The world economy was in a slowdown for a few months, and all industries were affected by the virus.
The economy was already out of breath, even though the markets were at their peak with the massive liquidity injections that the various central banks were able to make. The coronavirus slowed down the world economy, with more than 170 countries affected and a large part of the population confined for many weeks.
All of these situations have caused huge fluctuations in the various marketplaces around the world.
The luxury goods and watch industry was doing extremely well until China went into quarantine and the domino effect of the virus caused companies in this sector to lose a lot of money.
The watch industry has been incredibly shaken by the virus. Various luxury groups such as LVMH, Richemont, Kering, the Swatch group, and even independent brands have seen their sales plummet. Admittedly, the figures have not yet come out, but we can expect heavy losses.
Some manufacturers preferred to close their premises for a few days on this occasion. The various trade fairs that were due to take place were also canceled, such as the Basel trade fair.
In France, with the confinement on the part of China, there were practically no more tourists or people in the streets, so sales dropped enormously.
In a report published by Morgan Stanley, the top 50 Swiss watch brands were listed, which aimed to identify the market shares and current momentum of the sector. The report pointed out that the figures were based on the year 2019 and that it took into account the effect of the virus on projections for 2020.
In this report, intended for Morgan Stanley's clients, we can see that there are only seven billionaire watch brands in terms of turnover. There are two types of brands, those that are performing and growing strongly (there are only a few of them), and those that are stagnating or even losing turnover year after year.
There is only one brand that will probably join the very exclusive club of billionaire brands in 2020 unless the current economic situation prevents it. Given its growth, Richard Mille should probably join this very closed club.
Of all the brands analyzed, 50% have progressed, but 30% have declined, sometimes significantly. Here is the ranking of the eight largest companies in the sector.
We can see that Rolex is by far the biggest brand in the watchmaking sector in terms of turnover, with nearly 5.2 billion Swiss francs, or 4.9 billion euros.
The graph impressively demonstrates the supremacy of Rolex, which alone holds almost a quarter of the Swiss watch market. Rolex holds 23.4% of the market share. As you can see, the brands in blue represent the Swatch Group, the brands in yellow the Richemont Group, and the brands in orange the LVMH Group.
Moreover, the watch industry is probably the only luxury industry in which independent brands perform better than major watchmaking groups.
According to this graph, the top 4 independent brands in the ranking are Rolex, Patek Philippe, Audemars Piguet, and Richard Mille, which generated a cumulative turnover of 8.7 billion Swiss francs or 8.23 billion euros, representing 35% of the market share.
This compares with the 55% held by the four largest groups such as the Swatch Group (17 brands), the Richemont group (11), the LVMH group (6), and the Kering group (3), with their 37 watch brands.
But in that case, what's left for the other brands? Not much... 90% of sales and especially 98% of profits are controlled by 41 brands (4 independents + 37 brands owned by the 4 groups). We estimate the Swiss watch market at just over 50 billion Swiss francs, or around 47.5 billion euros depending on the value of retail sales, with a 2.6% growth in exports in 2019 (export statistics of the Swiss Watch Federation). Looking at the constant rise in the average price of watches sold and above all the abysmal fall in the number of Swiss watches sold last year (-3.1 million units), it can be concluded that a large number of Swiss brands in a very upmarket niche have fallen back.
The Swiss watch industry is still in the driving seat in the world watch market and still holds 53% of the market share, but with only 2% of the volume. The 13% (3.1 million watches) fall in volumes last year was concentrated in all price segments below 2,000 Swiss francs export price corresponding to 5,000 Swiss francs in public prices. Watches in these categories lost market share in terms of both value and quantity. The decline reflects an uninterrupted decline over the last 20 years. In 2000, an estimated 29 million units were sold, but this trend will accelerate sharply in 2019 with around 20.6 million units sold. The luxury goods sector, as well as the watchmaking sector, have been hard hit. In spite of everything, we noticed one thing. Some models, whether on the grey market or on the second-hand or even vintage market, have increased in value.
Why? That's a good question.
What we observed is that the models which were already complicated to find become even more so. Perhaps the manufacturers we're looking for have adapted to this very virus.
WHAT HAPPENED TO THE STOCKS IN CHINA?
Many watch stocks are located in China and are waiting for their buyers, as China is slowly recovering from the health crisis.
On the secondhand market, and on the vintage market, some models have also seen their market value increased. Indeed, some collectors seeking to secure their capital are starting to diversify their investments, and some have bought collector's watches on this occasion.
Let's not forget that the collector's watch is considered a safe investment just like gold. This is perhaps why the craze for collector's watches is increasing, because Gold at the moment is fluctuating a lot, and the stock market is collapsing, it is for these reasons there is even more of a demand for these models.
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