the Luxury Watch market has a strong track record
The luxury watch industry is well protected with high barriers to entry and a track record of consistent long term growth, underpinned by sustained investment and elevated innovation.
The Group estimates global retail sales of luxury watches were approximately $37.8 billion in 2020 (£26.9 billion), including the Swiss market, repairs and the contribution from non-Swiss luxury watch brands.
Luxury watches have continued to be supported by long term increases in prices, with average selling price of Swiss watch exports (wholesale) generating a 20-year CAGR of +3.4% (2020 vs 2000).
Watches at the luxury end of the market have outperformed lower priced segments and represent 91.6% of the value of global Swiss watch exports in 2019; note in 2000, luxury watches represented 38.7% of the value of all Swiss watch exports.
disciplined distribution management through Selective DISTRIBUTION agreements
Distribution of luxury watches takes place under selective distribution agreements entered into with brands, which are ordinarily limited by geography, awarded on a point of sale basis and which ensure retailers maintain strict presentation standards. Selective distribution agreements enable brands to control the number of points of sale and qualitative criteria on retailer approval.
Product presentation and customer experience are closely monitored by the brand owners.
Globally, the retail market for luxury watches is predominantly comprised of a large volume of small retailers.
global BRANDS HAVE SUPPLY DRIVEN GROWTH
For the total luxury watch industry, demand has increased at a faster rate than production, in part reflecting the labour-intensive nature of watchmaking and its dependence on highly skilled watchmakers in Switzerland. Rolex, Patek Philippe and Audemars Piguet have limited production capacity which does not meet market demand.
The industry is concentrated amongst the top independent brands and three luxury groups. Long term growth has been underpinned by increased average selling price (ASP), positive mix effects and limited volume increases.
loyal, Diverse, multi-generational customer base
Luxury watches attract a unique set of shoppers, who can become repeat customers, spanning age and income groups.
Store design, marketing and customer service of the Group appeals to a broad demographic audience.
Demand for luxury watches has also driven the pre-owned market which provides liquidity and enhances value preservation of the category as a whole.
continuous PRODUCT INNOVATION and advancement
Luxury watches are characterised by a focus on product innovation and advancement which are normally introduced at prestigious watch fairs in Switzerland. In the UK and the US, there is a strong preference for sports models with the key brands consistently investing to ensure the highest degree of technical (diver, aviation and chronograph) specifications.
The watch fair calendar and methods of unveiling and launching products have been affected by COVID-19, with the virtual format enabling brands to launch new products with more frequency, accompanied by relevant marketing support. The Watches and Wonders fair, which was due to be a physical event taking place in April 2020 and April 2021, transitioned to virtual formats, the sector’s first such experience. A smaller fair, Geneva Watch Days, was held in August 2020 alongside some of the major brands’ own less formal events. This was followed in quick succession by the Watches and Wonders virtual fair in April 2021 during which many brands participated and introduced another wave of newness and advancement. Patek Philippe unveiled a number of novelties throughout the year.
As a result of this revised timing of the major watch fairs, 2021 has benefitted from a good level of product introduction and innovation. In addition, the shift to a virtual model of product introduction and launch has enabled the brands to adopt an efficient, calendar-focused approach with new products introduced and delivered quickly, allowing for effective marketing support.
The market continues to recover following the impact from the COVID-19 shutdown.
During an unusual year due to the COVID-19 pandemic, the luxury watch industry has been resilient and agile, recovering from the closure of production facilities during lockdown in 2020. The global market for exports has experienced a significant increase in mainland China, now the leading market. Conditions in mainland Europe have remained challenging, whilst the UK has outperformed. The US, the second largest market for exports, has been strong.
