The Decline and Fall of the Traditional Watch Industry – Coronageddon 38

Watchfinder's watchmakers for the traditional watch industry

“Swiss watch brand Frederique Constant is hoping to limit the fall in sales to 25% this year,” its chief executive told Reuters. “That’s what we’re aiming for.” Niels Eggerding said in an interview in Zurich this week. The Citizen subsidiary’s “cut some jobs” and “many employees are still working shorter hours under a Swiss state-backed programme to avoid layoffs.” Well there’s something the mainstream watch press isn’t reporting. The beginning of the end for the traditional watch industry? . . .

Nine months into Coronageddon and we still don’t know how things are going to play out. The pandemic’s effects continue to shift. Two months ago, the Europeans were happy to lecture us on how their superior system managed the pandemic. Today, Paris is going back into lockdown. The uncertainty makes it very hard for companies to plan for their future and makes predictions almost worthless.

It doesn’t stop people from trying. Which brings me to a triplet of articles that were published over the last two weeks: Bloomberg, The Financial Times, and WatchPro. The gist of these articles: the outcome of Coronageddon might actually be good for the watch industry as a whole. Read closer and it becomes apparent that “good for the watch industry” really means “good for certain brands.”

A Flight to Quality

Rolex - a traditional watch industry survivor

The winners are – alas, alack – the ones who always win: Rolex, Patek Philippe, Audemars Piguet, OMEGA. The stated reasons (as always): tradition, design, technology, heritage.

This behavior represents what’s known as a flight to quality. Coronageddon has made buyers more conservative. Instead of splashing out on a whim, buying something that catches the eye, the wealthy have retreated into known commodities: watches and brands with which they are comfortable.

This conservatism is both an indication of and accelerant for a declining industry.

Traditional watch industry decline

We all know that the traditional watch market is in the midst of a secular decline. There’s little reason to expect that smart watches are going to give up the inroads they’ve made, that smartwatch buyers will return or migrate to traditional watches. The market is shrinking. Nothing on the horizon is going to reverse that.

That’s bad for a lot of manufacturers. Coronageddon is making it worse.

Shrinking markets

Declining markets tend to be very similar. Here’s what happens.

Consolidation – We’ve talked about this before. As weaker companies start to falter, they get picked off. Larger manufacturers scoop up the IP distribution, or customer lists and fold them into their own brands.

Increased focus on profitability – In shrinking markets, the benefits of expanding your reach are smaller (you get a bigger share of a smaller market) and harder (since competition has increased for the remaining customers). The classic strategic response to a declining market is to maximize profit the whole way down – essentially milk the market as much as you can, before shutting down or consolidating.

Concentration on core customers – By definition, declining markets, unless they’re very special, have very few new cohorts of customers coming in, so it makes rational sense to focus on your current customers. Going out and finding new ones is very expensive, which doesn’t make sense when you’re focusing on profitability. Which means, a) giving existing customers what they want and b) figuring out how to maximize revenue from each one.

Short-term and zero-sum thinkingCompanies increasingly view each other as direct competitors since there are more of them chasing each dollar of the market. Decisions get made thinking about game theory and hitting the next quarter rather than long-term investment.

Put together, companies in declining industries become profoundly conservative. What does this mean applied to the high-end of the traditional watch industry?

Audemars Piguet Royal Oak variations - the traditional watch industry responds

Infinite varieties on existing designs. Watchmakers tweaking bestsellers instead of investing in new designs. Marketing focus on “heritage” or “history,” since there’s no future to speak of. Loud complaining about expensive marketing events.

Above all, the trend reinforces a relentless focus on ensuring that the “best” customers are taken care of, to the exclusion of everyone else. Sound familiar?

Lionel Model train

Many consumer industries have gone through this process, especially ones that cater to collectors or, ahem, enthusiasts. Model trains. Sports memorabilia. Cameras. AAA video games.

It’s a cycle: the industry notices the market shrinking and decides to focus on its best customers. Prices rise and companies focus more on collectors and rich enthusiasts because they have money and are much easier to identify and sell to than newcomers .


Products become more esoteric and less applicable to a general audience. New consumers are turned off, either because they can’t afford the cost of entry, the industry has become too inward looking or they simply can’t get allocation.

Eventually these newcomers decide to spend their money somewhere else, the original customers age out and the industry collapses in on itself.

GPHG award

The traditional watch industry is in deep denial. Even as they prepare to celebrate their annual awards show, they reassure themselves that as long as high-end brands are selling out, everything will work out. Maybe some of the small players won’t survive, but that only matters at the margins. There will always be new customers!

The best way to reality check: look at the product from the strongest manufacturers.

Patek Philippe 24

Rolex’s last all-new model was in 2012. The last all-new Patek collection was the . . . what? Twenty~4 from 1999? (Sidenote, yeesh, what a late-90s name.)

I’ll give Audemars credit for launching the CODE 11.59 – although they got so badly burned they fired those responsible and promised the board they’ll never ever do it again. And joined everyone else selling reissues and “inspiration” from their past catalogues.

