During Covid19 and the global lockdowns the reports are out that the lower priced ‘premium’ mechanical watches have taken an even harsher beating this year than ever before. At the same time, the average prices have been pushed up by an average of 30% per year over the past three years. What could this mean long term?
Long term this means that the entry level will be no more and for a very large number of people mechanical watches will become inaccessible as a result. The watch industry will have achieved its much desired status of selling a pure ‘luxury good’ indeed, but at which cost?
The mechanical watch industry is setting itself up for a massive implosion over the next few decades. It is the economical equivalent of watching an ultra slow motion train wreck, filmed in the crispiest of detail at the highest possible resolution. Short term profit driven decision making will lead to long term negative consequences for a large part of our beloved industry. But yes, shareholders need something shiny at the end of every quarter, or else..
It is no surprise that the brands which are thriving, and will continue to do so, are the ones that do not have to chase the quarterly update schedule. In a recent statement made by Bernstein Research to the FT we learned that “Rolex, Patek Philippe and Audemars Piguet have risen in terms of consumer interest over the past decade, while pretty much every other brand has declined”.
The reaction within the industry has been quite clear for a while now. The bottom of the market is in danger? Well okay then – increase prices. Price increases have been the norm, but does the price increase also lead to a value increase? Certainly a question worth asking.
Over the past years the Swiss export prices have increased by nearly 30 %, thirty percent, per year. These are incredible numbers, one could say, unsustainable even. And it isn’t just the Swiss of course, the Japanese watch industry certainly is no stranger to recent price increases either. Price increases tend to imply value or quality increases as well. However, this expectation is being actively ignored by a large segment of the industry at this point.
The question is then, when do customers say enough is enough?