The euphoria that propelled the Swiss watchmaking industry to record heights appears to be fading. There is a slowdown in demand and a decline in prices on the secondary markets, prompting experts to warn of the end of post-pandemic “exceptional growth” in the luxury sector. This trend is part of a broader narrative of increasing fragility across the luxury goods spectrum, affecting giants like LVMH and Kering.
For three consecutive years, the Swiss watchmaking industry experienced exceptional growth, starting during the pandemic. Affluent consumers, confined with ample liquidity, turned to luxury mechanical watches from iconic Swiss brands such as Audemars Piguet and Rolex. Swiss watch exports reached a record peak of nearly 25 billion Swiss francs ($28.5 billion) in 2022.
However, recent months have marked a slowdown in demand and a decline in prices on the secondary markets. Richemont’s semi-annual results indicated a 3% decline in watch sales and a 17% drop in the Americas in November, signaling the beginning of this deceleration.
“Luxury is (unfortunately) not recession-proof,” wrote HSBC analysts last month, warning of the end of post-pandemic “exceptional growth” in the luxury sector.
This deceleration comes amid growing reports of fragility in the broader luxury goods domain, impacting giants such as LVMH and Kering.
Swiss watch exports experienced their first decline in over two years in July, and average growth in recent months is significantly lower than that of the first half of the year. Additionally, the Bloomberg Subdial Watch Index, tracking the 50 most-traded models, has dropped by about 42% since its peak in April 2022. The values of used watches have also been declining for over a year.
Behavioral changes
The pandemic prompted the affluent to reflect on the fragility of life. Inspired by social media influencers, they invested in luxury watches, creating a craze that led to massive production delays. However, September and October were challenging, with changes in consumer sentiment.
Indeed, as the pandemic subsided, watchmakers faced significant production delays, resulting in the accumulation of waiting lists in stores. However, in the face of declining demand in recent months, watchmakers responded by raising prices, a risky strategy according to some. Brands including Rolex, Swatch, Omega, Longines, and Tissot all increased their price tags, in Europe and the UK in February. Omega raised prices by 8% in the US in July, while Jaeger-LeCoultre added over 20% to the price of certain models. Rolex, producing over a million watches annually with sales estimated at over 9 billion francs, raised prices twice in 2022.
Industry figure Jean-Claude Biver highlighted the industry’s lack of humility in the face of persistent overproduction.
“We should have learned, and yet we still haven’t learned because we don’t have enough humility,” he said. “We are a bit arrogant. We feel like the kings of the customer, whereas the customer is the king. One should never reverse that.”
Downgraded forecasts
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Read also>SWISS WATCH EXPORTS UP IN OCTOBER
Featured photo : ©Patek Philippe
