“The entire Swiss watch industry exported 3.8 million watches in the first three months of the year while Apple shipped 7.6 million units,” watchpro.com reports, “exactly double the whole of Switzerland.” Proof positive that the the Swiss watch industry is on the ropes, as our man Adams reported. Our biz brain’s Coronavirus Watch 15 left this out from watchpro.com’s previous post . . .
Production in Switzerland ground to a virtual standstill in March, and is only now inching back to life.
Rolex remains closed, Patek Philippe is back but with limited production, Swatch Group has attempted to keep manufacturing, but at dramatically reduced capacity, LVMH brands began to return last week but virtually all of Richemont’s maisons are expected to remain closed through to the end of May.
Loss of production should, at least, prevent a massive oversupply of watches into wholesale that might then end up flooding the grey market.
Too late. As we’ve shown numerous times, the luxury watch market is already flooded. The grey market is chock-a-block with previously unobtainable pieces at reduced prices. Coronavirus watch sales are already here.
While the mainstream press has celebrated the re-opening of Patek Philippe and other Swiss watch factories, the media has simply repeated the spin that the manufacturers are slow-walking production for safety reasons. Like this from last week’s Barons.com . . .
One of the first brands to come back online was Breitling, which reopened production on April 6, at about 50% capacity to protect its staff . . .
Last week, Zenith, an LVMH brand, distributed a letter from CEO Julien Tornare, detailing its plans to slowly ramp up production in its factories this month, “in a limited capacity, with a very reduced team, which takes all the necessary safety precautions and will be equipped with masks, gloves and protective eyewear, while respecting safe distances between each other in the offices and workshops,” Tornare wrote.
“This will allow us to meet the demands of the markets that are coming out of confinement, in delivering products and continuing work on the prototypes of our upcoming pieces.”
News flash! There is no demand – with the possible exception of grail watches. Even if Rolex et. al ramped-up delivery of in-demand steel watches, it would be nowhere near enough to sustain pre-Coronageddon production levels.
The world economy is in the toilet. The super-rich may still be in the market – I repeat “may” – but the luxury goods sector will not fully recover until the merely rich feel secure. That’s going to be a while. During that long recovery, watch conglomerates will shed disastrously under-performing brands (e.g., Longines) and the little guys will go bankrupt.
It’s more than a marketing and sales catastrophe. The companies supplying parts to the Swiss watch industry are even more vulnerable than their customers. Watchmakers have watches to sell. They can maintain minimal production, lay off staff and live off the land for a while. Parts makers have to wait a lot longer for orders. Slowed production means many parts suppliers will be cash-starved to death.
Then what? How can watchmakers ramp-up if their suppliers are dead? The big boys can and will subsidize their suppliers, but the small makers won’t have any parts to make watches – accelerating their demise. In other words, they’re dead brands walking.
Remember what Mr. Adams’ said about the entire market contracting at the same time, as smart watches continue to be the go-to choice for new watch buyers? And my warning that smart watches are addictive? It’s a double-whammy. A perfect storm that’s busy laying waste to large swathes of the Swiss, German and even Japanese watch industries.
If I’m right, you’ll see a few things happening: less model choice across the board, falling pre-owned prices and [more] fire sales from smaller watchmakers. If I’m wrong, if the economy comes roaring back by the Christmas season, well thank God. Or someone. Coronavirus watch this space.