According to a market report by McKinsey & Company, the fine jewellery and premium and ultra-luxury watches sectors are poised for growth in the next five years. These two sectors are significant contributors to the luxury market, generating over $330 billion in annual revenue. However, due to the COVID-19 pandemic, both industries experienced a decrease in revenue, with fine jewellery seeing a decline of 10-15% and watches facing a decline of 25-30%.
The report suggests that the recovery of these sectors will be driven by younger consumers and domestic markets, with Asia leading the way in sales, particularly in China. For the fine jewellery segment, McKinsey predicts that established brands will become more prominent, with an emphasis on digitalization and sustainability. Branded jewellery is expected to grow at a compound annual growth rate of 8-12%, which is three times faster than the overall market. The report emphasizes the importance of providing a seamless experience across online and physical stores, as customers still prefer to make the majority of their purchases in-person. Additionally, sustainability plays a key role, with a projected 20-30% of global jewellery sales being influenced by sustainability-minded consumers by 2025. It is also anticipated that new jewellery brands will emerge and capture a larger market share, reaching 25-30% by 2025.
In the premium and ultra-luxury watches segment, McKinsey forecasts a slower growth rate of 1-3% annually from 2019 to 2025. A notable change in this market is the increasing demand for direct interaction between consumers and brands. Customers now expect enhanced online purchasing opportunities and a more personalized experience. Watch-makers must adapt to this shift by expanding their retail presence and adopting a dynamic omni-channel approach. However, this poses a challenge as $2.4 billion in revenue is expected to shift from multibrand retailers to brands by 2025. Moreover, the mid-range market for traditional watches faces pressure from digital-native players, fashion brands, and the growing smartwatch category. Without a response from mid-range brands, there is a potential decrease in revenue by $2.5 billion by 2025.
Lastly, McKinsey predicts that the second-hand watches sector will experience the fastest growth in the industry. Sales in this segment are estimated to be worth between $29 billion and $32 billion by 2025. Brands and specialized e-tailers will need to adapt their business models to capitalize on this growth in the increasingly competitive environment.
In conclusion, McKinsey’s market report provides valuable insights into the future of the fine jewellery and premium and ultra-luxury watches sectors. It underscores the significance of digitalization, sustainability, and adaptability in order to thrive in these evolving markets. With younger consumers and domestic markets driving growth, industry players must strategically position themselves to meet the changing preferences and demands of consumers.
Useful Links:
1. https://www.mckinsey.com/industries/retail/our-insights/the-jewellery-and-watch-industrys-digital-revolution
2. https://www.luxurydaily.com/mckinsey-estimates-trends-drives-4-5-contribution-to-luxury-profits-by-2025-report/
