Luxury brands are weathering the storm better than the rest. Keystone
The coronavirus crisis could eliminate up to 100 Swiss watch brands from the market, according to an expert interviewed by the German-language weekly NZZamSonntag.
Production came to a standstill during the pandemic and the most important export markets collapsed. Whether tourists with purchasing power will return to Switzerland remains in question. The watch industry, notes the newspaper, has been “caught in the perfect storm”.
Luxury brands are the exception. They have weathered the storm far better than the rest. Audemars Piguet, Rolex, Patek Philippe or Richard Mille belong to families or foundations that do not focus on driving sales. On the contrary, these luxury brands control their production in a targeted manner, artificially creating shortages in the market. The result: waiting lists for the most sought-after models and buyers who pay steep surcharges to get their dream watch immediately.
“Even in the coronavirus era, these prices have hardly fallen at all,” René Weber, an analyst at Bank Vontobel, told NZZamSonntag. “On platforms such as Chronext, an unworn Rolex Daytona also cost well over CHF20,000 ($21,000) in the last few weeks instead of CHF12,500.”
Other brands are paying the price of unrest in key market Hong Kong in addition to the economic consequences of the pandemic. Exports to Hong Kong collapsed after the outbreak of civil protests in August 2019. In 2020, the pandemic ground production to a halt for several months. Consumer sentiment collapsed and with it global exports. The tourists who typically go home with a Swiss-made watch have yet to show up.
“Of the approximately 600 watch brands, 50 to 100 will have difficulty surviving this crisis,” estimates Weber. Particularly at risk are smaller, independent brands that do not belong to the luxury groups Swatch Group, Richemont or LVMH. The analyst expects watch exports to shrink by 30% in 2020. For sales in Switzerland, he forecasts a 40-50% decline.
Watch retailers suffer too
The struggles of the Swiss watch makers are reflected in the watches retail sector. Big players such as Bucherer, Gübelin or Kirchhofer are on solid footing. “They have many good years behind them in which to build up reserves,” says Weber.
But the future looks bleak for smaller boutiques who rely on the hordes of tourists that descend on picturesque lake towns of Lucerne and Interlaken every year.
“The small, independent retailers are already suffering from the fact that they can no longer represent the most sought-after brands at all and that they have no online sales channel, and now their clientele is also breaking away,” points out the analyst.
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