The Swiss watch industry continues on its growth course

The Swiss watch industry is on an export high, with core regions such as the US and China recording healthy growth. Despite the rise in e-commerce, 62 percent of brands expect in-store sales to dominate over the next five years and plan to expand their retail activities. This is according to Deloitte's 2023 Swiss Watch Industry Study, which includes insights from industry experts and consumer surveys in key markets.

India as a growth market

The study shows that watch industry executives see India as a market with incredible potential for the coming years. In the first eight months of the current year, India recorded above-average sales growth of 18 percent. The study authors expect India to be among the top ten Swiss export markets within a decade. Double-digit growth also in 2023: Following its successful performance in 2022, when the Swiss watch industry recorded record exports worth CHF 24.8 billion, it continued its growth trajectory in the first eight months of the current year. By the end of August, watch exports had increased by 10.2 percent in terms of volume and 9.2 percent in terms of value - despite inflation.

Of the top ten export markets, the U.S. remained the most important single market for Swiss watches, with exports worth nearly CHF 2.7 billion, an increase of almost 10 percent over 2022. China saw similar growth of 9.3 percent over the same period, but exports are still 7.5 percent below 2021 levels. Watch industry executives have mixed feelings about China, with forecasts for growth and decline evenly split among respondents. Nearly four in 10 of the 75 executives surveyed said that reduced travel by Asian consumers has negatively impacted their sales figures over the past 12 months.

Less optimism for the next 12 months

When asked about the outlook for the coming 12 months, the majority of Swiss watch industry executives were optimistic about the prospects for both the Swiss economy (60%) and their main export markets (59%). Compared with the overall economic outlook, however, the industry is less confident about its own prospects than it was a year ago. Only half of respondents said they were positive about the outlook (down from 57% in 2022), and a quarter responded that they were negative. Most executives cited geopolitical uncertainty (84%) as the main reason for this sentiment, followed by inflation and the ongoing cost-of-living crisis (69% each). For the next year, executives consider the lack of qualified personnel to be a major risk factor. At the same time, suppliers indicated that they intend to increase both production capacity and the number of employees in Switzerland.

Personal experience trumps digital convenience

52 percent of the consumers surveyed buy watches primarily in stores where they can touch, test and try out the products. 43 percent said they value personal contact with sales staff. Most brands and retailers (62%) agree that offline sales will continue to outweigh online sales over the next five years, with differences by price segment. Generally speaking, customers mostly buy the expensive watches offline. Most brands are investing in expanding their retail space, whether in flagship stores or multi-brand outlets.

In a digitized world, watch trade shows are still very important. Nine out of ten executives see them as crucial for making contact with potential customers and expanding their customer base.

"The electrifying atmosphere of watch fairs and auctions and the opportunity to get up close and personal with a watch in a store cannot be replicated in the digital space. However, social selling - with personalized recommendations and instant purchases via connected apps as well as mobile payment options - will become an important secondary channel for the industry. In Asia, social commerce is already well established and transforms screen time into a satisfying shopping experience," says Karine Szegedi, Head of Consumer and Fashion & Luxury at Deloitte Switzerland.

India as the next growth market

The overwhelming majority of executives see India as the next big growth market for the watch industry, with the country being the most frequently mentioned answer to this question for the first time. India saw strong export growth in the first eight months of 2023, with a value of CHF 133.7 million, an increase of 18.5 percent over the same period last year and an increase of nearly 60 percent over the first eight months of 2021.

In current statistics, India ranks only 22nd in terms of value of Swiss watch exports, but the industry believes this will change. "India is a fascinating market. Consumers are not only numerous, but also increasingly affluent and appreciate luxury items - these are characteristics that attract the industry's attention. We expect export sales of Swiss watches in India to reach over CHF 400 million by 2028. And we expect India to be among the top 10 Swiss export markets within a decade," explains Karine Szegedi.

Sustainability is of strategic importance

As in previous years, sustainability is still important to the watch industry, but the motivations have changed, according to Karine Szegedi: "The survey shows a decisive change. Sustainability has evolved from a consumer-driven demand to an industry-led mission. More than two-thirds of respondents said that sustainability is part of their corporate strategy and that they invest in areas such as circular economy or governance structures." For brands, certified ethical gold (86%), recycled materials (76%) and alternatives to leather (74%) will play either a very important or an important role in the next five years.

34 percent would choose a watch from a brand that focuses on sustainability, while only 25 percent prefer a brand that focuses on its image. Younger generations are prioritizing sustainability over brand image. This shift underscores the need for the industry to integrate sustainability as a core business strategy.

"The Swiss watch industry is not only surviving, it is truly thriving, setting new records and focusing on both tradition and innovation. With the rise of India as a key market and the industry's internal shift towards sustainability, the sector is poised for a future that balances tradition and progress. So look to the watch more often in the future: the next chapter of Swiss watchmaking promises to be as multi-faceted and fascinating as the timepieces that emerge from it," concludes Karine Szegedi.

Source: www.deloitte.ch