Growth today isn’t just measured in financial value
Depending on who you’re speaking with in the watchmaking industry, the situation is dire, or perhaps in a deceleration. But it’s not entirely disastrous. “The market is slow,” is the line that flies off the tongues of dozens of retailers. “Stocks are moving but glacially and at a very monotonous pace,” another points out. Consumers get excited about products, but without direction or trend and this randomness is confusing to watch brands that need to capitalise on a large base. Plus, just because consumers are excited about a product doesn’t mean they are buying.
Add to that news of the Swatch Group’s recent announcement that half-year profits are down 50 per cent (they are not in the red, just with significantly reduced profits) and the FHH (the Federation of the Swiss Watch Industry) report that Swiss watch exports fell faster in the first half than ever before (16.4 per cent). These are tough numbers to swallow for an industry that has been enjoying popularity.
What’s most significant is the dip in precious metal watch exports, nearly a third down. The biggest hit markets were Hong Kong and Italy, two traditionally major importers of timepieces. Italy nearly single-handedly swung the Swiss watch world back from the dead back in the ’70s. In fact, the sports luxe icons of our time were created to cater to Italian demand for elegant sporty watches.
But there are bright spots in the world that are shining optimism on the industry. Australia is a steadily growing market and one that shows little signs of losing steam.
Other markets in the region (Cambodia, Myanmar, et cetera) are still in their infancy, but growing steadily. The United Kingdom, traditionally a market that has had little interest in luxury watches, is developing an
appetite for such products. And in the North American continent, a similar change is taking place among the upper middle sector. As brand flashing once again becomes apparent on the runways of Paris and Milan, shoppers are now more ready for the brand upgrade or statement piece. The luxury cycle is renewing itself.
Certainly the instability in the European continent has added to the region’s economic woes of the past few years and significantly affected consumer confidence. The Latin American continent’s failure to deliver on its possibility of becoming the next great emerging market has also impacted growth. But one most significant factor is the evolution of the Chinese consumer and the government’s clampdown on corruption.
Although Chinese consumers have become more careful about flagging themselves for the scrutiny of officials, they are buying into other products. Chinese shoppers today are as likely to buy good quality produce or living necessities from overseas as they are to be picking up a gold Rolex. ( Even clean air, bottled, is a luxury.) At the same time, China’s changing luxury tax code, with tax refunds of up to 11 per cent, is making consumption within the country more palatable.
The lack of pickup in other emerging markets like India is another pressure point. But it’s a delay. As economists point out, consumer confidence increases when social and political stability co-exist or appear to come to a steady state in our minds. So be patient, and in the meantime, the FHH points out that people are still happily spending in the CHF500-3000 range of watches, which has been minimally impacted.
the luxury cycle is renewing itself... and bright spots are shining optimism on the industry