The Swiss luxury watch industry, which experienced an unprecedented boom during the pandemic, is now facing a downturn. The surge in interest, beginning in 2020, was driven by wealthy consumers who developed a keen interest in luxury mechanical watches from renowned Swiss brands such as Audemars Piguet and Rolex. This led to a significant boost in Swiss watch exports, reaching nearly 25 billion francs ($28.5 billion) in 2022. However, the industry is now confronting various challenges that are impacting its growth.
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External factors like higher interest rates and uncertain economic growth, combined with internal issues such as aggressive pricing strategies and increased production, are contributing to a shift in consumer behavior. Once eager to invest in luxury timepieces, consumers are now becoming more cautious about spending. Recent months have seen a cooling of demand, and secondary market prices for luxury watches have declined. Industry executives, ranging from historic brands to newer market entrants, are acknowledging this slowdown. Francois-Henry Bennahmias, CEO of Audemars Piguet, remarked on the uniqueness of the 2021 and 2022 surge, noting that such a phenomenon is unlikely to occur again.
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The broader luxury goods sector, including companies like LVMH and Kering SA, is also experiencing weakened sales due to inflation and recession concerns. The downturn in the watch sector was highlighted by Richemont’s report of a decline in watch sales, particularly in the Americas. Used watch values have also been falling. The Bloomberg Subdial Watch Index, tracking the most-traded models, has shown a significant decrease since its peak in April 2022. The initial boom began unexpectedly with the onset of the pandemic. Production halts and store closures during the early days of COVID-19 lockdowns led to massive backlogs and soaring waiting lists once operations resumed.
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This demand extended across the market spectrum, from high-end models to more affordable ones like the Swatch MoonSwatch. However, as the market stabilizes post-pandemic, there has been an increase in stock levels, and consumers are diversifying their spending. Industry veterans like Jean-Claude Biver have observed this pattern of overproduction in response to high demand, cautioning against complacency and emphasizing the importance of prioritizing customer needs. In response to these market changes, some brands have increased their prices. Rolex, for instance, raised its prices twice in 2022, followed by price adjustments in 2023 in the US and UK. Other brands like Omega, Longines, Tissot, Jaeger-LeCoultre, and A. Lange & Sohne have also adjusted their prices. The Swiss watch industry, a key part of Switzerland’s economy and cultural identity, is now adapting to these new market conditions, seeking a balance between production, pricing, and consumer demand.
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