The luxury watch market, which experienced a meteoric rise during the pandemic, is now facing a significant downturn. The surge in prices and demand that characterized the latter part of 2021 has come to an abrupt halt, leading manufacturers to re-evaluate their strategies to avoid market saturation.
During the pandemic, luxury watch prices soared by 20% in just the fourth quarter of 2021, driven by a surge in demand and limited supply. However, this bubble has now burst, leaving the industry grappling with the aftermath.
A prominent watch seller recently noted, “The bubble wasn’t something we’ve seen before in the watch market,” indicating the unprecedented nature of the current market shift. Joel Faith, Director of Atlas Watches, observed a significant increase in the number of new models entering the market. “A big part of it is down to how the authorized dealer dynamic has changed,” Faith explained. In the past, dealers could easily sell any watch, but now many of their stocks are trading below retail price, affecting sales and market dynamics.
To counteract the oversupply and protect their brand value, luxury watch manufacturers have announced plans to limit shipments to retailers. This strategy aims to prevent retailers from amassing excess inventory, which could lead to further price drops and brand erosion. “The hype is over because there is too much merchandise,” Frank Müller, an industry consultant with The Bridge to Luxury, told Bloomberg. He added that excessive supply might prompt retailers to discount watches, potentially harming brand prestige.
Despite these concerns, Faith noted that the situation isn’t dire yet. “It’s not as if suddenly somebody’s turned on the tap and there are all these watches available. It’s still really scarce,” he said. Patek Philippe also reported that they have not reduced supply and emphasized that “demand remains higher than supply.”
The real trouble seems to be affecting middle-priced watches rather than the ultra-premium models. Data from the Fédération de l’industrie Horlogère Suisse revealed a 16.1% decline in Swiss watch exports year-on-year, with a 42% drop in the middle-priced segment (watches priced around £500-£2,500). This segment, often seen as the safe middle ground, is struggling as consumers shift their spending towards other high-end purchases.
As the market adjusts, Watches of Switzerland has revised its revenue expectations for the year, forecasting a range of £1.53 billion to £1.55 billion, down from previous estimates of £1.65 billion to £1.70 billion. The middle market’s difficulties suggest that while luxury watches will remain a coveted item, the sector must navigate a period of correction and realignment to stabilize and thrive in the post-pandemic landscape.
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