Is the worst over for watch industry? Only time will tell

Even though the pandemic has battered the global economy and posed significant challenges for the watch and clock industry, the markets are steadily recovering. Imports, exports, production volumes and profits have all rebounded from the depths of 2020, although still remain shy of 2019 levels.

Thierry Dubois, the representative from Switzerland's Federation of the Swiss Watch Industry FH, explained that Swiss watch exports during the first six months of 2021 have improved year-on-year. In 2020, the country's total exports dropped 21.7 per cent compared to the previous year. However, the total export value remained on a par with that of 2019, dipping only 0.5 per cent to 10.6 billion Swiss francs. This was thanks to the Mainland China market, which has seen a surge in demand for luxury Swiss watches since last summer. Demand from the US also began picking up from March this year, which was sooner than the Swiss watch industry anticipated.

Dubois pointed out that Asia now represents the largest market overall for Swiss watch exports, with Mainland China being the leading market, followed by the US, Hong Kong, Japan and Singapore. He foresees that by 2025, the mainland's consumption will pull further ahead and account for 46-48 per cent of all luxury watch purchases. He added that the pandemic has created new consumer habits, with prolonged lockdowns giving consumers more time to reflect on their watch purchases and make new discoveries. "We have observed that online sales quickly replaced physical sales, as shops had to close during the lockdowns. In 2019, online sales represented 10-15 per cent of total sales of luxury products. We expect this will rise to 30 per cent by 2025. At the same time, the importance of social media for communication, interaction and sales has continued to grow. Live streaming has exploded, and the trend is particularly visible in Asia. With the increase in e-commerce, the demand for efficient logistics and delivery has also climbed, because today's online shoppers expect swift product deliveries once they have placed an order," said Dubois.

He remarked that there has also been a notable increase in the demand for 'pre-owned' watches - or watches that have been possessed by someone else - which is expected to rise by 15-20 per cent within four years.

Guido Grohmann, the representative from Germany's Federal Associations of Jewellery, Watches, Silverware and Supplying Industry, said the country's exports of watches, clocks and parts saw a significant year-on-year decline of 14.1 per cent in 2020, including falls of 7.5 per cent in the European Union (EU) and 16.4 per cent in Asia. The situation was largely echoed in imports. In 2020, German imports of watches, clocks and parts fell 6.2 per cent compared to the previous year, with the biggest decline registered in Asia, at 8.7 per cent. Despite this, imports from the EU rose 28.5 per cent, with logistics operating more smoothly among EU countries. In 2021, both exports and imports continued to strengthen during the first five months with imports faring even better than the same period in 2019. While e-commerce continues to gain popularity, Grohmann said that offline stores are still maintaining their attractiveness. He remarked that even though lower-priced products were sold online during the pandemic, consumers still preferred going to stores to buy high-end products as it allows them to try out the luxury goods. The watch market was valued at $61.85 billion in 2020, registering a CAGR of 4.10 per cent during the forecast period (2021-2026).

Considering the Covid-19 pandemic, smartwatches companies have upgraded and launched products to detect the early symptoms of Covid-19 in individuals. For instance, in September 2020, Apple Inc launched the Apple Watch Series 6, which incorporates features such as heart rate and blood oxygen sensors, as it detects early signs of respiratory conditions like influenza and Covid-19.

The demand for smartwatches in the digital watch segment is getting stronger among young consumers, as they are more aware of smartphone technology. Popular brands, like Apple Inc and Fossil Group Inc, are increasingly launching new products with new product innovation year on year so as to sustain in this growing market.