As the Coronavirus cuts a swathe through the world’s most populous country, some 35 million Chinese are on lockdown. I know: it’s more than a little insensitive to speculate about the outbreak’s effect on Swiss watch sales. Luxury timepieces are the last thing anyone should care about when lives are at stake. Which is as it should be – and a dark cloud for luxury watchmakers . . .
There’s no getting around it: even in the best possible scenario, the outbreak will hit the industry hard.
As we reported December 21, pro-democracy protests caused a 30% year-on-year drop in the once prolific Hong Kong watch market. The Chinese crackdown on tax-dodging mainlanders hit the market with a double whammy. Sales in China itself – considered by luxury watchmakers to be the growth market – sank by 5.5%.
All that market activity has stopped, obviously. If the ban on public gathering extends to China’s wealthier cities, with the stroke of a pen (push of a button?), the Chinese Swiss watch market will cease to be.
According to the bbc.com, city officials in Beijing and Shanghai have “asked” residents returning from affected areas to stay at home for 14 days to prevent the spread of the virus. If those cities go into lockdown, retail sales will disappear.
Of course, it’s probably already gone. Who spends big bucks on a diamond-encrusted, rat-themed Harry Winston Premier Chinese New Year Automatic during an epidemic, even if the health crisis is hundreds of miles away?
After the Chinese outbreak runs its course, no matter how benignly, the question remains: how long will it take Chinese millionaires and billionaires to recover their psychological equilibrium to the point where they buy baubles instead of plane tickets to anywhere but here? Months? Years? Consumer confidence. It’s a fragile thing at every level.
The virus has spread to Japan and South Korea. Even if it’s a minor, containable outbreak, the idea of it is spreading. That may be enough to knock Swiss watch sales on their ass in those key markets. There’s a case here in the U.S. Could the entire worldwide luxury watch market crater? Let me put it this way: the virus is not going to anything to increase consumer confidence.
Human life is more precious than any physical object. But the business of business continues regardless of life and death, a process that continues regardless of business. It’s sad, but that’s the way it is.
UPDATE: Click here for an update on the coronavirus’ increasing threat to Swiss watch sales, referencing recently released 2019 export stats.