State of the Industry: Vontobel on the Watch Market
Vontobel's annual report on the Swiss watch industry highlights significant market shifts, particularly a growing concentration of sales among industry giants amid overall stagnation and external pressures like a strong Swiss franc and rising gold prices. Total Swiss watch exports fell for the second consecutive year, with a nominal decline of 1.7% to CHF25.5 billion. This decline has been exacerbated by adverse foreign exchange rates, which have reduced revenues for major global brands by approximately 10-15% over the past four years. The report also notes that most brands did not increase prices despite the rising costs of materials, indicating a lack of confidence in passing costs on to consumers. The market dynamics reveal a K-shaped recovery, where the ultra-luxury segment continues to thrive, while lower-end options see contraction. Brands like Rolex and Cartier are performing well, with Rolex's certified pre-owned program contributing significantly to its revenue. In contrast, Omega has faced a downturn, largely due to its reliance on the Chinese market and an unfocused product catalog, leading to a 26% drop in sales. Despite the challenges, there are signs of recovery in China, and Vontobel suggests that brands like Swatch Group and Richemont remain undervalued, hinting at potential stability in the luxury watch segment moving forward.
