The COVID-19 pandemic sparked a surge in Swiss luxury watch sales, but the boom is now coming to an end as consumer sentiment shifts and demand declines. Swiss watch exports reached unprecedented levels in 2022, driven by the interest of wealthy individuals in acquiring luxury mechanical timepieces from renowned Swiss brands like Audemars Piguet and Rolex. However, a combination of factors is now contributing to a slowdown in the industry.
External factors such as rising interest rates and uncertain economic growth are impacting the industry, but internal issues including aggressive price increases and increased production are also to blame. As a result, demand is decreasing, and prices on secondary markets are declining. Even industry leaders, including those at historic brands like Audemars Piguet, have acknowledged that the recent surge in demand was exceptional and unlikely to be repeated. The broader luxury goods sector has also witnessed a decrease in sales, with companies like LVMH and Kering SA attributing it to concerns about inflation and recession.
The decline in the watch industry became evident when Richemont, the owner of brands like Cartier and Vacheron Constantin, reported a decline in watch sales in its half-year results. Used watches have also been experiencing declining values for over a year. This market shift is a far cry from the peak of the boom, which occurred during the pandemic and led to watchmakers facing backlogs and soaring waiting lists at stores.
The pandemic reminded affluent consumers about the uncertainty of life, leading to an increased desire to display wealth and taste through luxury watches. The industry seized this sentiment, but now the market is showing signs of weakness. Factors like the Hamas-Israel war and aggressive price increases have contributed to the change in consumer sentiment. While cheaper watches have seen some gains, overall exports have declined, and growth has fallen short of expectations set in the first half of the year.
The Swiss watch industry holds significant cultural and financial importance, serving as a crucial sector in Switzerland’s economy, employing approximately 60,000 people, and ranking as the third-largest export sector. However, the ongoing slowdown is already causing ripple effects, as Swiss-based component suppliers are cutting positions, and influential watch content-provider Hodinkee has implemented layoffs.
Internal factors, such as price hikes and increased production, likely played a role in the industry’s downturn. For instance, Rolex, the industry giant, raised prices twice in 2022, and other brands like Omega and Jaeger-LeCoultre followed suit. Furthermore, watchmakers responded to the high demand by boosting production, resulting in an oversupply of watches in the market. Industry veterans, like Jean-Claude Biver, who have experienced boom and bust cycles, emphasize the importance of prioritizing the customer and practicing modesty to avoid oversaturation.
Overall, the record-breaking rush to purchase luxury Swiss watches has reached its end, underscoring a shift in consumer sentiment and a decline in demand. The industry now faces the challenge of adapting to a new market landscape and finding ways to remain relevant and appealing to customers in the future.
Links:
1. Reuters – Swiss watch industry’s great reopening wanes, prices drop
2. Financial Times – Swiss watch sales slow as the boom wears off
