Over the course of the last few years, the watch industry has been winding down.
From the rise of the smartwatch to the collapse of several key global markets, timepieces are in turmoil – Swiss watch export data shows a 14.2 per cent fall year-on-year to this July alone. But could Brexit, the result of the divisive national referendum in June, call time on this downturn?
Market breakdowns show that, despite Switzerland’s Swatch Group’s operating profits plummeting by a worrying 54 per cent (equating to £320 million) in the first half of 2016, the post-vote weakening of the pound boosted sales in several of the European company’s luxury brands flagship stores.
Swatch subsidiary watchmakers including Omega and Blancpain reported sharp sales rises in their London stores in the weeks immediately following the out vote, and Nick Hayek, chief executive of the Swatch Group, was even quoted as saying that “Brexit has produced fantastic results in the UK”.
But why is this? Even before Britain’s vote was official, the pound had started to slide. In the 24 hours after the result, the pound had dropped by 10 per cent and, two weeks after the result, the UK’s native currency had fallen to £1 to $1.28 – such a low exchange rate had only been witnessed once before in the history of the currencies.
So, beckoned to Mayfair by the appeal of a weak pound, tourists descended on London to pick up products that had become overnight bargains – and gave the struggling watch market an unexpected boost.
And, although the watch industry wasn’t the sole benefactor of the Brexit boon – at the Cannes Yachting Festival, Antony Sheriff of Princess Yachts this week highlighted the increased interest Brexit had brought to the luxury boat market – watchmakers were certainly the most grateful for the unexpected advantages of the vote.
Although London was where luxury timepieces’ luck turned around, the sales were not struggling too badly in the capital before the pound plummeted. The fall of Hong Kong, however, was one of the worst hits taken by watchmakers.
Struck by shifts in tourism flows and the mass exodus of Chinese customers over recent years, Swiss watch exports to Hong Kong were down 33 per cent year on year to July, causing sales in the far eastern territory to slip behind those of the USA for the first time in years.
And this hit, paired with other international incidents such as the recent French and German terrorist attacks, were among the factors blamed for the general downturn in the watch market. But others, such as the launch of smartwatches, seem to have been blamed erroneously.
Figures show that smartwatches have not eaten into the luxury watch market in the way that was initially projected – and feared. Adrian Hofer, consumer industry goods specialist at the Boston Consulting Group in Zurich, this week told the Financial Times: “I don’t think the luxury segment of watches will suffer from smartwatches.
“A luxury watch is a completely different product,” Hofer continued. “It is jewellery, a status symbol, a mechanical product. It is about experience and heritage. That is hard to cannibalise by taking a purely functional approach.”
So if the sector is safe, and smartwatches aren’t impeding too markedly on the market, presumably the crisis has simply been caused by tourists – newly adept at flocking to outlets with low exchange rates – being savvier in their purchases than ever before.
“It is not a crisis,” offers Nick Hayek of Swatch. “It is a slowdown in some areas. But not because the brands are unappealing or people don’t want to have watches. It is just that people are travelling differently.”