Swiss global watch exports booming again
The growth outlook is good, with global retail sales picking up and new positive trends emerging
SWISS watch exports are booming once again, and each watch is fetching a much higher price than before as the industry sees a strong revival in demand. The growth outlook is good, with global retail sales picking up and new positive trends emerging, which bode well for the future growth of the watch industry.
The total number of watches exported from Switzerland last year was 15.7 million pieces, up a robust 14.2 per cent in value over the previous year. Swiss watch exports in 2021 were even higher than in 2019 pre-Covid with sales valued at 22.1 billion Swiss francs (S$31.9 billion) last year. The Swiss watch industry thus seems to be in a stronger position today than before the outbreak of the Covid pandemic.
“Of course, early 2020 was difficult with a total standstill of global retail sales but the recovery was fast and furious,” says Singapore-based business veteran in luxury products and luxury watch distribution, Alexander C Melchers.
Among key recent developments in the watch industry is the extraordinary growth of the strongest brands such as Rolex, Patek Philippe, Cartier and Audemars Piguet, of which only Cartier belongs to a large group, he adds.
Another new development is the re-calibration of sales and the emergence of the importance of local and resident clients as retailers globally cannot just rely on Chinese tourists anymore
New opportunities
Melchers, who is the managing director of the Singapore branch of C Melchers GmbH & Co, says that another noteworthy development is the growth of the pre-owned watch market and the rise of new companies such as Singapore-based Watchbox. Many brands are looking at the pre-owned market to introduce new customers to their brand, with the pre-owned market getting global traction.
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Significantly, the Internet is providing new opportunities, as agile brands ranging from established players like MB&F to new brand Norqain can reach new client groups much faster during the pandemic lockdowns, he adds.
Of the 15.7 million watches exported from Switzerland last year, 9.4 million were quartz watches and the rest of the 6.3 million pieces were mechanical watches. While by value there was a strong 14.2 per cent increase over 2020, there was, in fact, a sharp decline of 47 per cent over the most recent peak in 2011, when nearly 30 million Swiss watches were sold.
“However, the value of the pieces has increased constantly. In 2011 the export value was around 15.9 billion Swiss francs and in 2021 it was 22.1 billion Swiss francs, resulting in a significant increase of the average value of each watch sold. Morgan Stanley referred to this as the premiumisation of the watch industry,” Melchers tells BT.
“(The) Chinese at large are estimated to account for up to 40 per cent of all global luxury purchases. Similar numbers may apply for the watch industry and many global retailers, whether based in London or Los Angeles or the Caribbean or Italy, and of course Singapore, can rely on selling to Chinese tourists…
“The pandemic has positively re-calibrated the sales mix and retailers globally and in Singapore can spend more time and effort on connecting with and building their resident client base. This will have made them more resilient and their business models more sustainable, as they can now nourish collectors and create longer-lasting relationships,” he adds.
Melchers says that the US has always been the largest pre-owned market for luxury watches. Americans are historically comfortable buying pre-loved watches and selling or trading in their watches. This trend has also developed in Europe, and to a certain extent in Asia too, though at a much slower pace.
But during the pandemic, Asian clients also started to discover the opportunities of both buying pre-loved watches and selling their own pieces. Now, brands consider this a relevant market segment.
Says Melchers: “It allows younger buyers access to the world of watch collecting. Singapore’s home-grown company Watchbox is a great example of a very successful business model in this segment. Watchbox is a company to watch!”
Recounting how the Swiss watch industry has attained its top position, Melchers says that it has conquered the world due to the high-quality of its products. Thanks to a series of innovations, the Swiss watch industry managed to become the world’s No 1. At the beginning of the 20th century, Swiss watchmakers equipped their watches with additional functions, such as the calendar or stopwatch. In the 1920s came the first waterproof watch, while in 1926 the first automatic wristwatch was manufactured. The remarkable innovations in mechanics and manufacturing gave Swiss watchmakers the top spot in the world watch market for decades.
Overcoming a crisis
After overcoming a severe crisis in the 1970s and 1980s due to the emergence of electric wristwatches and competition from Japan, this industry has experienced a new boom and remains one of the jewels of the Swiss economy to this day, Melchers says.
“I studied in Switzerland in the 1990s which was the time when the Swatch watch was a global success beyond belief for many, and in fact the incubator of the re-emergence of so many strong brands. Today, the Swatch Group is one of the largest watch groups and brands such as Breguet, Omega, Longines, Tissot, Rado, Swatch and Mido and also Harry Winston, belong to it...
“Watch icons such as Jean-Claude Biver, who most recently joined the Board of Norqain, are associated with this phenomenal growth. He first built Blancpain, then sold it to the Swatch Group and then built Omega, before he acquired Hublot and made it a mega success. He sold the brand to LVMH. He is one of these Swiss individuals who made a major impact on the Swiss watch industry and many, many people working in this industry.”
As a veteran player, Melchers sees a bright future for the Swiss watch industry and is of the view that it will continue to be tops in this field. “Switzerland will continue to top the global market for luxury watches. Swiss made is a hallmark in the world of watchmaking...
“The Swiss watch industry survived its biggest crisis in the 70s when the quartz movements came out. Since then, the industry has seen its ups and downs, but mainly driven by economic challenges from the Asian financial crisis, to Sars or the global financial crisis or the Chinese clamp down on corruption. But during all these times, the position of the Swiss watch industry was never challenged.”
The emergence of smart watches also led many people to assume that the end of the Swiss watch industry is near. But this was wrong, says Melchers. Mechanical luxury watches are in a different category to smart and connected watches. These watches are jewellery. They are pieces of art. Mechanical and technical miracles. Watchmakers are like the mechanical alchemists who create the impossible in the most limited space of a thin watch case. Luxury watches provide much more pleasure and satisfaction than only telling you the time, Melchers adds.
“Our company also strongly believes in the future of luxury watches. As one indicator we have recently signed a joint venture with Swiss watch brand Norqain, a new brand, and we have opened our first flagship boutique at Wisma Atria only a few days ago,” says Melchers.
To the question of whether enough young people are entering the watch industry, Melchers replies that it continues to be a challenge to find dedicated retail staff in Singapore. This is not a problem only for watch retail, but for many other professions.
Retail is demanding in Singapore due to the operating hours. But watch retail is also very rewarding, as the team is able to build lasting relationships with the clients and buyers. This makes it interesting and meaningful, he says.
“In Switzerland, of course, the watch industry is an important part of the Swiss economy contributing perhaps up to 2 per cent of GDP (gross domestic product) with some 60,000 direct employees and maybe around 100,000 indirect employees,” Melchers says.
“In order for the Swiss watch industry to maintain its leading position in the future, it is important to stay up to date in terms of innovation, new technologies, digitalisation, and so on. Accordingly, it is important that one also addresses the new generation and inspires young people.”
At the young independent brand Norqain, this mission is being pursued with determination.
The team has an average age of 35 years and is certainly one of the youngest teams in the industry. Accordingly, they also form a dynamic and fresh alternative to the established brands, which brings a breath of fresh air to the industry in general, he adds.
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