Watch Brands Are Having a Bully Year. And so Why Is Everyone Nervous?
The ruby-hot secondary market has cooled off in recent months. Only that’southward not the only matter worrying the industry.
If retail stores were cities, the C.D. Peacock watch and jewelry flagship, scheduled to open up in June 2023 at the Oakbrook Center mall in suburban Chicago, would be a metropolis.
Currently under construction, the store will fill almost 21,000 square feet, or almost half an acre. Renderings of the gleaming white interior feature a bar, a lounge and a individual event space designed to adjust a seated dinner for as many as 45 guests, equally well as several branded scout salons, including a two-level Rolex bazaar with its own street entrance and nearby valet station.
“There will also be Omega and Tudor boutiques, and one of the biggest Cartier Espaces in the country, about 900 square feet,” Steven Holtzman, vice chairman of the 185-yr-erstwhile retailer, said on a call in August. “It’s a large investment, and the timing is fantastic. Our business has been astounding.”
Many of Mr. Holtzman’s competitors probably would say the same matter. The Swiss sentry industry is on rails to take its best year always. Brands across the cost spectrum have reported record-breaking sales. And the growth is fueling expansion projects, like C.D. Peacock’due south $20 million-plus construction, that suggest the good times are expected to terminal.
Yet some emerging signs betoken 2023 may not be entirely polish sailing.
Resale prices of the hottest modern timepieces — chiefly the Rolex Daytona, the Patek Philippe Nautilus and the Audemars Piguet Royal Oak — have fallen by as much as 50 percent from their highs in January. The correction, which began in April, has spooked some buyers and sellers.
“If the iconic products from Patek, Rolex and Audemars are coming downwards to more reasonable levels on the secondary market, information technology shows the primary market is also cooling downwards a little bit,” said Oliver R. Müller, founder of LuxeConsult, a watch consultancy based near Lausanne, Switzerland.
“The business is non exactly running as usual,” he added. “At that place are a lot of uncertainties on the microeconomic side. Involvement rates are going up. President Biden still doesn’t desire to talk about recession. The signs are non too positive — merely also non too negative.”
Among longtime watch industry observers, that kind of ambivalence is non unusual. In March 2020, no 1 could have predicted that the pandemic would jumpstart a period of skyrocketing growth. Swiss lookout man exports peaked in 2021 at 22.iii billion Swiss francs, or near $23 billion, ii.7 per centum higher than in 2019, according to the Federation of the Swiss Spotter Manufacture’s 2021 year-terminate report.
And 2022 is shaping up to be fifty-fifty ameliorate: Export values for the first half dozen months of the year grew by 11.9 per centum over the same period in 2021, led, in large part, by the booming American market, which saw gains of 31.iv per centum.
So why is anybody and then nervous?
Experts have attributed much of the mania of the past two years to investment-minded buyers flush with stimulus cash and crypto wealth. By regularly paying three, four or fifty-fifty five times retail value for difficult-to-get models on secondary channels, they helped whip the market into a frenzy — until the crypto collapse in May halted the spending spree.
“All the speculators are running for cover,” Maximilian Büsser, founder and creative managing director of MB&F, a boutique picket make that saw its business explode during the pandemic, said on a phone telephone call. “Earlier Covid, our production was sold every year, sometimes xc percent, sometimes 115 per centum. And suddenly we had 25 times the corporeality of customers. Information technology was utterly insane.
“Everything we produce is sold, only now it’s easier to get watches on the wrists of people who really like what we do,” Mr. Büsser added. “Because earlier, nosotros had to starting time playing detective. Every unmarried watch nosotros were delivering we had to endeavour and discover out if the buyer was a existent lookout lover or somebody just trying to flip it.”
Mr. Holtzman echoed that sentiment. “We’re finding nosotros have less clients coming in looking for opportunistic situations,” he said. “Information technology’southward a much meliorate state of affairs for united states of america.”
What concerns many members of the Swiss watch trade today — fifty-fifty more than the war in Ukraine, rise interest rates, double-digit inflation and the looming prospect of recession — is the polarization that separates the meridian-performing brands from everyone else.
