Will the Swiss watch industry turn around in 2017?
After years of tremendous growth, Swiss watch makers have been facing difficult conditions in the last two years. Especially watch exports to Hong Kong - Switzerland’s foremost export market for watches - have fallen sharply since peaking at CHF 1.3 billion in Q4 2011, to less than half of that (CHF 668 billion) in Q4 2016. Overall, Swiss watch exports have now been declining for 18 consecutive months.
Swiss Watch exports (CHF, m)
Nonetheless, latest exports data give cause for hope. After many consecutive quarters of 20-40% decrease, watch exports to Hong Kong declined by only 12% in Q4. Watch exports to China even increased for two consecutive quarters. Whilst this surge has likely been boosted by higher import tax duties on luxury goods, it is still a positive sign that the Chinese market could be on a path of recovery.
In the meantime, the UK market has continued to show strong performance, even overtaking China as the third-ranking market in Q3, on the back of a weakened Sterling. Unless watch brands raise their prices in the local market anytime soon, this upward trend is likely to continue.
However, it is still unclear if a potential recovery of the Swiss watch industry will arrive this year. In a survey commissioned by Deloitte between May and July 2016, 82% of Swiss watch executives interviewed indicated that they were pessimistic about the outlook for the Swiss watch industry for the next twelve months. A return of Asian tourists to Europe, a potential recovery of the US market and the capacity of the Swiss watch brands to adapt their offering to new market conditions are all factors that could influence the timing and pace of such a recovery. 2017 should be a pivotal year for this key Swiss industry.
Regardless of these challenges, the fundamentals of the Swiss watch industry such as the attractiveness of the Swiss Made label, the undisputed leadership of Switzerland in the luxury watch market as well as its innovation capacity all remain strong.
Navigating through stormy waters