It’s not an ideal period for many watchmakers, given the ubiquity of digital devices such as smartphones, smart watches, and fitness trackers that have taken over the job of telling users the time.
But if you are in the watch business, you’re probably better off in its high end. The allure of luxury watches that go for thousands of dollars is about much more than keeping track of the hours and minutes. That’s been especially true during the pandemic.
The Swiss watch industry produces most of the world’s luxury watches, including an estimated 95% of those retailing for more than 10,000 Swiss francs ($11,250), consulting and tax firm Deloitte noted in a recent report (pdf). It’s home to brands such as Rolex, Patek Philippe, and TAG Heuer that are known for their intricate mechanical watches. After Covid-19 paused sales in important markets like China and shut down much of Europe and the US this year, Swiss watch exports plunged. The strongest recovery has happened among watches with high price tags.
Between January and September, the value of exports for watches costing more than 3,000 Swiss francs dropped 25% versus the same period last year, according to Deloitte, registering the lowest overall decline of all price groups. Those costing between 500 francs and 3,000 francs are just behind, having fallen about 30% in the period, though now they’re surging ahead. In October, the most recent month with data available from the Federation of the Swiss Watch Industry, the leading organization representing Swiss watchmakers, the trend continued, with more expensive watches suffering less.
Very high-end watches are one reason for the surprising buoyancy of luxury watches this year. The total market for personal luxury goods in 2020 is expected to plummet 23% versus its 2019 level, according to a forecast from management consultancy Bain & Company in partnership with Altagamma, an association of Italian luxury manufacturers. The market for luxury watches—most of them Swiss, but including all origins—will decline 30%. It’s one of the luxury categories anticipated to be hit hardest, though it could have gone much worse.
“In 2020 actually we would have expected an even deeper drop of the watch market,” says Federica Levato, a partner at Bain and leader of its global consumer products and retail practice. “The watch market has proven to be resilient.”
Luxury watches have been under pressure for some time, Levato says, due to watches losing their place as timekeepers to digital devices and because of a generational shift in the makeup of luxury shoppers. Watch companies have also largely continued relying on networks of retailers while much of the rest of luxury has invested in stores, e-commerce, and digital marketing to connect directly to customers. Watch brands missed these opportunities to forge stronger relationships with shoppers.
Given these shortcomings, luxury watches could be expected to fall further behind in a pandemic, but companies have taken measures to mitigate the damage. Many have accelerated efforts to expand their sales online and connect to customers digitally. Some, such as Patek Philippe and Rolex, have also reissued highly sought vintage styles. Luxury’s ongoing rally in China is also helping, as is a shift among luxury shoppers toward so-called hard luxury items such as jewelry and watches that retain value well.
For a few years now, the Swiss watch industry has actually exported fewer watches but still seen the total value of exports rise. The reason is the ongoing demand for really expensive watches, which even a pandemic hasn’t stopped.