It was not so long ago that a percentage meant a discount on the retail price. In the post-lockdown world, the same term now refers to a premium on value for certain brands that have been the poster boys of short supply, particularly in the premium steel sports category. To understand why luxury watches like Rolex and Audemars Piguet are in short supply, we need to understand how the industry of handcrafted industrialization works.
Swiss watch exports have been on a steady rise in the past two years. Despite the Covid-related closures of China and Hong Kong (among the world’s top three traditional markets) and the ongoing war between Russia and Ukraine, Swiss watch exports are growing by 12% year-to-date (continuing in October 2022) Reported) Federation of the Swiss Watch Industry, FH), driven by unprecedented growth in the top markets of the United States, Japan, the UK, Singapore and even 22nd-ranked India, expected to grow by 27% in 2022-21 And growing at a rate of 125% in 2022-2020. There has never been a better time for the luxury watch industry. Having said that, what are the reasons behind this rapid demand and supply failure in the retail sector.
Rolex GMT Master II | Photo Credit: Special Arrangement
I remember watching this April that Watches & Wonders was returning from 2022 with the Country Head of a brand that was always in short supply. Surprisingly, he also complained about how he had to turn down most of the requests since January.
To understand this wild demand for luxury watches around the world after the lockdown, I spoke to Raymond Lorraine, President of the GPHG (Foundation of the Grand Prix d’Horlogerie de Genève), who was visiting New Delhi in October. His one word answer was “compensation”. “When you deprive someone of something, they will look for something else,” he said. The lack of travel and shopping opportunities, coupled with good returns from the stock market, has created a propensity to indulge in and invest in luxury watches.
Bioceramic Moonwatch | Photo Credit: Special Arrangement
I am often asked why Rolex can’t supply more. according to a new York Times Reportedly, Rolex manufactured 1.05 million pieces last year, which is a market estimate as Rolex never shares any figures. There are many conspiracy theories behind this short supply such as the company intentionally withdrawing the watches, retailers hoarding stock to drive up market premiums, and reduced production due to pandemic-related factory closures. While all of them may be partially true, they cannot be the main reason. I was fortunate enough to visit the Rolex manufactures (three of them) in Geneva in 2011 and can say with some authority that a company like Rolex cannot suddenly grow a production that involves meticulous handcrafts at almost every stage of production. What they would have done is produce more high-end timepieces than entry-priced steel watches. And this led to FOMO (fear of missing out) by watch collectors and investors (who were otherwise not in the watch market), rapidly driving up secondary prices, even for relatively cheap steel variants.
This high demand for Rolex, Patek Philippe and Audemars Piguet has also helped drive sales for the entire luxury industry. And the big three listed companies selling luxury watches, Richemont, LVMH and Swatch Group, have sold well despite increasing prices of major brands and reducing trade discounts. Retailers who usually offered 20% and above as discounts on certain brands are now comfortably selling the same brands at single digit discounts. Plus, some new launches have rewritten the rulebooks. The hunt for the Swatch Moonwatch, priced at ₹21,100 worldwide (launched last month in India, and available at the new boutique in Palladium Mall, Mumbai), as the flagship store in London closed earlier this year due to overcrowding was lying, has kept the collectors busy.
Audemars Piguet Selfwinding Flying Tourbillon Chronograph | Photo Credit: Special Arrangement
But it was not easy for the industry to overcome the negative growth induced by the pandemic. specifically speaking Hindu From Nyon, Switzerland, Hublot’s CEO, Ricardo Guadalupe, sees the pandemic as an experience that has helped the manufacturing and marketing departments streamline many things to take advantage of the post-lockdown world. Of the measures taken by the brand, he says, “It is clear that the pandemic has brought many changes: promoting digitisation, finding solutions to production challenges. We see the importance of bringing human connection to the digital world and it will play an important role in the evolution of luxury. Customers are looking for authenticity and a personalized experience. As for future trends, Ricardo says, “watches are becoming genderless and the 40mm size has become popular for both men and women today”. Continuing the tradition of innovation, the brand successfully added a new square-shaped timepiece, the Square Bang UNICO, earlier this year and continues its timekeeping partnership with the recently concluded FIFA World Cup 2022 in Qatar for the fourth time is an association that started in 2010 in South Africa.
Where we talk about Swiss watches, Japanese watches have also done well. On the luxury end, Grand Seiko is today a highly recognized name around the world for offering great precision, legibility, elegance, durability and ease of use. Talking about the strategies to deal with the post-pandemic growth, Akio Naito, President of Seiko Watch Corporation, says, “All our decisions regarding research, development and manufacturing are made keeping in mind the long-term perspective. Hence, the advent of the pandemic did not alter our investment strategy, however, we have adjusted our marketing strategies and increased our online presence.”
The bull run won’t last forever, but the industry will settle higher than before. Availability will increase, premium will come down. Customers will continue to look for lasting value and will pay top dollar to obtain the pieces they love. And street sizes between 38-42mm will see more and more launches.