What happened
The appetite for Swiss watches remains steady, with total exports in April growing 6.8 percent to 2.26 billion, according to the Federation of the Swiss Watch Industry.
This growth was largely driven by mainland China, where exports achieved a substantial year-on-year growth of 107.8 percent as consumers flocked to stores once lockdown measures were lifted. Hong Kong was up 15.8 percent YoY in exports, while Japan rose moderately at 5.4 percent.
In contrast, exports of Swiss timepieces to the US fell 4.9 percent YoY — the first decrease in over two years. Singapore and Italy similarly reported low- to mid-single-digit declines.
The Jing Take
In 2021, the US overtook China as the world’s largest market for Swiss watches. A break in this 27-month growth streak reiterates the slowing consumption in North America; although US consumer spending accelerated at its fastest pace in nearly two years in January 2023, sluggishness in February and March dampened momentum entering the second quarter.
The decline in US luxury consumption has impacted brands across the luxury industry. Watchmakers such as Patek Philippe and Zenith as well as fashion players like Burberry and Michael Kors’ parent Capri have recently flagged slowing sales in the region. On May 23, 2023, investor fears over a US spending slowdown even caused European-listed luxury stocks including LVMH, Hermès, and Kering to shed 30 billion in market value.
The US is not the Swiss watch market’s only challenge. While exports are up in value, volume continues to fall (in other words, a small number of watches accounts for the majority of value). In 2022, the industry exported only 15.8 million watches, up just 0.3 percent from 2021 — a far cry from the 30 million units shipped out in 2000. The rise of smartwatches has decimated the entry-level segment of Swiss watches, with the exception of the ever-popular MoonSwatch, states a Morgan Stanely report.
As such, more luxury watchmakers have turned their eye to well-off Chinese consumers. During the Watches and Wonders 2023 event in late March, 10 luxury watch brands including Piaget and IWC Schaffhausen launched over 40 timepieces on Tmall Luxury Pavilion. These players have also connected to local consumers by creating limited edition watches that feature zodiac animals or other elements of traditional Chinese culture.
With mainland China and Hong Kong combined making up the largest market globally for Swiss watches, developing innovative omnichannel tactics and localizing marketing and product designs will be crucial for offsetting future slumps in North America.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.