Bubbles, pandemics, and the watch luxury market trends of 2020

Is the luxury watch market currently experiencing a bubble with limited production Swiss pieces from big makers selling for sometimes more than double list price, or is it just the start of a booming market?

As of mid-2020, the Swiss watch export is not in a boom at all.

The COVID influence (sorry for the wordplay) has added much stress in a market that was already suffering from the Hong Kong political turmoil. For your information, a large part of Swiss export towards the Far East passes (or used to pass) through the city-state of Hong Kong.

More, the trend about watch buying shows a clear trend since many years. The data of the Swiss Federation of Watch Manufacturers show that the number of watches sold worldwide is less than before, but the value of the global market is increasing slowly but steadily.

This means that in the world, people buy less watches, but the watches sold are of a higher level and price.

This fact also means that the Swiss, which are the main manufacturers of high-end and luxury watches, should not be too worried about the situation. But it also means that the world is requiring new players to step into this market, especially for mid-range watches (aka affordable luxury) which show the best-possible increment in their cluster.

This is due to the fact that nations like China and India are developing a robust middle-class, and one of the needs of a middle-class is buying objects of quality.

However, if we matrix this data with the values sought by the recentest customer cluster, the Millennials, we see that they value heritage and experience, not branding.

Established brands signify much less to them if they are not accompanied by a convincing history — the Millennials are much more individualistic than to be restrained by peer pressure, as the Gen X did.

This means that the established situation of big-brand groups following a policy of mass-market selling (which are currently the top dogs of the horology food chain) are not going to work too well with this cluster. And this also explains why there are young watch startups emerging worldwide, manufacturing interesting timepieces which tick all the boxes that Millennials require (affordable, ethical, interesting, experiential).

In short, the 2020 watch market should reserve lots of interesting possibilities: the only bottleneck I see here is the limited supply of quality movements, since Switzerland has a dominance in this market, but has a limited supply due to the recent decisions of the Swiss Government’s antitrust commission, which had banned ETA from supplying its movements to big groups — and Sellita, the other big manufacturer, is already fully booked.

So, to sum it up: while the market does not look bad in perspective, it is not all bells and whistles.

And if you are thinking of “investing” in watches, I warmly suggest you to think back. Unless you know what to do, watches are — and are continuing to be — a minefield.

PS: recently, the Swiss Commission conceded to the reasons of ETA, so now the company is allowed again to sell its movements to everyone that they wish. However, someone could file an appeal and freeze the distribution again. As I said before, the situation is not stable, and the companies are looking elsewhere. No-one wants to be double-tied to a unique supplier anymore, and ETA will have to learn that lesson.

I talk about the watch market in more detail in my book, The Watch Manual. You are welcome to check it and download a freeextract from the website.