Can China save the Swiss watch market?

    The luxury watch industry is looking to affluent Chinese consumers as a stabilizing force in 2024, highlighted by sustained interest in China despite the country’s economic headwinds.
    Chinese attendees were noticeable at the recent Watches & Wonders event in Geneva. Image: Getty
      Published   in Hard Luxury

    The global luxury watch industry faces two crucial questions in 2024: Has the luxury watch bubble popped? And if so, can demand from mainland China prop up the industry?

    Major indices paint a bleak picture for the luxury watch industry in the post-pandemic era. The Bloomberg Subdial Index, which monitors the pricing of the top 50 luxury watches traded by value, is down 1.2% over the past 30 days and a whopping 36.9% over the past two years.

    Image: Bloomberg Subdial Index
    Image: Bloomberg Subdial Index

    Meanwhile, the Wristcheck 100 index, which measures the 100 most traded models in the secondary watch market, is down 0.47% over the past month and an even more jarring 56.50% over the past 24 months.

    While the Bloomberg Subdial index notes still-high interest in so-called luxury “grails” like the Rolex Submariner Date #126610LN and Patek Philippe Nautilus Blue #5711/1A-010, the prices of other Rolex models like the Daytona Rose Gold #116505 and Daytona Yellow Gold #116528 have softened.

    The Wristcheck 100 index shows declining prices for certain Patek Philippe models, such as the Nautilus Travel Time Rose Gold Blue Dial #5990/1R-001 (down 0.6% in the last 90 days) and Nautilus Moonphase Rose Gold Brown Dial #5712/1R-001 (down 1.5% over the past three months).

    In April, global Swiss watch exports fell 16.1% YoY to a total of $2.16 billion, due in no small part to flagging demand in Greater China. In March, exports to mainland China and Hong Kong plummeted 41.5% and 44.2%, respectively, contributing to an overall decrease of 6.3% in Swiss watch exports in Q1 2024 compared to the previous year.

    These figures followed a difficult February for Swiss watchmakers, with the Federation of the Swiss Watch Industry reporting a 3.8% YoY exports drop to CHF 2.15 billion ($2.3 billion) and a 5.2% decrease in the number of watches shipped that month, totaling 1.2 million pieces.

    Not all of the news is bad. There are indications that prices are finding a floor after two years of falling. Prices for waiting list watches from the secondary market's “big three” – Rolex, Patek Philippe, and Audemars Piguet – have shown signs of stabilization. According to Morgan Stanley, the price decline from Q4 2023 to Q1 2024 was minimal, with Rolex dropping just 1.1% and Patek Philippe 1.4%.

    In contrast, Audemars Piguet prices actually rose 0.1%, based on data from WatchCharts and Morgan Stanley Research. This recent trend marks a significant shift from the steeper declines experienced over the past year, when average secondary market prices fell by 8.6% for Rolex, 13.1% for Patek Philippe, and 13.6% for Audemars Piguet.

    Are the numbers on China accurate?#

    Despite recent disappointing results for major luxury watchmakers, there are indications that Chinese demand is better than the figures suggest. A report by the Federation of the Swiss Watch Industry (FHS) reveals that mainland China and Hong Kong combined accounted for over CHF 5 billion (approximately $5.49 billion) in watch purchases in 2023. That year, buyers from mainland China made around 30% of all global Swiss watch purchases.

    Further emphasizing the strong market presence of Chinese buyers, an estimated 40% of the 49,000 attendees at the recent Watches and Wonders fair hailed from Asia, with a considerable number coming from China, according to CEO Matthieu Humair.

    Chinese actor Zhu Yilong poses at this year’s Watches & Wonders event. Photo: Chopard
    Chinese actor Zhu Yilong poses at this year’s Watches & Wonders event. Photo: Chopard

    Underlining the importance of Chinese clients, high-profile brand ambassadors spotted at the fair included Jaeger Le-Coultre ambassador Jackson Yee, Zhu Yilong (Chopard), and Wang Yang (IWC), while personalities like Zenith ambassador Xiao Zhan engaged fans through livestreams, connecting directly with luxury watch enthusiasts and potential buyers.

    A silver lining#

    Smaller independent luxury brands are expected to be less hard-hit by the global watch industry softening after its pandemic-era boom. Producing far fewer watches at a higher price point for a highly devoted clientele, the likes of Czapek and Cie and F.P. Journe are seeing their fortunes rise as more seasoned Chinese watch buyers seek out less widely purchased brands to build their collections.

    Chinese watch lovers, many of whom already boast impressive collections of Rolex, Audemars Piguet, or Patek Philippe timepieces, are gravitating towards newer and more niche independent brands. The dilemma for newer independent brands is whether to target these buyers globally, or to expand within mainland China.

    As François-Marie Neycensas, Chief Marketing Officer and Partner at the Swiss-made watch brand Reservoir, tells Jing Daily, “Since Q3 2023, the context is undoubtedly challenging for the luxury watches category in [mainland] China. But China remains a giant, accounting for a third of the global market and watch lovers are more and more eager to discover alternatives to well-established models or brands with less and less accessible pricing.”