Take advantage

Wilbur Watches 2020 Launch Edition side

And yet longstanding traditional watch industry consumers are OK with this. They shrug when brands try to do something truly different and go back to searching for Subs, courting Calatravas, and debasing ourselves to ADs for an allocation. Meanwhile, an entire galaxy of beautifully made and interesting watches are ignored and available at a discount.

The problem here is that this state of affairs goes on until it doesn’t. So what is an enlightened consumer to do? Take advantage of it.

Patek Philippe Travel Time Calatrava Pilot

Interestingly, declining markets are exactly the ones where contrarians can do well. Let all the people who get their opinions from HoDinkee debase themselves and go bargain hunting. There’s a galaxy of wonderful off-the-beaten path brands and models that can be had for a substantial discount (and even some of the big boys’ less-loved pieces).

So, enjoy being different! Embrace it. And if you want to go full hipster, Robert can talk to you about pocket watches, an industry whose predicted collapse was ridiculed. Right until it wasn’t.


  1. It is a really interesting diversion that at the same time status clingers are whining about how they can’t get a Rolex, and talking about their positions on the “waitlists” that ADs make up to get people without a purchase history out of their stores, Swatch Group and Seiko are making incredible mechanical watches available for under $1,000 (especially when grey prices are considered).

    The ceramic/sapphire SRPE03 can be had under $400. The silicon hairspring T120.407.11.041.01 can be had under $600. The true GMT C032.429.11.051.00 can be had under $600. And these are not liquidation prices like some brands have now, these are prices that Swatch Group and Seiko’s manufacturing capabilities can easily support as long as the physical retailer fat is removed.

    We are seeing the “increased focus on profitability”/price increase death spiral, and have for at least the last 10 years, even in good times. Richemont took it too far and had to cut prices, although its retail prices are still a joke. I’m not sure how much consolidation we will see though. The strong players already have way too many brands (good example with Citizen and FC), and the small players don’t have any compelling technology or manufacturing capability worth acquiring. For the most part the small players will be left to die.

    Where we could see some interesting movement is with the big dealer groups. E.g., Govberg/WatchBox merging with Kering and making Ulysse Nardin available only through WatchBox, but cutting prices in half to match reality. Or SwatchGroup getting the investors their cash-out by acquiring HoDinkee.

    1. Great points. Seiko is doing Seiko things, which is building beautifully finished, high technology pieces at scale. Swatch continues to blend style and scale. They’ve been doing this for as long as I can remember (and longer) and it’s working for them, even if as you said, status-seekers are more or less ignoring them. The only thing holding me back from buying a GS is the size; 42mm is more or less my max and the sport models tend to run a little bigger than that.

      Two things I didn’t get to in this article, that you mentioned. 1) The response to the Great Financial Crisis was to *raise* prices and buy back inventory. It is interesting now, that Rolex is keeping prices more or less constant this time, and letting waiting lists bloom. I would love to understand the rationale behind the strategy. It might be that Rolex is worried that any higher and they’ll lose being the attainable status symbol of “I had a good year” and become something closer to the playground of the truly rich, like PP.

      2) I didn’t touch on vertical integration explicitly but you’re right, it would not surprise me if we did see some of that. That’s certainly a characteristic of a declining market because it allows companies to squeeze every drop out of profit their value chain. Owning the distribution channel (and the fat markups that come with it) is something that a lot of the manufacturers want. Everyone in retail learned the lessons of the Apple Store, even if most of them can’t replicate it. Maybe another piece.

  2. Thank you for ending on a somewhat upbeat note. The prospect of things getting more recursively hidebound is daunting.

    1. I must say, the Frederique Constant High Life pieces are quite nice. There’s a ton of great watches out there because the industry hasn’t changed much, so the “cheaper” players are just as good as the big boys.

      1. This is a great observation. The difference between something high end and middle range is smaller than ever, and it usually comes down to finishing, style, brand, and precious metals. As texastimex pointed out above, a Si hairspring can be obtained for far less than $1k. Many “complications” are relatively easy to produce.

        Of course when technology equalizes, brand becomes more and more important…if you care about those things.

        1. The problem with “Brand” is that it can often go out of fashion unless it’s been around forever. Even Rolex has gone through ups and downs, you could get one very easily in the 70s no problem. It’s just how they’re able to weather the storm so to speak and if the next generation has had access to that through their parents; they may well reject the brands their parents liked. (A la Mercedes Benz with me).

          1. Agreed. Brand strength is a dicey thing in the long-term. A lot of it depends the current incarnation of the brand staying relevant in the current markets and demographic factors. It is almost certainly overrated as a way to get and retain customers because of availability and selection bias; we tend not to remember the brands that faded away decades ago even if they were large and popular.

            (It’s also a good reason why watches are absolutely not an investment!!!)

  3. More of this please. You won’t find this kind of article and discussion on many other platforms. Most other sources either skip it all together or simply repost the press releases with little to no analysis.

    1. Thanks! We definitely want to bring this side of the industry to readers and do it in as balanced of a manner as we can. We’re in the middle of great changes in the industry, and believe that someone should be documenting it, independently.

  4. Who exactly got fired over at AP for the 11:59 drama? The CEO is still there, plugging this as enthusiastically as he has ever done, and there seems to have been no change of direction on that line given all the new releases in 2020 and gradual coming out of age for some of the higher end models with less idiotic fonts.

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