Post-COVID, the fine watch industry experienced a strong rebound in 2021, which was confirmed in the first half of 2022, fueled by both tight production and unabated demand. Nothing like scarcity to maintain desire…
The reasons for the rebound.
“Fine watchmaking has not been spared by the health crisis. Like other luxury industries, it is experiencing a strong rebound, especially in the past 6 to 9 months” explains Olivier Müller, journalist expert in watchmaking. Indeed, if we pay attention to the export statistics published every month by the Federation of the Swiss Watch Industry (FIHS), the trend “very favorable displayed since the beginning of the year by Swiss watch exports” continues. “With growth of 8.3% compared to July 2021, their value stood at 2.2 billion francs, the highest monthly level after the record of October 2014”.
Several phenomena explain this good health according to Olivier Müller. The first one, “the injection of a high level of liquidity into the markets, as part of the various recovery plans, which have fueled the appetite of investors and industrial beneficiaries of this aid. At European level alone, 2000 billion euros have been mobilized”. The second is explained by the fact that in a context of crisis, the great fortunes seek to achieve accessible investments, which bring in a lot, at very high rates and very short interest. And in this respect, luxury watchmaking acts as an El Dorado. “A luxury watch is easy to buy, can be stored in a safe, does not declare itself and crosses all borders on the wrist”.
A weighty argument, which has not escaped the connoisseurs who bet on the trio formed by Patek Philippe, Rolex and Audemars Piguet, houses which are posting double-digit growth rates. Last thing to consider: the vitality of watchmakers in terms of innovation.“The growth of the sector cannot be justified solely by the renewed interest of consumers. We must recognize that manufacturers, and in particular independents like Czapek or Philippe Dufour, have a creative asset that maintains desirability for this segment” says Olivier Müller. It must be said that the crisis has proved to be a great space for dialogue for luxury houses. According to Paul Miquel, journalist specializing in the watch segment and editor-in-chief of Montre Heroes magazine, “Consumers used this time to better understand the world of luxury, and to deepen their research upstream of the purchasing phase. For their part, the houses took the opportunity to refocus on their icons, like ‘Audemars Piguet, which makes the 50th anniversary of the iconic Royal Oak (1972) a very powerful communication opportunity that spans the entire year.
A market driven by dynamic demand.
While the successive confinements may have accentuated the tensions on production, the imbalance between supply and demand is explained above all by the desire of watchmakers to nurture desirability of their watches. “And this involves the rationing of points of sale coupled with very limited production. It is estimated that Rolex produces 1 million pieces per year, Audemars Piguet 50,000 and Patek Philippe 62,000, volumes which mechanically are not enough to absorb the request” insists the expert. An imbalance that can also be found among independent labels such as MB&F, URWERK, De Bethune or even CZAPEK.
In this context, the act of purchase becomes a way of responding to an impulse to consume. “Whereas before, the customer could ask himself the question of investing in a grand complication at Patek Philippe at 1.2 million euros or in a Richard Mille at 600,000 €, the rarity of the pieces alone justifies the purchase, as it is difficult to get your hands on these luxury watches”. In the viewfinder of buyers, there are also many models from the big houses such as the Patek Philippe Nautilus blue dial, the Rolex Daytona, but also watches signed François-Paul Journe or Kari Voutilainen for whom the waiting lists stretch on several years. For the coming months, Olivier Müller expects this upward trend to continue, even if it should dip slightly due to the economic and geopolitical context. A statement shared by Paul Miquel, a journalist specializing in the watchmaking segment, for whom the difficulties of the Chinese market linked to the zero COVID strategy, combined with the decline of the Hong Kong market, could ultimately penalize a very Sino-dependent market. “However, there is good news, the strong comeback of the American market, which allows watchmakers to compensate for the decrease in Asian demand”.
CSR and second-hand, the challenges to be met.
Apart from the looming economic context, what are the challenges awaiting watchmakers in the high-end segment? For Paul Miquel, the future inevitably passes through the turn to eco-responsibility. “A few years ago, ecology only concerned accessories such as the bracelet or the watch case. Today, the questions of sourcing and traceability lead to reviewing all the processes of the supply chain, and therefore to touch the sacrosanct movement of the watch”. From his point of view, the operational delays of manufacturers on these issues have created a breath of fresh air for young labels like Awake Concept or ID Geneve Watches, even if statutory brands like Cartier, Panerai, Chopard or Breitling clearly display their ambitions. in this domain. “It is imperative that the big houses jump on the CSR bandwagon, at the risk of cutting themselves off from the millennials” insists the expert.
Another market neglected by watchmakers? The second handwhere some references reach stratospheric prices. “With rare exceptions, the houses have never taken this phenomenon seriously, so that they do not put their pieces on the second-hand market. Almost everything is managed by external operators”. The journalist, who had access to certain figures from several resale sites of this “grey market”, confirms that references from Patek Philippe Nautilus, Audemars Piguet Royal Oak or even Rolex Cosmograph Daytona, have sometimes taken more than 150% of increase over the past two years with a sharp turnaround observed since the second quarter of 2022. Figures partly explained by the interest of speculators who sniffed out a good deal. A trend that should settle with the rise in rates. “The striking power of fine watchmaking is based on a disproportion of its value between the perceived image, built thanks to significant investments in marketing and communication, and the reality of the overall volume of this economy. In reality, less than 10 watchmakers exceed one billion in turnover”. A discrepancy that feeds the interest of enthusiasts as much as the appetite of investors…