March 16, 2016
This analysis is by Bloomberg Intelligence analysts Deborah Aitken and Maja Rakic. It first appeared on the Bloomberg Terminal.
Over 150,000 watch enthusiasts will arrive in Switzerland for the Baselworld this week. With 1,500 brands at the fair hoping to will impress buyers, Bloomberg Pursuits will round-up the new timepieces and features. This Bloomberg Intelligence report looks at the factors that contributed to waning demand for timepieces in 2015, and how male shoppers and technology could help the industry this year.
Luxury watchmakers are hoping to entice younger customers. Photo: George Osodi/Bloomberg
LVMH, Tiffany, Swatch welcome wearables, allure of young user
- With watch demand waning, luxury peers from LVMH to Swatch are targeting younger customers.
- One third of consumers aged 16 to 34 don’t own a watch, and only 26% of people who do actually use it, according to YouGov.
- According to YouGov, about 60% of 16 to 34 year olds use a phone as primary timepiece.
- Tiffany CEO Frederic Cumenal sees new technology, such as the Fitbit, as a way to refocus attention on the wrist, which could be leveraged by luxury brands.
- Building brand loyalty among the young could lift demand for luxury watches, as their income rises with age.
One third of consumers aged 16 to 34 don’t own a watch, according to YouGov. Photo: Jason Alden/Bloomberg
Tech watch spend could help double fashion, luxury watch segment
“The watch business globally is about $65 billion. It’s a relatively small industry, and we have a relatively small share. If you look at the tech industry, phone, cell service, iPad, games, et cetera, it’s trillions of business – trillions of dollars in consumer spending every year. If just a small percentage of that spending comes into our category, it’ll change the industry. It can double the business in a relatively short order.”
Kosta Kartsotis – Chairman and CEO, Fossil Group Piper Jaffrey Consumer Conference, June 9, 2015 (via Bloomberg Intelligence)
- Watch volumes struggled in 2015, on ebbing demand across most price points.
- Fossil, Michael Kors and Swatch are fashion brands with plans to reignite growth via smart technology.
- Fossil designs, manufactures and distributes watches and jewellery under the Fossil brand and via licenses for Adidas, Armani, Burberry, Diesel, DKNY, Kate Spade, Marc Jacobs, Michael Kors and Tory Burch. It makes and sells 30 million watches a year.
The TAG Heuer Connected watch is the first true smart watch from a Swiss luxury watchmaker. Photographer: Michael Nagle/Bloomberg
Read more from Bloomberg Intelligence: Balancing tradition and digital in the luxury goods market
Asia, Americas need fix to counter EU’s puny Swiss watch imports
- A 9% drop in Asia and 2% decrease in the Americas are the main drivers of 2015’s 3% decline in Swiss watch exports.
- Reviving exports to these markets is crucial, given they make up 65% of all Swiss watch exports.
- Brand re-positioning, adding new functionality, expanding product offer and more accessible price points may be ways to lure back customer demand.
- Europe, which makes up 33% of the Swiss watch export market, increased imports 6%. This was not enough to offset falling demand elsewhere.
- LVMH is re-positioning TAG Heuer with new smartwatches, boosting production for higher demand.
- Richemont’s Montblanc offers an e-strap combining a mechanical watch and smart wearable device.
- Swiss brand Greubel Forsey is offering simpler timepieces at less than a third of the brand’s average price point.
Trunk Clothier’s owner Mats Klingberg explains his experience of how men shop for luxury fashion. Photo: Bloomberg Media
Men’s luxury market growth forecast dragged by watches, apparel
- The higher growth seen up to 2013 in the men’s luxury market is not expected to return any time soon, according to Euromonitor.
- The slowdown in the sales compound annual growth forecast to 3.1% to 2020, 170 bps below the level achieved between 2010 and 2013, is mostly due to lower demand for luxury men’s watches.
- Timepiece growth is expected to be just a third of that registered a couple of years ago, indicating little, if any, recovery in Asia, where Chinese demand has plummeted amid government austerity measures.