Are Swiss Watches the Canary in the Coal Mine of the Luxury Business ?
Movie stars may check their Rolexes to tell the time, but others keep an eye on Swiss watches for a different reason: as indicators of where the global luxury industry is headed. Although Swiss watch manufacturers never tire of touting their centuries-old crafting traditions, 95 percent of Swiss watches are exported far away from the workshops of master watchmakers, making the goods acutely sensitive to the fortunes of the global elite.
Back in 2012 — before there was much talk of a Chinese economic slowdown and well before Burberry slashed prices by up to 50 percent at its flagship store in Hong Kong — Swiss watch manufacturers first felt the sting of falling mass market demand in Asia. The slump foreshadowed worse things to come. Due to falling Chinese growth rates combined with the country’s anti-corruption campaign, low oil prices, and terrorist attacks in Paris, the Swiss watch industry has recorded a fall in exports for 14 months straight. That has sparked some soul-searching in an industry which has focused largely on the top-end of the market since the 1990s.
“It’s a topsy-turvy world in watchmaking at the moment,” said Arthur Touchot, the editor-in-chief of Hodinkee, a luxury watch online magazine and shop. For the first time, complicated watches — those with more than just the most basic features — are being made in stainless steel rather than rare metals, while a perpetual calendar watch has entered the marketplace at below $10,000 (perpetual calendars only need to be adjusted once per century and usually go for $30,000.)
It’s the higher-end models in particular that have taken a hit from the declining spending habits of the emerging world’s super-rich. According to the official Swiss watch federation’s latest report, watches costing more than 3,000 Swiss francs ($3,600) have suffered a “particularly steep” drop in exports, which fell for the entire sector by 8.8 percent this August year-on-year.
China looms large on the Swiss watch market’s woes, as it has for much of the luxury industry (an estimated one in three luxury goods are bought by the Chinese). While the luxury watch industry’s bread and butter still comes from well-established markets like the EU and the U.S., it depended on Asia for about 70 percent of its growth from 2000 to 2012, with China and Hong Kong in the lead, according to a 2013 Credit Suisse report. “ That the Chinese market constitutes not just a growth driver but also poses a certain cluster risk is evident from the economic slowdown that has recently affected the industry,” the report warned.
Manufacturers are worried, but “they’re not panicking,” said Touchot, of watch magazine Hodinkee. Despite these declines, the industry has stayed remarkably resilient over the centuries, and Swiss brands such as Rolex and Patek Philippe remain firmly ingrained in the public psyche.
Meanwhile, there are still some bright spots in the global market for Swiss watches. While Asia is generally down and sales in Russia and the Middle East have plummeted due to low oil prices, sales have skyrocketed in the UK. Why? Brexit made luxury products significantly cheaper there due to the weakening of the British pound — and moneyed foreigners who are suddenly looking for a good deal have made London their first stop.
