Exports of Swiss watches may plummet to lowest level in 35 years
The Swiss watch industry has been facing challenging conditions in recent years. As competition from fitness bands and smartwatches heats up, exports of watches are set to fall in 2019 to their lowest level in 35 years.
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For a long time, the industry, which typically generates more than $20 billion in annual exports, enjoyed an air of exclusivity. Now traditional watchmakers are losing market share.
According to a Federation of the Swiss Watch Industry, the country shipped 18.9 million watches in the 11 months through November, a 13% drop from 2018. As far as revenue, exports were down 3.5 % year-on-year in November. The last time things were this dire was back in 1984 when the industry exported only 17.8 million timepieces. But this when it faced a crisis caused by the entry of low-cost quartz watches.
This ushered in an era of cheaper, more accurate alternatives to Swiss mechanical watches. At the time, the industry nearly collapsed under siege from new upstarts. The number of Swiss watchmakers feel from 1,500 in 1970s, to 600 at the height of the crisis in the mid-1980s. Ultimately Swiss watch companies managed to ride out the storm, and found their niche in the luxury high end of the market.
This time around Swiss entry-level watches are facing another threat. It is from high-end wearables such as the Apple Watch and a plethora of other smart and hybrid timepieces. Shipments of Swiss watches costing less than $200 slumped 20% in November.
The industry’s unique positioning in the luxury segment, the strong brand image, the appeal of the Swiss Made label, continue to offer opportunities to traditional Swiss watchmakers. And it is precisely the high-end mechanical timepieces that cost over $3,000 that some watchmakers have turned to.
However the current political turmoil in Hong Kong is cutting demand in that traditional hub. This has had a significant impact on overall performance as Hong Kong is the second largest market for Swiss watches after the US.
Some traditional watchmakers are making steps in the fast-growing wearables market via technology partnerships and investments. This includes Tag Heuer, Frederique Constant and a number of others. But so far, Swiss brands have not played a very important role in the smartwatch market in terms of sales.
Only time will tell whether Swiss watchmakers manage to turn market fortunes around. If it is to survive, this part of the industry cannot afford to ignore the potential opportunities and threats posed by the new smartwatch segment.
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