An accelerated transformation
The Deloitte Swiss Watch Industry Study 2020
Although pessimism is rife among Swiss watch industry executives, there are reasons to be optimistic. Demand is picking up, especially in China. Brands, even traditional ones, are seeing the benefits of omnichannel. Luxury brands are shifting to the lucrative pre-owned segment. The industry as a whole realises the importance of sustainability and ethics across its entire value chain.
The Swiss Watch Industry Study 2020 is based on a survey of more than 55 watch executives and 5,800 consumers living in China, France, Germany, Hong Kong, Italy, Japan, Singapore, Switzerland, the United Arab Emirates, the United Kingdom and the United States.
85% of watch executives forecast a grim outlook for the industry in the year ahead.
Hover over one of the watch segments to find out more
COVID-19 hits the industry hard
Over 80% of industry executives forecast a grim outlook for the industry. The collapse in global tourism due to travel restrictions, a drop in domestic demand due to the lockdown and cautious spending habits are having a direct impact.
More than just the pandemic
54% of executives said external factors such as protests in Hong Kong and France, and political uncertainty from Brexit, the US-China trade war and upcoming US elections will have a negative impact on the industry. Weaker foreign demand, softening domestic demand, and a strong Swiss franc continue to pose significant risks to the industry.
Over 70% of Swiss watch executives believe that offline distribution channels will continue to dominate digital ones. Over 60% of watch brands are prioritising their omnichannel strategy. Executives are looking to enhance the in-store experience with experiential brand experiences, a mobile-driven workforce and mobile apps.
62% of watch executives said the industry missed the boat with smartwatches. However, 60% of consumers would wear either a traditional watch or both a traditional and a smartwatch, a positive sign that consumers are not fully digitalised with their timepieces.
Watch executives mention pre-owned watches most often as the ‘next big thing’. One-fifth of consumers are likely to buy a pre-owned luxury watch in the next year, a proportion that is likely to increase with the shift to selling via digital channels, online auctions and dedicated pre-owned spaces in retail locations.
Nearly 90% of the executives believe that sustainability and supply chain transparency are important for the industry, and over 50% of consumers surveyed consider sustainability when purchasing a watch. Greater transparency is being driven by changing consumer demands, the company itself, and the media.
COVID’s impact on exports
Far East & high-end are vital
Bringing the brand to life
Marketing channel mix
COVID-19 impact on Swiss watch exports
The high-end mechanical segment (export prices > CHF3,000) has been the least affected this year and rebounded back to 2019 volumes in August 2020. In line with recent years, high-end mechanical watches should drive the recovery of the Swiss watch industry, which historically has experienced periods of growth after challenging times. Entry-level watches are suffering more due to cautious spending, growing competition from similarly priced smartwatches and non-Swiss fashion brands, and less need for the ‘Swiss Made’ label in this price range.
The Far East and high-end are vital for growth
China is a growth region for the year ahead with 77% of executives expecting growth in the market. Over one-third expect growth in the Middle East and a decline is expected in both Europe and Hong Kong. Other than China, the US and other densely populated Asian countries like Indonesia, India and Vietnam are mentioned most often as the next big growth markets for the Swiss watch industry. Mechanical watches, particularly high-end ones, have been more resilient to crises and slowdowns in the past. They have driven the recovery in China over the summer, and this trend should continue.
Over the next year, 63% of brands are looking to develop or strengthen their omnichannel strategy. For suppliers, the focus is to reduce costs and increase R&D. More brands are optimising their sales channels by reducing the number of points-of-sales and verticalising their distribution networks to stay closer to their end consumers, better control pricing and recoup some of their margins. Normally seen as traditional, the watch industry must now innovate in the areas of digitalisation, e-commerce and digital engagement along the entire customer journey.
The chart shows the share of “Strong priority” to the question “To what extent is each of the following business strategies likely to be a priority for your business over the next 12 months?
Bringing the brand to life
The in-store experience is an essential part of the customer journey and will continue to be vital as customers place greater emphasis on authentic brand experiences. Executives are looking to implement experiential marketing for brands, a mobile-driven workforce and mobile apps to enhance their in-store customer experience. Brands and retailers must find creative ways to combine the physical and digital shopping experience to not only create a seamless journey for customers, but also increase resilience should another lockdown happen.
Multiple touchpoints possible, in-store preferred
Bricks and mortar stores will remain the most important sales channels in the coming years, despite the pandemic. More than 50% of those surveyed chose mono-brand stores and authorised dealers as key sales channels, and 44% of watch executives say they will likely open a new mono-brand or flagship store in the next 12 months. Social media selling, such as via Instagram, are the third most important sales channel which demonstrates that the shift to social media sales, accelerated by the pandemic, is here to stay and will inevitably grow in importance.
Consumers vary when it comes to the influence marketing channels have on their decision to buy a watch. Print advertisements are still most influential in Switzerland and Germany, while in France, China and the UK in-store events have the greatest impact on purchasing decisions. Social media and influencers are more effective in Hong Kong, the UAE and Singapore. Radio and TV are still quite important in many countries, showing how critical it is for brands to get the marketing channel mix right and consistently measure the impact of advertising campaigns.
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Previous editionsThe Deloitte Swiss Watch Industry Study 2017, It's all about digital The Deloitte Swiss Watch Industry Study 2016, Navigating through stormy waters The Deloitte Swiss Watch Industry Study 2015, Uncertain times The Deloitte Swiss Watch Industry Study 2014, Changing times The Deloitte Swiss Watch Industry Study 2013, Time for the future