Will the US or China lead the global luxury watch market?

This article will soon be exclusive to Jing Daily Pro* subscribers. The Pro* membership will feature our most focused coverage yet as we double down on our investment in research, trend forecasting, and practical insights for brands and executives doing business in China. Pre-register for a free trial, coming later this summer. - For more than a decade, the Greater China region has powered the growth of the Swiss watch industry. Between 2010 and 2023, mainland China and Hong Kong jointly imported 67.5 billion Swiss francs ($75.5 billion) worth of Swiss watches, nearly twice as much as the US. This accounted for nearly 23% of global Swiss watch exports over that time period, according to FHH historical data sourced by Jing Daily. However, Greater China’s dominance has waned since the onset of the pandemic, while the influence of the US has increased. In the first four months of 2024, Swiss watch exports to China and Hong Kong fell by around 18%, while exports to the US rose by 4%. Watch industry analyst Oliver Müller estimates that the luxury watch market will remain weak in greater China until mid-2025, while the US will continue to be the top global market for the next two years at least. Müller notes that Greater China may have delivered “El Dorado growth with minimal effort from the watch brands” over the past two decades, but such rapid growth is unsustainable in the long term. “Any brand should have understood by now that it needs to reduce its dependency on the Chinese market,” he adds. Indeed, Omega and Vacheron Constantin have gradually reduced their dependence on China over the past eight years to focus more on other markets, according to a Morgan Stanley and LuxeConsult watch industry report released earlier this year. Since 2017, Vacheron Constantin has seen its Chinese sales decrease from 50% to 30% of its total sales, and the brand has focused more on the US in a strategic move that worked in its favor. For the first time in Vacheron Constantin’s history, its sales exceeded 1 billion Swiss francs ($1.12 billion) in 2023. China, an indispensable growth driver However, despite discouraging market sentiments and ongoing economic concerns in China, some popular Swiss watch brands remain eager to expand in the region. Currently, Greater China generates only 10% to 15% of Hublot’s global sales. Still, growth in the region is important for Hublot, “because the average price of Hublot watches sold in Greater China is the highest among all our markets,” reveals Ricardo Guadalupe, CEO of Hublot. The brand’s higher-priced Big Bang and ceramic watches perform well in Greater China, whereas entry-level watches are more popular in the US – Hublot’s biggest market. Hublot started establishing its retail network in the US, mainland China, and Hong Kong around the same time, between 2009 and 2010. Since then, the brand has expanded more in the US, where it has 58 points of sale, compared to just 16 in China and 18 in Hong Kong. “This is because we entered China later than other brands, thus losing out on prime retail space,” Guadalupe says, adding that the brand will not open any new boutiques in mainland China this year, but plans to host pop-ups. “We first want to focus on aligning the local prices of watches with other markets because Chinese consumers are sensitive to price differences,” says Guadalupe. The US is also the top market for Breitling SA, which operates 250 points of sales there. Currently, Chinese buyers account for less than 10% of Breitling’s global consumer base. Breitling entered mainland China in 2018, much later than most watch brands, but it is rapidly expanding its retail presence in the region. So far, it has opened 70 points of sale in mainland China and 20 in Hong Kong. While some watch brands are pausing their China expansion plans due to discouraging luxury market forecasts, Breitling is set to launch another 15 boutiques in the Chinese mainland in 2024, “because we want to build a strong local market here rather than rely on tourism-driven growth,” Breitling CEO Georges Kern, tells Jing Daily. Kern notes that he is not discouraged by China’s highly publicized crackdown on luxury exhibitionism, because “Breitling is positioned as a casual, inclusive and sustainable luxury watch brand and this will support its growth in China.” Barriers slowing China’s growth Although China remains one of the leading markets for the luxury watch industry, some fundamental barriers limit its long-term dominance. According to luxury watch industry analyst Müller, the Chinese government needs to lower import duties if the Swiss watch industry wants to capture an even bigger part of Chinese luxury spending. But, Müller says, “if you read what their official standpoint is on luxury overall, it is clearly not a primary goal.” According to Edouard Aubin, equity analyst at Morgan Stanley, middle-income consumers in China are currently under economic pressure, “because two-thirds of Chinese household wealth is tied up in real estate which is depreciating,” adding that even though the Chinese stock market has seen a slight recovery recently, it is not enough to offset the negative impact of the housing market. As for the future of the luxury watch industry in China, Aubin says he “wouldn’t be too bearish,” noting that when the Chinese economy bounces back, the middle-class population will increase and will likely continue fueling the growth of the watch industry.

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Will the US or China lead the global luxury watch market?