    This growing demand is echoed by Nicolas Freudiger, co-founder of Geneva-based sustainable luxury watch brand ID Genève Watches. Says Freudiger, “What I can tell you is [from] the perspective of a young upcoming brand, we have a lot of demand in Asia, especially from mainland China, but at the moment, we are not able – due to capacities – to tackle this opportunity.”

    ID Genève sold the entire limited-edition run of its Circular C Edition Lab timepiece, priced from $6,025. Photo: ID Genève
    ID Genève sold the entire limited-edition run of its Circular C Edition Lab timepiece, priced from $6,025. Photo: ID Genève

    Citing recent data that indicates sustainability is becoming a key purchase criteria among Chinese buyers, Freudiger adds, “I think personally that we will find our community [in China], especially in Shanghai. In my opinion, the ecological transition might go faster [there] than in Europe due to the political landscape.”

    ID Genève’s expansion plans will see the brand launch in the Middle East and India this year, with Asia to follow in 2025.

    Reservoir, too, plans to expand into China in the near term. Notes François-Marie Neycensas, “We are actively working on soon introducing Reservoir watches to Chinese clients and tackle this opportunity with innovative timepieces with a single hand on the dial, at very well-positioned prices.”

    Reservoir watches range from around €4,000 ($4,282) to upwards of €62,000 ($66,380), putting them in a competitive position in the independent category.

    A sustained appetite for luxury#

    Despite China’s economic slowdown, the allure of watches among China’s affluent remains intact, with luxury timepieces viewed as a viable alternative investment to real estate and stocks, which continue to suffer.

    According to the latest Hurun Chinese Luxury Consumer Survey, China’s wealthy has a sustained appetite for tangible luxury items. Last year, Chinese high net-worth individuals (HNWIs) spent an estimated 490 billion RMB ($70 billion) on “traditional” luxury items, including watches, an increase of 8% YoY.

    Swiss-made Reservoir is looking to tap growing demand among mainland Chinese consumers for independent and unique timepieces. Photo: Reservoir
    Swiss-made Reservoir is looking to tap growing demand among mainland Chinese consumers for independent and unique timepieces. Photo: Reservoir

    In lower-tier markets in eastern and central China, many of which are home to fewer luxury boutiques than their coastal counterparts, pockets of opportunity remain for the taking. Looking to capture pent-up demand, Van Cleef and Arpels is prioritizing new boutiques in eastern and northern China, consciously avoiding southern cities that are closer to the duty-free shops of Hong Kong.

    ‘Too much merchandise’#

    In response to a post-pandemic glut in the secondary market, luxury watch manufacturers are recalibrating their supply chains to maintain brand exclusivity and avoid market saturation.

    This cautious approach is intended to prevent further oversupply, which could force retailers to discount prices.

    As Frank Müller, former head of Glashütte Original, told Bloomberg, “The hype is over because there is too much merchandise.” By controlling shipment volumes, watchmakers could help stabilize prices and preserve the high-status allure of their products.

    Joel Faith, director of Atlas Watches, notes that the days of easy sales are passing. As Faith recently told City A.M., "Previously, [authorized dealers] could call up a customer for any watch and have it sold,” adding that “nowadays that’s not the case because a large volume of their stock trades below retail price – some of it quite considerably below retail price – and their customers aren’t really buying those watches.”

    As with many areas of the luxury industry, the road to recovery could begin in China. The recent outsized presence of Chinese attendees and collectors at Watches & Wonders, growing demand for niche brands, and pockets of wealth in inland areas could augur opportunities for large and small watchmakers in the remainder of 2024.

    This means brands need to continue investing in China rather than pulling back. As Edouard Meylan, CEO of Schaffhausen-based H. Moser & Cie., recently told Jing Daily, “In the next five years, Greater China will be our most important strategic market, globally. We will invest more in Greater China than anywhere else in the world because it is a relatively new market for us, and we need to become more visible.”

    • The luxury watch industry has experienced a significant downturn, with the Bloomberg Subdial Index showing a 36.9% decrease over the past two years and Swiss watch exports to Greater China falling sharply by 41.5% and 44.2%, respectively, in March 2024.
    • Despite declines, data from Morgan Stanley indicates that prices for high-demand luxury watches in the secondary market are beginning to stabilize, with Rolex and Patek Philippe experiencing minimal QoQ declines in early 2024.
    • Brands should focus on adjusting their supply chains to manage production closely and maintain exclusivity, thereby preventing market saturation and helping stabilize prices, as suggested by industry experts commenting on the current excess in merchandise.
    • With the strong presence of Chinese consumers at international events like Watches & Wonders and a sustained interest in luxury goods, brands could find growth opportunities by expanding into underserved Chinese regions and catering to the nuanced tastes of affluent Chinese watch collectors.
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