You may have heard that the coronavirus catastrophe has closed China for business. The effects are being felt throughout the region, and beyond. But that general statement doesn’t indicate the seriousness of the problem for Swiss watchmakers . . .
Recently released 2019 export stats reveal that the Swiss watch industry placed 52.9% of its eggs in the basket named Asia. The South China Morning Post reports on the current state of play at ground zero: the gambling mecca or Macau.
On January 28, Beijing announced a temporary freeze on individual visas for mainland tourists visiting the gambling hub, which had already seen an enormous drop in tourist numbers.
Trips to Macau by mainland Chinese dropped a staggering 81.7 per cent during the Lunar New Year holiday compared to the same period a year earlier, according to the latest figures from the Macau Government Tourism Office. During the fifth and sixth days of the Lunar New Year, January 28 and 29, visits dropped 90.6 and 91.8 per cent respectively.
In other words, Chinese high rollers’ home away from home is a ghost town.
The following watchmakers have boutiques in the Macau Venetian: Cartier, Citizen, Gucci, Panerai, Rolex, Breitling, Breguet, Bvlgari, Chopard, Doxa, Longines, Montblanc, OMEGA, Piaget, Rado, Grand Seiko, and TAG Heuer. The list isn’t complete and doesn’t include jewelry stores who also sell watches (e.g., Tiffany’s).
If there’s a famous Swiss (or German) watchmaker that’s not tempting high rollers at the Venetian (e.g., Blancpain IWC, Hublot, Jaeger LeCoultre), rest assured they’ve got a boutique in one of the other high end casino/resorts. Like their cross-town rivals, you can round down the amount of business they’re currently doing to zero. At the same time, rent.
And that’s just Macau. While other main Asian markets for Swiss luxury watches (e.g. Singapore) may not be deserted due to the coronavirus catastrophe, I don’t think Asia’s ultra-wealthy are feeling particularly prone to picking up an example of high horology at the moment.
The Asian luxury watch market collapse means that the supply of expensive watches will eventually exceed demand. By how much remains to be seen. The worse the outbreak, the longer it continues, the larger the unsold supply.
It may take a while for the sharp end of the supply chain (i.e. retail) to feel the effects of unsold inventory. No doubt “excess” production will be re-routed away from afflicted areas. But there’s only so much product you can push down the sales pipeline if it’s not being consumed at the business end.
By the same token, manufacturers are more likely to slow down production and hold on to inventory rather than flood the [remaining] market or cut prices. That said, you can run but you can’t hide from the law of supply and demand. What are the odds you can cut a deal on high-priced watch in Macau if you’re bold enough – or legally able – to darken a watchmaker’s door?
Looking ahead . . .
If you’re planning on a major watch purchase, it may be a good time to adopt a wait-and-see approach. But it’s definitely a good time to sell – an influx of gray market pieces could cause pre-owned prices to plummet. If you see prices for used watches dropping on chrono24 or elsewhere, you’ll know what’s coming.
“If this is over in two months and forgotten in six, it won’t be a problem,” said Vitaly Umansky, a gaming industry researcher with Sanford C. Bernstein. “If it continues until summer and there’s no end in sight, that’s a problem.”
UPDATE: CNN reports that Macau authorities have confirmed eight cases of coronavirus-infected residents/visitors.