these shops. However, given the poor reputation of Chinese businesses in terms of business practices, ethics, fraud and the lack of the rule of law. Ziwatches would have to tread very carefully with the China market.

A.Key factors critical to success of the market strategy

One of the critical success factors for running a successful online business is using a medium to low cost strategy because it is easy to compare prices of the same product online. Since there is no import tax impose for most of the goods to Hong Kong, the list price is already 10-20% lower than the other countries. Together with the 28-35% discount offered by the official distributors, ZiWatches can have a very competitive price advantage against its competitors.

International shipping and fast delivery is also very important. (Some of the online shops do not accept orders outside US). Most of the online shoppers are either too busy or living far from the shopping center, they don’t bother to shop around for the goods especially choosing gifts for their friends, the online shop can save their trouble and can offer a door to door delivery. Since there are different editions of Swatch watches in different countries, ZiWatches is able to release this boundary and ship these products internationally.

Hong Kong is the hub of Asia, with the fast and efficient postal service, parcels are able to deliver to almost anywhere in the world. The tracking order system of the Hong Kong Post Office is very effective and all mail orders can be track online. The distributor agreed to provide a same day delivery to ZiWatches, therefore, it can offer a fast delivery service to its customers. In experience, the average shipping time by registered airmail is 3-5 days to Asia Pacific region, 5-10 days to Europe and 7-14 days to US. The normal P+P fee (postage and handling) is US$ 8 per orders (no handling fee for additional article). Shipping will be made by international registered airmail. Customers wishing to use a courier service would be charged extra, the actual amount depend on the number of watches ordered and the country involved.

Customer service is another crucial factor for an online business. In our experience, over 20% of sales are from repeated customers, they can also recommend their friends to buy from you or post their feedback on some discussion forum. Therefore, it is very important to maintain a good customer relationship. Due to the different time zone, most of the time, potential customers will inquire after Hong Kong office hour (sometimes is midnight). Since it is a home-based business, most of the inquiries can be catered in a short time. Customers are very impressed by this real time reply and they will have a confidence to buy from a shop that value their customers.

ZiWatches Club is another value-added service for the customers or potential customers. It is a place where people of the same interest can share their views, exchange opinions, seeking advice, selling or buying their favorite collections (2^nd handed) through the auction site. Although running a fans club is very time consuming and may not generate immediate benefit, it is a kind of soft selling which can win a good image to the company in the long run.

Security is always a big concern to customers for online purchases. ZiWatches’ shopping cart system uses industrial standard SSL encoding which is generally considered to be among the safest available. All the credit card information of customers is not available to the merchant. It offers a Secure Order Guarantee that gives customers 100% protection for their credit card transactions. The Secure Order Guarantee means that people never have to pay any money related to unauthorized charges to their credit card account, if those charges result from a transaction at ZiWatches.