Why are Swiss watch exports to China plummeting?

    Swiss watch exports declined in May, with a 2.2% drop in value driven by tanking shipments to mainland China and Hong Kong.
    Chinese actor Wang Yang at this year's "Watches and Wonders Geneva" luxury watch fair in Geneva. Image: Getty Images
      Published   in Hard Luxury

    Swiss watch exports declined sharply in May, raising fresh questions about the underlying causes. The latest figures from the Federation of the Swiss Watch Industry reveal a 2.2% year-on-year drop in value to 2.3 billion Swiss francs ($2.6 billion). This slowdown is predominantly attributed to significant drops in shipments to mainland China and Hong Kong, two crucial markets for Swiss watchmakers.

    In May, exports to mainland China fell 18%, while those to Hong Kong plummeted 23%. Analysts attribute this decline to several economic factors. A downturn in real estate values in China has dented consumer sentiment, leading to reduced spending on luxury items. The strength of the Swiss franc has also played a role, making Swiss watches more expensive and less attractive in some markets.

    This is the latest in a rollercoaster ride for the Swiss watch industry since January. Swiss watch exports began the year positively, with January seeing a 3.1% increase in value to 1.9 billion Swiss francs ($2.16 billion) compared to the previous year. Growth was propelled by watches made from precious metals, which saw a 13.4% increase in exports value. Exports of steel and bimetallic watches, however, declined in value by 2.8% and 3.2%, respectively. The US and China were among the top markets, with exports to China increasing 5%.

    In February, the Federation of the Swiss Watch Industry announced a 3.8% drop in Swiss watch exports to 2.15 billion Swiss francs ($2.44 billion), with shipments volume dropping 5.2% YoY to 1.2 million pieces. The body attributed this primarily to reduced shipments to mainland China and Hong Kong, with Swiss watch exports to the former falling 25% compared to the previous year, and exports to the latter declining 19% YoY.

    Data: Federation of the Swiss Watch Industry
    Data: Federation of the Swiss Watch Industry

    The decline only gained pace in March, with Swiss watch exports falling 16.1% YoY that month to $2.16 billion. Again, the federation attributed the decline largely to plummeting demand in mainland China and Hong Kong, which saw drops of 41.5% and 44.2%, respectively.

    All of this added up to a difficult first quarter of 2024 for the Swiss watch industry, which saw total exports fall by 6.3% compared to the same period in 2023. All categories of watches were affected, with exports of stainless steel watches dropping 28.2% in value and 23.2% in volume. High-end watches priced above 3,000 Swiss francs ($3,360) saw a 9.9% decrease in value, while mid-range watches between 500 and 3,000 Swiss francs ($560 to $3,360) plummeted by 38.2%.

    Export performance in April varied across markets, with the US seeing an 11.6% increase to 338.7 million Swiss francs ($380 million), Japan growing by 13.6% to 172.1 million Swiss francs ($193.2 million), and Singapore up by 12.5% to 145.5 million Swiss francs ($163.6 million). Meanwhile, exports to China fell by 7.5% to 187.2 million Swiss francs ($210.3 million), and Hong Kong remained stable with a 0.2% increase to 169.7 million Swiss francs ($190.5 million).

    The global luxury watch market remained highly complex in the first half of 2024, with markets like the US outperforming as demand in mainland China and Hong Kong was muted. Despite the decline in key markets, there are mixed signals across different segments and regions.

    While exports of expensive watches priced above 3,000 Swiss francs ($3,360) increased slightly in value, the number of units sold fell. Conversely, mid-range watches between 500 and 3,000 Swiss francs ($560-$3,360) saw a 16% drop, and lower-priced watches fell by 1.2%.

    In 2023, buyers from mainland China accounted for roughly 30% of global Swiss watch sales, according to Morgan Stanley. Despite plummeting exports to mainland China and Hong Kong so far this year, there are indications of resilience and potential growth. Smaller, independent luxury brands are faring better, particularly among seasoned collectors in China.

    “China remains a giant, accounting for a third of the global market, and watch lovers are increasingly eager to discover alternatives to well-established models,” François-Marie Neycensas, Chief Marketing Officer at Reservoir Watch, recently told Jing Daily.

    One factor impacting demand in mainland China this year is Beijing’s ongoing crackdown on extravagant displays of wealth. The Chinese government has been pushing for more modest behavior among its citizens, particularly public officials and high-profile individuals. This campaign is likely discouraging the purchase of luxury items such as high-end watches, which are often seen as status symbols.

    Another factor is that Chinese consumers are increasingly purchasing luxury goods abroad. Post-pandemic, Chinese tourists are once again traveling and shopping overseas, particularly in destinations like Japan and Singapore. This trend could be shifting where these purchases are recorded, potentially underreporting domestic sales while boosting figures in other markets.

    Data from the recent Watches & Wonders event in Geneva supports this. A significant portion of the 49,000 attendees were from Asia, many of whom were Chinese. This international interest suggests that while domestic sales might be down, Chinese consumers remain interested in luxury watches and are even more interested in buying them abroad.

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