Which way now for British watch businesses?

The watch market was far from a single story in 2017, with very different challenges and opportunities for major multiples, family owned independents, online stores, luxury boutiques and fast fashion shops. Will the UK start to grow more consistently and predictably across the watch retail landscape in 2018? Not likely, predicts retail analyst GfK‘s client insight director Paul Mitchell.

Whilst the watch market in Great Britain continues to record overall value growth, there are several different stories that warrant our attention. At the beginning of a new year, we can look back at what has gone and we can look forward to what the future may have in store.

There was never much doubt that the long term value growth seen in the UK market over the past seven years would continue in 2017 and, whilst growth slowed down during the course of the year, sales increased 9.1% over the full 12 months.

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Luxury brands drove this performance, with sales over £1,000 up 22.1% in value year on year, a continuation of a trend seen since the Brexit vote. Below that price point, it has been a different story. Sales between £500 – £1,000 fell by 2.0%, and the market under £500 is proving consistently challenging for retailers and brands alike; value sales here were down –10.7% in 2017.

That is not to say that there were not some success stories at the lower end of the market in 2017, but with volume sales down by -11.1% across the market, the challenge is clear: how to maximise and retain value in a shrinking market if you don’t operate at the high end of the market? The answer could lie in many different areas, or combinations of areas, including innovation, renewed marketing campaigns, the optimisation of the assortment offered, ensuring the right product is positioned at the right price and a deep understanding of consumer needs and behaviours.

Previously, online has been a focus area and sales through this medium grew over time, though whilst the full annual performance for this channel is positive (+4.3%), online sales in December were down -3.1% against December 2016, a clear indication that growth in this channel cannot be guaranteed in the future.

There is also a different story to tell when looking at Gents and Ladies watches, with the former up 12.5% in value in 2017 and the latter down -0.7% adding more complexity when considering how to maximise sales in 2018.

So what can we expect in the coming year? 2017 introduced us to the smart home en masse, while the connected car gained traction, and voice-assistance struck a chord. Looking forward, expect the Internet of Things to become a firmer reality in 2018. Artificial intelligence continues to develop towards increasingly intimate and personalised interfaces. It will be interesting to see what role Smart and Connected Watches will play within this. What is certain is that there will be continued innovation.

Within the traditional watch market the level of innovation, in the form of new models, has remained remarkably consistent over time. In any given year, new watches introduced in that year generate around 10% of the market’s value. The following year the contribution from these models rises to 20-25%, before falling away to 15-20% the year after and then dwindling further after that. The advent of Smart and Connected watches has not yet had a major impact on the traditional watch market, but they do represent a step change in terms of product innovation.

Outside of the Jewellers, Core Wearable products including Health & Fitness Trackers and Wrist Sport Computers, as well as Smart and Connected Watches, are gaining traction and growing sales. The key to any future growth for these products and their consequent impact on the watch market will be whether they meet a specific consumer need and what recognisable benefits they provide. Only if these two considerations are met will these products be truly successful, but we do know that there are several key underlying consumer trends that will be important in the year ahead that will have a bearing on developments in this area.

People are leading busy, stressful lives, and are looking for solutions to make their lives easier. Technology enables them to access things everywhere and also meets a growing consumer need for retail to be more experiential, we are seeing leading retailers make use of AR and VR environments. What a product looks like and the superficial aspects it produces are now less important than whether it can be tailored to specific needs and whether it fits into individual lives and situations. While consumers are looking for solutions to problems, they also want to enjoy themselves and get on with experiencing life.

How this plays out within the watch industry over the next few years will be interesting to see. There will always be a market for traditional wrist watches and high end brands will always hold appeal for their advocates, but technology and innovation will have an impact, particularly at the lower end of the market. Previously this was focused on the growth of online sales and the need to compete in this space, going forward it may be more product led, but ultimately whatever is offered to consumers will have to meet their needs if it is to have a notable story in the future.

2018 CONSUMER TRENDS TO WATCH

Considered consumption
Brands need to be socially responsible and be clear about the provenance of their products so that customers can shop without adding to their guilt and insecurity.

Revaluing value
Consumers are on a never-ending quest for good value in everything they consume from a high street coffee to a luxury Swiss watch.

Fitspiration
Consumers are looking to manage the stress in their daily lives and are looking for ways to maintain their physical and mental wellbeing.

Green guilt
Today’s customers do not want to add to the planet’s suffering, in fact they want to contribute to its healing.

Individualisation
People want something a little different, ideally unique, and tailored to their tastes, budgets and lifestyles.

Instant everywhere
Customers expect goods and services to be immediately and constantly available. Indeed, a growing tribe are willing to settle for an inferior product if it’s available when they need it.

Redefining home
Smart technology for the home is going mainstream, giving businesses an opportunity to learn more about customer behaviour and come up with solutions that work in harmony with their lives.

Experiencing life
When the going gets tough, consumers’ priority is to maintain the standard of living they’ve enjoyed previously by whatever means, and they’ll look to brands and companies to help them do this as they enjoy themselves wherever possible.

Streamlined convenience
Consumers are increasingly willing to pay for products and services that make their lives easier.

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