In a significant blow to the luxury watch market, Swiss watch exports saw a staggering decline of 12.4% in September 2024, marking a troubling trend for an industry once considered resilient against economic fluctuations. The primary catalyst for this downturn is a notable 50% drop in shipments to China, a country that has been a cornerstone of luxury watch demand, especially for high-end brands.
Data from the Federation of the Swiss Watch Industry revealed that total exports valued at approximately 1.9 billion Swiss francs (around $2.2 billion) not only reflect a dip from the same period last year but also underline a broader crisis as global consumers tighten their spending. The luxury sector, which experienced an initial boom following the pandemic, now faces a reality check as the exuberance of post-pandemic consumer behavior wanes.
The Role of the Chinese Market
The decline is predominantly attributed to weak sales in Asia, with mainland China and Hong Kong contributing to two-thirds of the monthly export decline. As reported, a comprehensive analysis of the first nine months of 2024 reveals an overall decrease in exports by 2.7% compared to the previous year. Chinese consumers, known for their affinity towards luxury timepieces, are reassessing their buying habits amidst a cooling economy, leaving Swiss manufacturers grappling with the fallout.
This trend has not spared even the more expensive segments of the market. Exports of watches priced above 3,000 Swiss francs have seen a significant value reduction of 7.3%. While these luxury items had displayed resilience earlier in the year, they are now feeling the effects of a market correction.
Brand Performance Variances
Despite the overall downturn, certain brands like Rolex and Patek Philippe are still reporting growth in sales. According to Jean-Philippe Bertschy, head of Swiss equity research at Vontobel, the overall export decline would have been more pronounced had it not been for these high-performing brands. This phenomenon indicates a bifurcation in the luxury market, where top-tier brands continue to thrive while others struggle to stay afloat.
The Federation, alongside various horology worker groups, has voiced concerns regarding the significant drop in demand, which could jeopardize the operations and employment within many Swiss watchmaking companies. In response to the crisis, there have been calls for the Swiss National Bank to intervene and take measures to devalue the strong Swiss franc, which increases export costs.
Industry Adjustments and Future Outlook
In light of falling orders, some brands have initiated furlough programs supported by the government’s “short-time” work scheme. Notably, Sowind Group’s brands, including Girard-Perregaux and Ulysse Nardin, have furloughed about 15% of their workforce. This type of drastic measure indicates the severity of the situation and the industry’s attempt to navigate these troubled waters.
Component suppliers, crucial to watch production, are also feeling the strain. Reports of prolonged holidays and reduced work hours reflect the cascading effect of diminished orders as these suppliers adapt to fluctuating demands.
The recent downturn serves as a stark reminder of the luxury sector’s vulnerabilities. Economic headwinds, rising production costs, and shifting consumer preferences are reshaping the landscape. What remains to be seen is how luxury watch brands will recalibrate their strategies to not only survive but possibly thrive in a new economic reality.
Luxury goods have always been seen as a status symbol, and the resilience of brands like Rolex indicates that there remains a segment of affluent consumers willing to invest in high-caliber watches. However, as the overall market faces pressures, only time will tell if the Swiss watch industry can innovate and adapt to reclaim its status as a leading player in the global luxury market.
