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Industry forecast 2009: Watches
High-end watches to thrive as 'aspirational' sector sinks
By Joseph Dobrian
February 13, 2009
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| Breitling's "Chrono-Matic 49" revives one of the most famous models in its history, paying homage to when the brand released the first self-winding chronograph movement in 1969. Suggested retail ranges from $4,490 to $14,905. Breitling.com |
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New York--As the watch business heads into 2009, the high end of the timepiece trade seems to be holding up handily, at least for now.
Trend-wise, automatic watches continue to tick along, slowly regaining market share. Rose gold remains strong, but less expensive stainless steel--made more elegant in some cases with the addition of diamonds--is gaining popularity. As for size, watches continue to get bigger, with 48-millimeter or 49-millimeter pieces no longer uncommon, even as some say that trend has peaked.
Industry observers say, however, that economic worries have sent some "aspirational" brands in the $1,000 to $3,000 price-point range into the trouble zone.
Speaking before the 2008 holiday season, Andrew Talbert, chief operating officer of luxury goods surveyor LGI Network, noted that September and October 2008 saw watch sales drop dramatically: about 20 percent year-over-year.
"We find it interesting that all price points have been hit hard with two exceptions," he says. "The super-high end, $25,000 and up, is doing well because people who will pay that much for a watch still have money to spend. Another price range that's doing well is $500 to $799, where we've seen only a single-digit drop. That may be because several manufacturers have introduced diamonds in that price range, which we hadn't seen before."
Talbert adds that while the total number of pieces sold has dropped, average suggested retail price per sale rose nearly 18 percent, from $758 in September 2007 to $889 in September 2008.
Some industry insiders predict dramatic changes at the brand level. Mid-priced women's watches are struggling and so are the lowest price points--which means some brands will have to rethink their strategy and reinvent themselves.
Ronald Wolfgang, president of Roger Dubuis North America and a longtime veteran of the industry, suggests that repositioning is advisable for certain brands.
"Higher-priced watches will be easier to sell than lower-priced watches," he says. "The young, affluent, style-conscious consumer is still attracted to larger watches, and complications continue strong."
Wolfgang acknowledges that the product shortages that left many retailers concerned after the 2008 Swiss shows will continue to be a problem in 2009.
"Suppliers are way overextended; complicated watches take a long time to make, and that's where most of the demand is," he says.
Oliver Smith, owner of Oliver Smith Jeweler in Scottsdale, Ariz., says he recently dropped a brand when he discovered that it had 11 points of sale in the city where his store is located.
"So it wasn't turning for us, much as we like that brand," Smith says. "We haven't found a replacement, but we're going to forgo the $1,000 to $2,000 price point until we find a watch that we know is going to turn. In better times, we might have gone ahead and filled that void."
John Pember, watch buyer at Chicago's Howard Frum Jewelers, says watches will continue to get larger.
"A 44-millimeter watch is huge, but people are now buying in the 46- to 48-millimeter range, and Breitling [came out at BaselWorld 2008] with a 49-millimeter," he says. "Of the 60 pieces I have currently in stock, 45 are oversized. A large watch used to be the Rolex 'Submariner,' at 40 millimeters. But once you put on a 44 and wear it for a while, the Submariner feels like a boy's watch. Rolex did come out with a larger model, the 43-millimeter 'Deepsea,' and that surprised people because you don't expect Rolex to bow to trends."
But on the West Coast, Rob Caplan, vice president of Topper Jewelers in Burlingame, Calif., says he has noticed a shift back to watches that are only moderately large. He credits actor Daniel Craig for setting this trend by wearing a 42-millimeter Omega "Seamaster Planet Ocean" co-axial chronometer during his portrayal of master-spy James Bond in the latest movie, Quantum of Solace.
"Oversized watches will still sell and will remain an important segment, but the 40- to 42-millimeter sizes will pick up, now that we've seen a big strapping guy wearing one," he says.
Michael Edelman, who runs the watch salon at London Jewelers in Manhasset, N.Y., also reports that the high-end watch business still looks strong, but the moderate price points are taking a hit.
"I'm hoping to see more of limited-edition complications at Basel and Geneva," he says. "We're doing especially well with Cartier's 'Ballon Bleu,' plus Rolex and Patek Philippe. Our business is OK--but we have to watch it."
Trend ticker
--Bigger is better: Watches continue to grow, with 48- to 49-millimeter sizes not uncommon.
--Steel with diamonds: The metal will become a bigger player in the $500 to $799 range.
--"Trouble zone": Watch the $1,000 to $3,000 range. Economic woes are expected to hit that price point the hardest.
--Young affluents: Those consumers are still going for higher price points and timepieces with complications.
Editor's note: This story first appeared in the January 2009 print edition of National Jeweler.
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