2020 Swiss Watch Industry Market: Export Value Falls Back To 10 Years Ago

In late November, the Swiss advanced Watch Foundation announced that it would cancel the offline Salon of the 2021 Geneva "watch and miracle Exhibition" originally scheduled to be held from 7 to 13 April 2021. The organizer will launch a fully digital version of the exhibition on the original date, providing new services and functions including online discussion and live broadcast, so that the brand can display the new 2021 watch and interact with the audience. "This is a decision we have made in consultation with key stakeholders, and it is the most responsible action for the time being, out of uncertainty about the current epidemic situation and the future direction," the official statement said

In the face of the cancellation or rescheduling of exhibitions in 2020, people have long been accustomed to it. After all, 2020 will be a year full of turbulence and change for any industry. Swiss watch making industry, with a long history, exquisite technology and noble quality, is a barometer of the global luxury watch making industry. Stimulated by the external factors of the epidemic this year, what new trends are emerging? A few days ago, a number of institutions released the Swiss watch industry research report and industry trend forecast in 2020. The data shows that the epidemic has caused a heavy blow to the export and sales of Swiss watch industry. However, with the performance of the Chinese market since the second half of the year, the decline rate is expected to further slow down.

The master of the watch factory is using the magnifying instrument to show the extraordinary hand and strength. All the pictures are from visual China

One dynasty fell back to ten years ago

In the first three quarters of this year, affected by the epidemic, a large number of local factories in Switzerland were forced to shut down and watch shops closed. Only in the second quarter did it begin to show signs of slow recovery. At the end of August, some brands and manufacturers successively employed part-time employees to resume production. Until September and October, a few brands active in the field of high-end watches and their respective suppliers fully resumed normal production. According to the latest decline data released by FH, in the first ten months of this year, the overall output value of Swiss watches and clocks fell by 25% to 12.6 billion Swiss francs; the actual export volume fell by 37% to 10.7 million pieces. The Swiss watch industry federation said the industry was facing "the biggest decline not seen in the last 80 years".

Although the reality is very "skinny", but Morgan Stanley's "gentle" attitude towards the overall expectation of the industry in the second half of the year undoubtedly shows its confidence in the recovery of the industry. According to the forecast of Morgan Stanley, the output value of Swiss watches and clocks will shrink by 19.5% to 16 billion Swiss francs in 2020, returning to the level of 2010; while the export volume is expected to decline by 32% to 14 million pieces, falling to the lowest level since 1946, but both forecasts are better than the actual data of the previous ten months.

Morgan Stanley's confidence is not groundless, but comes from China's market, which has taken the lead in getting out of the epidemic and sustained economic recovery. In the first ten months of last year, the export volume of watches and clocks to other markets showed a downward trend of 11% in the first ten months of last year. According to Morgan Stanley's forecast, as the only market showing a growth trend since January, the export of Swiss watches to mainland China will increase by 24% to 2.5 billion Swiss francs in 2020, accounting for about 14% of the total export of Swiss watches and clocks. By then, China may become the biggest export market of Swiss watch brands. In addition, Deloitte's 2020 watch industry research report also pointed out that if the growth momentum can be maintained, the Chinese market is expected to usher in a big rebound in 2021. Since retail sales in overseas markets largely depend on Chinese consumers' direct purchase in stores when traveling abroad, but as far as the current epidemic situation is concerned, cross-border tourism will not be fully recovered until 2022-2023. Therefore, the report believes that there is still a long way to go for other overseas markets to achieve sales growth.

High end mechanical watch shows strong performance

In the mainstream watch market, quartz watch and mechanical watch are the two most common watch types. They have their own advantages and characteristics: quartz watch is accurate, about 30 times higher than the average accuracy of mechanical watch. At the same time, it also has the characteristics of low price and fashionable style, which is more suitable for people who pursue the practicality of watches. The technical content of mechanical watch is relatively high, and the three top-level watch making technologies -- tourbillon, calendar and three questions are all reflected in the mechanical watch, so the price is naturally rising and has a good collection value. Deloitte research report points out that since 2012, the export volume of entry-level Swiss quartz watches has gradually declined. In 2019, the export volume of Swiss quartz watches is nearly 10 million less than that in 2011. In the first half of 2020, the situation was even worse, with exports falling by nearly 45%. According to the report, when there is a crisis, people tend to save or spend prudently, considering that there may be less money available for free spending in the future. In recent years, in the similar price range, besides the entry-level Swiss quartz watches, there are smart watches, non Swiss fashion watch brands and other watch models to choose from, which indirectly causes the competition between quartz watches and other watch models to become more intense. Some respondents said that if the sales of entry-level quartz watches and medium and low-grade mechanical watches continue to decline, the influence of Swiss watch industry may be weakened, and the chain impact effect of price reduction and unemployment of workers may inevitably be caused in the future.

