Prospects grim for Swiss watch industry

Swiss watchmakers fear they will be hit worse by coronavirus than many other industries. Exports tumbled 28% in the first nine months of the year while company executives see a host of problems unrelated to the pandemic hitting future sales.

A survey of the Swiss watch industry by consultants Deloitte has found wide-ranging and deep pessimism. The sector has been beset by the same pandemic woes as other industries. Watch exports, which had risen from CHF9 billion ($10 billion) to CHF21 billion over the last 20 years, have been drastically reduced in 2020.

Only China recorded positive figures and is poised to take over from Hong Kong as the single most important export market. The worst hit segment is mass produced, lower cost watches. The report’s authors believe that the high-end segment will be most likely to lead a recovery.

But executives fear that the industry will be hit by more problems than the pandemic. Even when tourism resumes in large numbers, many countries will be reeling from the economic aftershock of Covid-19. Geopolitical tensions, such as Brexit or trade disputes between the US and China, could also hinder recovery.

As a result, 67% of the 55 executives surveyed had a pessimistic outlook for the Swiss economy as a whole while 85% said the watch industry in particular faced difficult times ahead.

Another cloud looming over the traditional Swiss watch is the popularity of smartwatches. The Apple Watch sold 30.7 million units last year, dwarfing the 20.6 million units sold by the entire Swiss watch industry, the report says.

A third of Swiss watch executives think that smartwatches pose a real threat to their business interests. In 2017, when Deloitte conducted a similar survey, only 14% of executives felt the same way.

Asked about how they plan to rebound from their current woes, bosses said that retail outlets would remain the single most important point of sales. But they also plan to boost their presence in digital channels.

Executives are also rethinking their previous reluctance to enter the second-hand – or “pre-owned” – market. This has been previously dismissed in Switzerland as compromising luxury labels. But Deloitte says 20% of 5,800 consumers they surveyed globally would be happy to buy a second-hand luxury watch. Watch makers also need to find new ways to drive sales.