Luxury watch companies must adapt to changes in consumer behaviour or run the risk of becoming irrelevant—Arts & Collections investigates this lucrative industry.
The concept of the wristwatch came into fruition during World War I; they were originally worn by soldiers as a convenient and practical way to time-keep. Since then, this horological device has reached a ubiquitous status. It has gradually morphed into a lavish accessory, admired not just for its capabilities in telling time, but also for its masterful design and craftsmanship. The global watch market is dominated by a small handful of countries—clear leaders being Switzerland and China.
A few years ago, the once proud luxury watch market saw a huge decrease in sales and popularity. Circa 2017, the industry was in its weakest position since the early 80s. The rise of the smartwatch and the collapse of several key global markets meant that the timepiece industry was in turmoil. So, what are luxury watch companies doing to encourage consumers to fall back in love with watches?
Supply versus demand
After a worrying two-year slump in the market, signs that sales in the luxury timepiece market are tentatively rebounding are beginning to show. The dip in sales was sparked by a number of factors with sluggish economic growth being the most significant. Prominent terrorist attacks in France and Germany prompted a decline in tourists (predominantly Chinese) in Europe. Plus, the emergence of the smartwatch created a new dynamic within a firmly traditional industry.
Now, Swiss watch export figures—which act as a barometer for the health of the global trade—saw their strongest growth for more than five years in 2017, according to a report by the Federation of the Swiss Watch Industry. Hong Kong and China were the top markets for Swiss watches; sales rose by 21.3 percent and 44.3 percent in Hong Kong and mainland China respectively.
Figures show that the British referendum marked a turnaround for the luxury timepiece industry. The weakening of the pound made the U.K. a global bargain basement for luxury watches. In the first half of 2016, Swatch Group’s operating profits plummeted by 54 percent, a loss of £320 million.
But the diminished post-vote pound boosted sales in several of the European company’s luxury brands’ flagship stores. Esteemed proprietors and luxury watch companies Omega and Blancpain reported sharp sale rises in their London stores. Well-known retailers also began to cash in. Harrods noted a direct increase in sales of watches worth over £200,000. Soon after, prices were adjusted to reflect the currency fluctuation.
A maturing market
There’s a growing concern within the watch community that younger generations are becoming indifferent to traditional timepieces. This poses a big problem, for it is they who are being counted on as future consumers. What marks them apart is their different attitude to spending. For a generation that is largely in debt, it follows that they will naturally be more frugal.
Wilhelm Schmid, chief executive of watch brand A. Lange & Söhne, commented: ‘We should keep in mind that the oldest digital natives are just 20 years old and will only appear as buyers of high-end watches in a few years’ time. It is true however, that an upcoming generation that grew up in a digital world may have different values and develop a new consumer behaviour.’
Farer co-founder Jono Holt agrees with this speculation: ‘This is a consumer who wants to buy things that last a lifetime. No other generation has been so informed in the purchases they make than now. For the luxury watch industry, this will mean having to behave in more open ways than they have ever had to do in the past.’
Technology has come a long way in the last few decades; global brands are having to adapt quickly to keep up with the ever-changing climate. When smartwatches came bolstering onto the scene, many experts regarded them as a game changer. The topic of smartwatches has created a degree of division amongst watch specialists: some view their presence as positive while others view it as negative.
‘Watches became irrelevant as soon as the smartphone hit the scene,’ comments Emily Stoll, director of north American sales at Swiss watchmaker Carl F. Bucherer. However, not everyone has the same bleak outlook. Adrian Hofer, consumer industry goods specialist, told the Financial Times: ‘I don’t think the luxury segment of watches will suffer from smartwatches.
‘It is jewellery, a status symbol, a mechanical product. It is about experience and heritage. That is hard to cannibalise by taking a purely functional approach,’ he added. Chief executive of Nomos Glashütte Uwe Ahrendt believes smartwatches will bring the accessory back into the general consciousness. ‘The smartwatch is certainly changing the market, but they also attract attention back to the wrist,’ Ahrendt says.
In response to the demand for smart technology, extra functionalities are being built into traditional analogue watches, creating the best of both worlds. Private luxury strap retailer Excedo Luxuria has seen an influx in requests for the inclusion of key fobs and RFID strips that alert owners if the piece goes missing. The bonus of additional functions existing within the strap is that the integrity and design of the watch face itself stay intact.
According to Deloitte, 60 percent of consumers now use online or digital channels to research prices and information when purchasing watches, and social media’s influence is proving to be supremely significant in this respect. Key influencers are driving the sale of luxury items via inspiring blog, Facebook and Instagram posts.
‘The luxury watch industry has to embrace and react to the trends in social media in order to successfully engage this generation,’ recommends Stoll. After years of resistance, luxury brand Rolex took the plunge and joined social media in 2013. They posted their first photo on Instagram in 2015 and have since gained 8.7 million followers. This is the perfect example of a brand, steeped in heritage and history, adapting its marketing methods to suit modern audiences.
At present, there is optimism among analysts that some of the sector’s long-term challenges have abated and the market will continue to improve—only time will tell. Søren Jenry Petersen, president & CEO, Urban Jürgensen maintains: ‘The definition of a luxury watch will return back to what it once meant: a highly handcrafted unique piece of art—akin to what we see in a Picasso, a Rolls Royce or a hand-crafted Hermès bag.’
This feature first appeared in Arts & Collections Volume 3, 2018. Click here to view the digital version of the magazine.
See also: Baselworld: Watchmaking’s Biggest Stage