Analysis and Perspective: Watches and Jewelry Markets – 2017

The Hard Luxury Sector is more Voluntary and Experienced from political unreliability as well as slowing demand in key markets. Nevertheless the Industry will Stabilize in 2017, based on positive Macro-Economic factors and on-the-ground Market Outlook.

The World Presentation of Haute Horlogerie (WPHH) and The Salon International de la Haute Horlogerie (SIHH), Two Watch Exhibitions organized by Franck Muller and Richemont respectively, Opened doors in Geneva earlier this month in the middle of a 12-month period with Plenty of Challenges for the Watch Industry, and more generally for the Hard Luxury Sector as a Whole.

Indeed, 2016 was a difficult year as the Subsector Revenues were down -5% on average. According to Bain, Watch Sales decreased by -8% at Constant Exchange Rates while Jewelry grew by a mere +2% after several years of Rapid Growth. The Global Luxury Market was flat due to lower Sightseer flows in Major European Capitals as well as Political unpredictability in the UK and US that turned away demand for High-End Spending. In a context where Consumer Behavior is changing (From Baby Boomers to Millennials), Luxury Companies need to adapt their Brand Positioning to better address Consumer expectations in a market that has become more Polarized.

Decreased Tourism impacts Europe

Interviewing European Distributors during the WPHH about 2016 activity gave us a crystal-clear picture of the Current Scenario of the Watches & Jewelry Market. Hit by Terrorist Attacks and Several Strikes (particularly in France), 80% of our Panel of distributors reported lower Financial Results in 2016. The Reduction in Store Traffic was mainly the Outcome of lower Chinese Tourists but also fewer local Customers affected by the Negative Economic mood in Europe. The only Market which exceeded expectations was the UK, helped by the weak sterling after the Brexit Vote in June.

Cautious Outlook in the US

In the US, Almost Every Watch and Jewelry Retailers experienced a Drastic Year due to a Slowdown in Consumption ahead of the Presidential Election. On a Yearly Scale, Some Watch Retailers highlighted the Resilience of the Rolex Brand in the Pricing Category of $3,000 and above. However, Overall Watch Sales in the US reduced in volume while unit prices held up well. A Large number of distributors gave a Cautious outlook due to their fear of an unexpected tariff or tax on imported products to the US.

The Changing Reality of Chinese Tourism

The Asian market, mostly Hong Kong, has been at the center of the major concerns of watchmakers. Hong Kong became the Asian hub for watches and jewelry for more than a decade now thanks, particularly, to strong Chinese consumption. Luxury Companies boosted their Store Footmark in Asia to meet the Fast Growing Demand of Chinese, increasing inventories and Fixed Costs to Operate their Store Network. Local Retailers reported lower results compared to 2015, Blaming less tourism from Chinese consumers after tighter customs controls. However, with Coordination between Asia and Europe/Americas, High-End Watchmakers did healthier during the Second Half of the Year. The Brands mentioned most frequently by survey respondents are Patek Philippe, Rolex & Cartier.