Exports for Swiss watchmakers had reached CHF 24.6 billion by the end of November 2023, just shy of 2022’s total of CHF 24.8 billion.
If growth for December is maintained at 7.7% — the average growth for the first 11 months of last year — 2023 will have ended with Swiss watch exports worth a record CHF 26.7 billion.
That translates to retail sales of around $50 billion.
Sales at retail have been cooling across Western markets, including the mighty USA, which has seen its key holiday season affected by a squeeze on household budgets and lower consumer confidence than 2022.
Mainland China slipped from the world’s largest market for Swiss watches to trail the United States by almost CHF 1.3 billion for the January to November period of 2023, but Hong Kong’s growth has returned after the ravages of covid restrictions, and Macau is also benefiting from Chinese tourists shopping closer to home.
I am concerned that too many over-priced watches were manufactured in the second half of last year.
Export data tells us these watches got as far as their intended countries, but retail figures suggest they were not all bought by end consumers.
This increases the danger of stock being discounted or dumped on the grey market, where operations that have blossomed in sophistication and expertise will undercut authorised dealers and weaken primary demand still further.
Although I think 2024 will feel a lot more “normal” than recent post-pandemic boom, I remain positive about the year ahead.
Improving economy
Inflation has been falling dramatically across the world and incomes are now rising in real terms again.
Financial analysts are predicting multiple interest rates from major central banks, which will improve household finances, particularly for those with mortgages.
Crypto boom
Bitcoin started this year trading at $45,000, its highest price since April 2022.
The crypto-currency’s value has almost trebled since the beginning of last year, and there is no reason to think that the recovery will not feed into demand for luxury watches, particularly those Rolex, AP and Patek Philippe pieces seen as a good bet by speculators.
Wealth
The number of savers in the United States with $1 million in their retirement accounts increased by around 100,000 people in 2023, helped by a 24% rise in the S&P 500.
That is on top of the wealth amassed in property and other assets, most of which held their value last year and have the potential to rise in 2024.
There is no shortage of wealth in the UK either, with 388 people living in London valued at $100 million or more.
Across the country around 2.5 million, almost one in 20 of the population, are classed as millionaires.
Better-than-ever retail
Specialist retailers and the watch brands they work with have invested tens of millions on both sides of the Atlantic to improve the experience for customers, and to give their businesses the best intelligence on their operations through sophisticated CRMs and other systems.
This capital expenditure is supporting demand, although I expect to see margins squeezed because the cost of customer acquisition and retention has risen.
Outlook
Realistically, maintaining global watch sales of around $50 billion will require fresh tactics from brands and retailers.
It will require solid business fundamentals of cost control, great leadership and expert sales and marketing, which thankfully we have in abundance in our vibrant and resilient sector, but also creative thinking, fresh ideas and flawless execution.
Paradoxically, although I am expecting a return to a more normal market, it is not the same market as before the pandemic since so much more investment has come into the sector (new and pre-owned), there are more wealthy people in the world (an extra one million millionaires were minted in the US, alone, in 2021), and watches have risen up the ranks of luxuries people want to spend their money on.
