Swiss Watchmakers Aren't Worried about Slowing Growth in China

Reporting from Baselworld, Reuters quoted a number of watch industry executives who said they expect to continue to see strong growth in 2019. This is despite a slow start to 2019 in which Swiss watch exports have risen just 2.1 percent in the first two months of the year. In 2018, Swiss watch exports rose 6.3 percent.

“We’re aiming for double-digit growth in our watch business this year,” Reuters quoted Jean-Christophe Babin, chief executive of LVMH’s jeweller Bulgari. Meanwhile, Oris said sales in the United States, its biggest market, were growing strongly. That trend was confirmed by retailer Watches of Switzerland, which also reported firm UK demand, particularly for Rolex, Patek Philippe and Audemars Piguet products.

This is in line with the general trend that the super-high end is doing just fine, even as sales at the middle- and low-end continue to shrink. In 2018, the market for watches priced over CHF 3,000 grew by 7.5 percent, while the market for watches under CHF 500 shrank.

For its part, Patek Phillipe said it plans for this year’s sales to be similar to last year, and that it would again deliver about 62,000 pieces. Oh, and what of the news that Patek Phillipe might be coming up for sale? Not happening, president Thierry Henry said.

As the Chinese market boomed over the last few years — it grew 12 percent in 2018 — many brands chased easy volume growth in the country. But, as demand dries up, this means excess inventory is easy to come by, especially in the grey market, where watches can be had for cheaper than authorized dealers' listed MSRPs. Brands like Rolex and Patek largely have avoided this trap, maintaining the strength and exclusivity of their brand names because of it.

The value chain of the watch industry is still undergoing a fundamental shift: brands are focused on owning their own distribution channels and reaching consumers directly — either through their own boutiques or online — which means moving away from the old third-party retailer and distribution model.

Read the rest of Reuters’ report here.