The State of the Watch Industry: Anxieties and Uncertainties

The watch industry has remained resilient amidst various global crises over the past few years, including the crisis in Ukraine, China’s rigorous lockdowns, inflation, collapsing stock markets and the collapse of cryptocurrencies.

The value of watches has even increased by almost 13 percent from January to May of this year compared to 2021, which was already a record-breaking year for the industry. However, Swiss watchmakers are becoming increasingly anxious about the future as things may not be what they seem.

Growth and Expansion

Businesses throughout the economic spectrum have reported unprecedented levels of sales and efforts to expand, indicating that the good times will last. For instance, CD Peacock’s 20 million-dollar-plus building project is being driven by growth. Furthermore, the Federation of the Swiss Watch industry reports that watch shipments have increased by 2.3 percent year over year, and higher priced wristwatches are currently in demand.

Price Drops and Uncertainties

Nevertheless, there are cautionary signs that suggest the luxury watch industry could face uncertainties in the near future. The average price sags of over seven thousand dollars per piece in 2021 are causing concern. As of the end of 2021, luxury watches were responsible for around 75 percent of the total value of Swiss watch exports. The resale prices of the most sought-after contemporary timepieces, including Rolex Daytona, Patek Philippe Nautilus, and Adama Bigger Royal Oak, have plunged by as much as 50 percent since their January highs, causing a market decline.

Speculators and Investors

Many experts attribute the excitement over the past two years to speculators flush with stimulus, cash, and cryptocurrency wealth. They contributed to the market frenzy by consistently paying three to five times the retail price on secondary channels for rare models. Nonetheless, the spending rush was broken up by the crypto market crash in May, and many people now have to be reminded to ensure whether or not they are true watch enthusiasts or they simply want to make fast cash.

Polarizing Brands and Competition

Many members in the Swiss Watch industry are worried about the polarization that divides top-performing brands from everyone else, which could lead to fewer choices for consumers in the future. Among younger consumers, the increased popularity of non-Swiss fashion names like Gas, Puma, and Armani is putting pressure on businesses that produce moderately priced timepieces under the Swiss made label.

Industrial Base and Independent Suppliers

Luxury sales are crucial but are not enough to keep the watch industry afloat in the future. The need for economies of scale to recoup investment costs leads us to conclude that a solid industrial base is essential. The Swatch group and Rolex are two successful watchmaking firms that have upgraded their manufacturing models to meet rising demand. Several companies have increased their in-house manufacturing capabilities and acquired subcontractors and the mechanical movements and component industries during the past decade. In turn, this gives labels greater power in the protection process.

Today, independent suppliers are hard for smaller businesses to obtain due to a lack of available subcontractors, making things considerably more complicated. The high quality Swiss watch market directly results from the large number of highly educated people employed in the industry, making the sector rely heavily on the efforts of its many self-employed professionals and small company owners.

Though anxieties and uncertainties loom in the watch industry, it remains resilient and adaptable to challenges. The industry’s sustained growth depends heavily on watch enthusiasts who are pushing the industry forward. It is encouraging that a growing number of young people are showing interest in Swiss watches. Still, observers worry if the Swiss watch industry will have hundreds of brands for them to choose from in the next 10 years. Independent watchmakers, although unable to create many watches each year for wealthy enthusiasts, find some solace in the flourishing market.