Economy Wednesday, May 9th 2012
Exports of finished Swiss watches for the first quarter 2012 grew 17% overall in value to CHF 4.3 billion and 4% in volume to 6.8 million units, an increase clearly driven by fine watches.
Even as Europe limps along, bogged down by public debt, the United States struggle to convince, and China's contracting growth becomes a cause for concern, the Swiss watch sector defies the odds with a sparkling first quarter. Latest figures published by the Federation of the Swiss Watch Industry show that exports of finished watches increased 17% over the first three months of 2012 to end the quarter at CHF 4.3 billion (EUR 3.6 billion / USD 4.74 billion) with a corresponding 4% rise in volume terms.
Quartz watches are not sub-products
While this upward swing benefits the entire branch, one segment in particular is driving growth, namely fine watches which are defined as timepieces with an export value above CHF 1,500 (EUR 1,250 / USD 1,655) - multiply this by 2.5 to 3 to calculate the retail price excluding VAT. Over Q1 2012, they grew four times more than watches under CHF 1,500 to exceed 20%. An even bigger increase was recorded in the segment that includes watches above CHF 6,000 (EUR 5,000 / USD 6,600).
This latter category is the only one in which quartz watches progress more than mechanical movements, at close to 30%. In every other price category, mechanical takes a clear lead. This progression proves that even though quartz accounts for a significantly smaller volume of exports than mechanical, at this price point it is seen as anything but a sub-product, particularly where gem-set watches are concerned.
An unexpected performance from North America
Turning to the markets, Asia including Japan is still the foremost destination for Switzerland's fine watch brands. It accounted for close to half first-quarter exports in value terms. However, even as the Asian market confirms its front-runner status, at just one-fifth of the market size North America posted much stronger year-on-year growth for the period, well in excess of 30%. Asia remained below this threshold, with the exception of Japan where the implications of Fukushima no longer appear to be influencing sales of luxury goods. In Europe, exports of watches above the CHF 1,500 (EUR 1,250 / USD 1,655) cut-off point also grew, though less spectacularly. There were some surprises nonetheless, particularly Germany which notched up the biggest increase of the top ten markets for Swiss watches, leaping close to 50%. Italy and Spain stood their ground.
Ceramic to join metals as a category
In terms of materials, gold watches were most in demand, and by a long chalk, in the CHF 6,000-plus category. They gained around 30% in both volume and value over the first quarter. Steel and bi-metallic watches came first in the lower-priced categories, though they failed to progress by the same amount.
Exports of timepieces in hard metal (platinum, palladium, titanium, tungsten…), though little more than a blip on the radar in volume terms, still posted the biggest increase in the CHF 1,500-6,000 segment compared with the gold, steel and bi-metallic categories. Beyond this price point, they account for second place in value terms, after gold. This classification per material will probably soon be extended to include ceramic which has made major inroads in fine watchmaking over recent years, thanks to its technical and aesthetic qualities. ■