The report also pointed out that in recent years, with consumers aware of the differences between quartz watches, mechanical watches and smart watches in terms of function and positioning, mechanical watches have become the "hot cakes" in the eyes of consumers, with a market size of 83%. The popularity of mechanical watches not only helps to promote the overall sales growth of Swiss watches, but also takes on the burden of promoting the recovery of watch industry from the crisis. According to the data, in the first six months of 2020, the performance of mechanical watch category was relatively strong, and the export volume fell by 25% year-on-year, which was lower than the average drop of 33% in the whole industry. High end mechanical watches, whose export prices exceed CHF 3000, have been the least affected this year, and export sales have returned to 2019 levels as early as August.

Apple watch, with a market share of 55%, is undoubtedly the leading brand in smart watches. According to Deloitte Research Report, in the first quarter of 2020, apple watch shipment increased by 23% year-on-year to 7.6 million, while the traditional Swiss watch fell by 23% under the impact of the epidemic. Since Apple released the apple watch in 2014, some people have begun to worry about whether smart watches will impact the traditional watch industry. Up to 62% of the brand managers interviewed believe that the Swiss watch industry has missed the opportunity to develop smart watches. However, the good news is that 60% of consumers still say that they prefer to "only wear a traditional watch" or "hold a traditional watch + a smart watch", which means that consumers' preference for watches has not been fully digitized. After all, smart watches and traditional watches carry very different functions, processes and cultures.

Towards Omni channel seamless connection

The core of the Swiss watch industry is tradition, so the sales channel also relies on the physical flagship stores and retail distribution stores to a large extent. Deloitte research report pointed out that in the context of the epidemic blockade, physical purchase has become difficult, and embracing digital has become an inevitable choice for brands to contact consumers. Not surprisingly, 60% of the brands interviewed said that they would put the development and enhancement of Omni channel sales in the company's development strategy in the future, by setting up scenes catering to social media online or directly using e-commerce platforms to sell; maintaining the noble experience and high-level sense of entity purchase offline, making online and offline drain each other and supporting each other, so as to accelerate the adaptation to the new market situation under the epidemic situation Potential. In April 2020, Patek Philippe announced that it would authorize designated agents to sell inventory online for a limited period of time. Although it looks like a temporary move, it has been seen by the industry as a small innovation initiated by the traditional top watch brand. In the first quarter of 2020, the online sales of industry giant Lifeng group accounted for 8% of the total sales, showing a gentle growth trend compared with 2% of last year. Lifeng group said that although its online retail has not achieved brilliant results for the time being, the influence of online channels is gradually increasing and more resilient. Therefore, it is necessary to further develop and open all sales channels.

It is worth noting that nearly 90% of business management admit that sustainability and transparency of the supply chain are becoming more and more important to the Swiss watch industry. In 2018, IWC group became the first Swiss luxury watch group to issue sustainable reports and launch global reporting standards. In this year's research report, 49% of enterprises will publish relevant sustainable measures and achievements online, while 31% of the enterprises interviewed said they have published relevant reports. In the survey, more than half of the surveyed consumers will take sustainability into consideration when buying watches and clocks. And 89% of the management interviewed believe that supply chain transparency will become "important or very important" in the next five years. With the increasing maturity of blockchain technology, the use of blockchain technology in supply chain management can make the information open between upstream and downstream enterprises, improve the degree of information sharing, and make it more convenient for multi-agent to participate in monitoring and auditing the production of raw materials. This will reduce the risk of counterfeiting in a specific fragmentary supply chain in the watch industry and enhance the trust between the brand and the consumer.