The Truth About Watches has done its level best to report on the secretive Swiss watch industry throughout Coronageddon. While the Swiss Watch Federation provides some general stats (e.g., Swiss watch exports declined another 10 percent in January) and we read Big Watch’s’ financial reports, we’ve been mostly flying blind. Until now . . .
watchpro.com’s just published industry data unearthed and collated by Morgan Stanley. Finally we have solid intel upon which to base our observations. There’s plenty of insight to be gleaned from the numbers. Here’s a few key takeaways . . .
It’s Rolex’s world – everyone else is just living in it
As Swiss watch sales hit the skids, we predicted “a flight to safety” (i.e., strong consumer preference for established watch brands). True story. Rolex sits at the top of the sales chart like a Swiss Colossus. The brand captured 24.9 percent of the Swiss watch market, gobbling up market share at the expense of its rivals. Rolex’s market share is 50 percent larger than the top three Swatch brands.
As a result, Rolex was able to increase prices – despite shipping “just” 800k watches (140k less than the previous year). Also predicted and realized: industry consolidation on the supply (manufacturer) side.
The top 10 Swiss watch brands now represent 68 percent of the market. We’re not seeing consolidation on the demand (consumer) side. Everyone is buying Rolexes; Swiss watch fans are turning into a monoculture.
OMEGA got crushed
In 2019. OMEGA earned around $2.4b in gross revenue. In 2020, the number fell to $1.75b. All Swiss watch brands saw declining income, but OMEGA’s nearly 30 percent hit is stunning, and not in a good way.
How much of their fall was down to disappearing in-person shopping, how much was the result of a flight to “quality” (vs Rolex)? Still unknown. But if I were the Swatch Group (OMEGA’s owners) I would be very very worried.
High end Swiss watchmakers held on – as much as could be expected
Patek Philippe, Audemars Piguet and Richard Mille all saw declines from last year, but they weathered the storm better than most of their competitors. That’s because the action was at the top end of the market. Swiss watches priced over $7,515 may have only accounted for 10 percent of exports by volume, but they were responsible for 70 percent of sales in terms of value.
This is probably due to the K-shaped recovery throughout the world and tighter supplies in general – as opposed to overall demand making the higher end more resilient. Maybe selling variations on the same basic watch (Royal Oak, I’m looking at you) is a good strategy in times of trouble.
The middle of the market is toast
TAG Heuer and Tissot got absolutely murdered, notching worse declines than OMEGA. Robert would say this mid-market cratering is the Apple Watch taking its toll (Apple Watch sales were up 19 percent in 2020 to 33.9 million units). I’m inclined to agree. 2020 was a year when people wanted convenience and technology of a smartwatch and didn’t care that it looks like dog shit on your wrist.
The good news? We’ll be going out and about in 2021; the downward trend is likely abating. A little. The bad news? Rolex’s market dominance is not abating. If Rolex had more watches to sell it would be even worse/better. Which they will. Meanwhile, all those Apple Watch customers ain’t coming back. The long term implications are almost as ugly as the blood on the carpet revealed by Morgan Stanley.