“You accept probably 5 to seven brands who take nearly one-half of the business,” said Jean-Claude Biver, former president of the LVMH Watch Division and a longtime watch marketing executive. “And there’s a huge demand for them. Only that doesn’t mean other brands accept the same demand.
“Withal, if you are looking for Brand A and y’all tin’t get it, yous are set to purchase Brand B, and that helps the manufacture,” he added.
There is no question that the trickle-downwardly event created past the extreme scarcity of sure steel sport watches (ahem, Rolex) has given a boost to similar-looking but more than available models, such equally the Laureato, a steel sport-chic lookout man introduced by Girard-Perregaux in the 1970s. But whether watchmakers tin can sustain that need in the midst of a market reset is unclear.
Many watchmakers and dealers said they were optimistic near business over the next yr considering, despite the hasty retreat of speculative buyers, the industry has proved its resilience. Even with flagging demand in Red china and Hong Kong, the industry’s No. 2 and No. 3 consign markets, the merchandise is still thriving, at both retail and resale.
“It is important to realize that prices are still expensive,” Sean Song, a rare and vintage watch dealer based in Kuala Lumpur, Malaysia, wrote in an email. “For example, a stainless steel Audemars Piguet 15202ST with a bluish dial — certainly a bellwether of ‘hype’ watches — trades at roughly the same price every bit it did last year, and is even so multiples that of retail.”
That lookout, the Royal Oak “Jumbo” Extra-Thin, retailed for $33,200 before Audemars Piguet discontinued information technology earlier this yr. Every bit of August, the model was selling for $90,000 to $105,000 on secondary channels.
Mr. Song also pointed out that the motivations driving his core clientele oasis’t changed. “The collectors buying Daniel Roths and vintage Rolex were collectors earlier the electric current craze and will still be collectors,” he wrote.
Simply information technology is not only the high-end of the market that feels sanguine about the time to come. Watchmakers across the toll spectrum said they believe that some people who were drawn to the category’due south investment potential over the by couple years now realize they have a 18-carat passion for timepieces, and that will assistance sustain the manufacture through any economic turbulence that lies ahead.
“To be frank, in that location are going to be some slower moments in the next two to three years,” Etienne Malec, founder of Baltic, a five-year-old microbrand based in Paris, said by phone. “Only it’s a conversion rate. Perchance 20 percent of the people who entered the marketplace volition keep a picket on their wrist that they didn’t have before.”
Then in that location are the scores of new buyers only discovering the luxury spotter world through artistic collaborations such every bit the Swatch Grouping’s enormously successful MoonSwatch collection.
Introduced in late March, the $260 quartz timepieces, which married the affordability and material innovation of a plastic Swatch sentinel with the design artful and history of the Omega Speedmaster Moonwatch, caused a retail sensation when thousands of buyers swarmed Swatch boutiques effectually the world.
“Since and then, they have probably delivered 150,000 MoonSwatches,” said Mr. Müller of LuxeConsult, a sometime Omega executive. “By the end of this twelvemonth, it will probably be half a 1000000.
“The extraordinary thing that happened with the MoonSwatch,” he added, “is that all these immature people were lining upwards in the street considering information technology was cool, colorful and based on an iconic production with a very cool history.”
But when those newcomers to watches become more than mature buyers over the next decade, will the industry yet offer them choices among the hundreds of brands that currently compose the ranks of the Swiss watch trade? Many experts fearfulness the reply is no, as consolidation and the increasing dominance of the then-called Big Iv (Rolex, Patek Philippe, Audemars Piguet and Richard Mille) threaten to squeeze out smaller watchmakers.
“Sometimes you lot will have a newcomer, similar Richard Mille 20 years agone, finding its place and becoming a blockbuster, just those will be the rare exception to the dominion,” Mr. Müller said.
“Different what many people call up, there is not space for everyone,” he added. “There is infinite when the marketplace is booming, when money is flowing, only at present the tide has turned. The natural choice has been quite tough and will be tougher in the side by side 12 to 24 months. It’south not all negative, merely nosotros have to be realistic.”