With more than 30,000 cases in Switzerland and 4.3 million cases worldwide, the impact of COVID-19 has hit the Swiss Watch Industry really hard. Swiss watch exports fell sharply in March, by -21.9% equivalent to CHF 1.4 billion Swiss Francs. With exports expecting to deteriorate even more in the month of April —figures to be published at the end of this month—, the steep decline in exports comes mostly from certain countries in Asia like Hong Kong —one of the most important watch markets in the world—, Singapore, South Korea, and Taiwan, and throughout the European Union from countries like the U.K., Germany, France, and Italy which have seen a very steep decline.
Rolex Boutique on Bond Street in London, England
Italy and Saudi Arabia the Most Affected Countries
While most markets declined significantly, Italy and Saudi Arabia were the most affected countries down by -57.6% and -51.5% respectively. Contrary to all expectations, a few markets including the U.S., China, and Japan saw a significant increase in numbers. Opposed to the economic downturn in the United States, the exports to the U.S. were up by +20.9%, which makes you believe at least amongst those watch collectors with deep pockets, things have not taken a turn for the worst.
Despite some of the positive changes in certain countries, in terms of value, the Swiss watch exports as of March 2020 —when compared to the previous year— are down -21.9%, and in terms of the number of units exported the percentage goes even steeper to -43.1%.
Omega Boutique Monte Napoleone in Milan, Italy
Source: Federation of the Swiss Watch Industry March 2020.
Steepest Decline for Stainless Steel Watches
Rolex GMT-Master II ref. 126710BLRO in Stainless Steel
In terms of metals, stainless steel watches saw one of the steepest declines in value, with a significant impact on the overall result, along with watches made from precious metals. Volumes were also affected by the negative performance of steel watches, which fell by almost half. The number of watches exported fell by almost 700,000 in March 2020, producing an unprecedented monthly figure of only 900,000 units.
Source: Federation of the Swiss Watch Industry March 2020.
While watches priced at over CHF 3,000 Swiss Francs —export price— held up slightly better, all price segments saw sharp falls in both value and the number of watches.
Source: Federation of the Swiss Watch Industry March 2020.
NOTE: All the figures released by FH refer to exports data and not to sales to end-consumers. Differences between these two types of data may therefore exist. These data must be regarded as consolidated figures gathering export results from all Swiss watch companies. They obviously cannot reflect the individual results of one particular company or group of companies, knowing that business activity may greatly vary from one to the other. The data can be subsequently revised or adjusted. The most recent publications prevail.
My Perspective
In summary, the Swiss watch industry is having a very difficult time during the pandemic and the numbers don’t lie. While countries like the U.S. and China are performing above average and holding better than the rest of the world, this doesn’t mean that the numbers for April 2020 —once they get released at the end of May— will not be lower than March.
As the economic downturn sets in deeper, factors like limited international travel, social distancing, closed retailers, and the need for monetary liquidity will continue to have a negative impact on the Swiss watch industry exports and overall luxury watch sales around the world. With the current situation, I still see watch collectors making purchases. However, a lot of the buyers that were actively buying in the $10,000-$15,000 USD range are settling in and feeling more comfortable making purchases in the $5,000-$8,000 USD range, to still feed their need for a new watch.
When it comes to the ultra-rich, this segment continues to behave almost in the same way with steady purchases above $50,000 USD, not a bad thing for those brands that just released a large number of novelties within that price point or even way above it.
As far as the preowned luxury watch market, I still see that transactions have diminished and the current offering from dealers in this segment of the market continues to increase as collectors start to sell some of their watches in need of liquidity. A seller’s market for sure but while I still haven’t seen a flood of preowned watches and people just dumping partial collections for fast cash, I believe that in a couple of months we will see more of that. For now, buy what you like and won’t get you in financial trouble. Cash is king during these challenging times.
Stay tuned for the April 2020 update at the end of this month. Be safe and smart out there!
Rolex GMT-Master II ref. 126715CHNR
