At the end of October, Morgan Stanley published a ten-point breakdown of the trends in market shares determining industry growth this year.
The first takeaway analytics sadly note is a yearly fall in Swiss watch exports, with volumes at their lowest since 1946. Swiss watch exports are expected to be down -32% in volume to 14 million units, which is half the record 29.8 million reported in 2011. That being the case, the decline should be less severe in terms of value, with a projected contraction of "just" 19.5% at 16 billion Swiss francs, the same level of exports recorded in 2010.
Top luxury brands are clearly faring better than many others in this situation. Polarization is the second distinct trend. While the industry as a whole is contracting by almost a fifth, manufacturers of pricier bestsellers like Patek Philippe and Audemars Piguet are only experiencing a 10% drop. The experts have deduced a third trend from these findings — premiumization. According to yearly results, watches retailing at over 6000 Swiss francs will account for 71% of all Swiss watch exports in value. However, it’s estimated that this segment will only represent 10% of exports in volume.
The forth trend is that smartphones are impacting the entry price of traditional watch models. Two watch categories that have been declining over a number of years were highlighted by the Federation of the Swiss Watch Industry as being at risk: those in the price range of 0 to 500 Swiss francs, and those priced from 200 to 500 Swiss francs (consumer prices are at least double the amount).
Analysts draw attention to the the Apple Watch Series 6 entry price of 450 Swiss francs, and the Fitbit entry price of 250 Swiss francs. These gadgets are gaining ground at an alarming pace. The number of Swiss watches sold 4 years ago was on par with the volume of smartwatch sales, but their lead is set to become more than just a cause for concern this year, with 14 million traditional Swiss watch exports compared to 81 million smart model sales.
A number of trends highlighted by Morgan Stanley focus on major markets. Market growth continues in Mainland China. Despite all of the turmoil caused by the coronavirus pandemic, Swiss watch exports to China should increase by 24% this year to 2.5 billion Swiss francs, and will account for about 14% of all Swiss watch exports. At the same time, Swiss watches are not as popular as they used to be in the United States. Buyers in the US will purchase 15% fewer watches this year.
The secondhand watch market was another focal point. The main takeaway is that there's growth for Rolex, stability for Audemars Piguet and a slight decline for Patek Philippe. Prices began to slide on average at the beginning of the year, but they managed to level off in the summer. That being the case, the sector is doing fairly well.
Popular online secondary marketplaces for luxury watches reported a 10% fall in prices in the second quarter, but nevertheless, prices for popular models were still higher than the current recommended retail prices (steel Audemars Piguet Royal Oak, Patek Philippe Nautilus and Rolex Daytona).
Finally, Morgan Stanley noted that Rolex will remain rock-solid even in 2020, and Breitling was highlighted in the list of watch brands that have managed to strengthen their position over what has been such an unstable year. The analysts summarized their findings, concluding that private brands are feeling more confident than those listed on the stock exchange.
The brands that should remain in the black are Rolex, Patek Philippe, Audemars Piguet, Tudor, Blancpain and Breitling. Meanwhile, Cartier, Vacheron Constantin, Omega, Mido, Longines and Hublot will remain stable. The watchmakers in danger of remaining in the red are Chopard, Breguet, Rado, Tissot, TAG Heuer, Ulysee Nardin, Girard Perregaux, Montblanc, Roger Dubuis, Jaeger LeCoultre, Panerai, Baume & Mercier and IWC.