Despite the tail-off in sales expected over the coming months, Swiss watchmakers can still look forward to a bright future, with three recent reports confirming forecasts made by industry insiders such as Jean-Claude Biver, Chairman of Hublot. He expects Swiss watch exports to double over fifteen years to reach CHF 40 billion (USD 43 billion).
While these predictions have yet to be borne out, if only with respect to production capacity, wealthy buyers will more than ever keep watch sales on an upward trajectory, particularly in the high-end segment. Despite a subdued economy, the number of affluent consumers continues to rise and will drive growth in the watch branch.
Asia takes off
According to Credit Suisse, an additional 18 million individuals will swell the ranks of millionaires by 2017 bringing the total number of seven-digit fortunes to 46 million worldwide. Unsurprisingly, most of these fortunes will be in developing economies. Meanwhile, of the 85,000 individuals in the world worth more than USD 50 million, close to half are from the United States, according to the Credit Suisse Global Wealth Report 2012.
Hot on the heels of the world’s biggest economy is Asia. In the second edition of its annual Wealth Report, Swiss private banking group Julius Baer forecasts that the number of High Net Worth Individuals (HNWIs) in Asia could climb to almost 3 million in 2015, compared with 1.16 million in 2010. In less than a decade, their number will have doubled. Switzerland can claim 3,050 Ultra High Net Worth Individuals, ranking sixth on a global scale behind the United States, China, Germany, Japan and the United Kingdom.
China will be the biggest luxury market in 2015
At the same time as the number of wealthy individuals increases, so does their fortune. Again according to Julius Baer, by 2015 the world’s millionaires should have total assets worth USD 16.7 trillion versus USD 5.59 trillion in 2010. China should be home to 1.46 million HNWIs in 2015 with a stock of wealth that could reach USD 9.3 trillion: more than 55% of global wealth.
A recently published study from the Boston Consulting Group (BCG) states that China will become the world’s largest luxury market by 2015, with Chinese consumers buying luxury goods and services at home or when travelling abroad. This is five years earlier than previously suggested by Asian specialist brokerage CLSA, which predicted 2020. In its defence, luxury goods consumption has grown by an average 27% annually in the Greater China region (China, Hong Kong, Taiwan and Macao). Not easy to predict.
Two out of three watches sold to Asians
“We predict that by 2020, more than 330 cities in China will have the same level of disposable income that Shanghai had in 2010,” says BCG in its survey. Auditors PriceWaterhouseCoopers (PWC) are also tipping 2015 as the cut-off point when China will dominate global luxury sales. According to BCG, as much as 40% of global luxury sales are already coming from Chinese consumers.
The implications for Swiss watch brands of this boom in wealth become apparent in the light of recent export figures. Two out of three Swiss watches are now bought by Asian consumers. Over fifteen years, exports to China have rocketed by almost 3,000%. Despite the slowdown observed over the past months, China nonetheless posted growth of 10.9% for the first eight months of 2012… which represents an increase of 64.6% on 2010. Taiwan has performed even more strongly at +132% / +48.7% respectively. And Hong Kong, Swiss watchmakers’ biggest export market, has nothing to be ashamed of at +19.9% / +51.7%.