The outbreak of COVID-19 – the name given by the World Health Organization to the novel strain of coronavirus which since December has spread worldwide from China – is certain to reshuffle the cards in watch markets. And this comes on top of eight months of unrest in Hong Kong that have already taken their toll on sales. With an 11.4% drop in exports to this special administrative region of China for 2019, figures announced by the Federation of the Swiss Watch Industry for the month of January confirm a dire situation as shipments to Hong Kong plummeted by 25%. For the same month, exports to China, where the epidemic took hold, increased by 7% although the next batch of numbers is expected to paint a different picture, with China going the same way as Hong Kong. This leaves the door open for the United States, where exports gained 15.2% in January, to reclaim its spot as the main international market for Swiss watch brands.
And so it seems inevitable that watchmakers will go West if they are to make anything of the first half-year, which is generally crucial for business. Brands that put their eggs in the Chinese basket are making eyes at Uncle Sam, particularly now the honeymoon is well and truly over with the United Kingdom whose withdrawal from the European Union was reflected by a 14% drop in Swiss watch exports in January. In contrast, after a protracted sluggish period, the United States has been playing catch-up these past two years, shown by the 18% rise in watch exports over the past 24 months. Could it be that the Apple Watch has sparked interest among US consumers for “real” timepieces? One thing is for sure: while there is no denying the popularity of Apple’s connected watch on the North American market, it doesn’t appear to have dented the potential of Swiss mechanical watches.
Expanding footprint in the US
Much of the action has been taking place at retail level. Richard Mille last year opened its ninth US store – and not just any store. This vast flagship extends over 390 square metres in central Manhattan, New York. Visible from a block away, 13 tons of suspended glass panels form the two-storey facade which is engraved and arranged to form a sculpture of the brand’s RM-008 tourbillon movement. Swiss retailer Bucherer is another key player to have made a bold move by expanding Stateside. The group, the world’s largest watch retailer with revenue estimated in the region of CHF 2 billion, snapped up the 28 Tourneau boutiques and the four Baron & Leeds stores in the United States – described by Jörg Baumann, Head of Marketing and Business Development, as the main strategic market for watches. At the time of the acquisitions in 2018, the group already operated 34 points of sale in the US.
The American market is six times the size of the British market for jewellery but only one and a half times the size for watches.
Watches of Switzerland is another one to have the US in its sights. The group went public on the London stock exchange in June last year and is hot on the heels of Bucherer. Self-proclaimed number-one retailer of Rolex, Cartier and Breitling watches in the United Kingdom, the British group has also crossed the Atlantic with the acquisition in 2017 of the Mayors chain of watch and jewellery stores in Florida and Georgia. It went on to open a space in Las Vegas, quickly followed by New York and soon New Jersey – not forgetting the 11 monobrand boutiques that are currently in the pipeline for Breitling, Omega and TAG Heuer. The group posted revenue of £773.5 million for the financial year ending April 2019, with 24% of that coming from the United States. Speaking last year, Watches of Switzerland Executive Vice President David Hurley said, “It’s not just about gaining market share. The American market can grow in absolute terms. It is already six times the size of the British market for jewellery but only one and a half times the size of the United Kingdom for watches. You can see the growth potential.” A potential that clearly hasn’t been lost on the world’s largest and second-largest watch retailers.