It is confirmed, watchmaking figures are up again. So what ?

In a previous article posted on 1 February 2016 here, I stated that figures for the watchmaking industry were down but that this industry has an habit to recover from all (even harsh) situations.

Some reasons explaining the decline

The global economic situation experienced a steady downturn over the last few years while the watchmaking industry continued to perform well for a time, then finally followed the downward trend, as China saved the day after the big financial crisis in 2008 but finally went back to a more "normal" (?) growth, mainly due to a general overheating, successive Yuan devaluations, as well as the governmental push for more domestic consumption and the increase of import taxes on luxury products. Recently, the global economy has shown a tangible recovery with almost all green lights in terms of developments for the short to mid-term.

But these were not the only reasons behind the 20-months continuous decrease of the watchmaking figures. At the same time, the client confidence in the products'value clearly blemished as well, after years of continuous price increases with no/small apparent client benefit. Everyone now in the industry is speaking about putting the client "centre stage", and it has not always been the case. So the task is huge and will take some time.

A prospective view

The last-issued FHS export figures for Jan-Nov 2017 show an encouraging 3% YoY growth in value, but a few points must be noted: 1) 2015 and 2016 results were negative and we are now back to figures around 2012-2013 levels, so 5 years of growth have vanished. 2) these figures don't take into account all the stock buybacks necessary to insuffle a new breath into the industry 3) the export figures are not perfect and don't show the real situation of the markets in real time (sell-in vs. sell-out, retail vs. wholesale, etc.). And 4) the distribution of these results has changed: powerful players are now more powerful, smaller players are now more exposed (or not here anymore).

Nevertheless, and I am still the optimistic here, from the various sensors I have throughout the industry and in the markets, I can assess with some degree of confidence that: 1) China (and Hong Kong) is back, in a different way but most probably a healthier way: more domestic consumption, more targeted, long-term-value oriented. 2) the smartwatch phenomenon is now integrated and its effect limited to specific segments. 3) the distribution is evolving at a fast pace towards a digitalization and will help the business to develop further, which can be an asset for the smaller players, more and more marginalized in the traditional distribution. And 5) the sell-out is apparently quite healthy in most markets.

The favourable global economic situation will most probably further help confidence to be back and ultimately positive results for the watchmaking industry will return, slowly but hopefully surely. We shall see in a couple of years if this was a safe assessment or only wishful thinking... I wish you all a great and successful 2018 year ahead !