After five years of sustained growth in the U.S. following a long stagnant period, industry experts said the renaissance in consumer interest here for fine Swiss-made timepieces is showing no signs of coming to an end. Optimism reigns for the holiday retail season and kickoff to the new year.
“The high-end market is on fire,” said Andrew J. Block, senior vice president of watch chain Tourneau. “Housing prices are strong, unemployment is lower. People don’t seem to be weighed down by the geopolitical situation, and this is a feel-good purchase.”
The U.S. has emerged as the biggest market for Swiss watch consumption year to date, according to the Federation of the Swiss Watch Industry, the trade group in Bienne, Switzerland. Almost $1.3 billion worth of Swiss timepieces have arrived in the U.S. between January and October, a 15.6 increase from last year’s $1.1 billion during the same period. Hong Kong, Japan and European countries such as Italy, France and Germany follow behind the U.S. in Swiss watch consumption.
Finished Swiss watch exports have shown a downward trend, according to Swiss figures. Almost 20 million watches left the country between January and October, a 4.9 percent decrease compared with last year’s 10-month figure of 21 million. In 2004, total watch exports amounted to 25.1 million.
However, fine Swiss watches show increasingly strong growth because of an overall increase in the value of the timepieces leaving the country. In October, $916 million worth of watches were exported from Switzerland, a 9.2 percent increase over this month last year. Between January and October, the value of finished watch exports was $6.9 billion, an 11.4 percent increase compared with last year’s figures.
The value of Swiss watch exports increased partly because of more use of precious metals, such as white and yellow gold and platinum. Unlike the remainder of the accessories business, which has experienced a stripping away of sparkly touches, fine Swiss watches also continue to use diamond treatments on the face and bezel.
“Diamonds are everywhere, and it’s not just for women, but men also,” said Tourneau’s Block. “Watches that you wouldn’t normally associate with being bejeweled are.”
Block anticipates such bejeweled pieces to be among the bestsellers for the holiday season from brands such as Cartier, Patek Philippe and Tag Heuer. When it comes to price, the sky’s the limit, with watches in the $10,000 and up category drawing consumer attention.
Block said the holiday period is a great selling season, but doesn’t make or break a year for Tourneau, a point echoed by Cathy Cronin, diamond and watch buyer for jeweler Shreve, Crump & Low, which opened in Boston last month in addition to having a boutique in the Mall in Chestnut Hill, Mass., and a sister store, Schwarzschild Jewelers, in Richmond, Va.
“It’s a very important season, accounting for about 25 percent of annual business, but it’s equal with spring, when people are making purchases for Mother’s Day or graduation,” she said.
In addition to industry adjustments to compensate for the strong euro against the dollar, the increase in the value of timepieces has raised the prices on watches in the stores by 10 percent, she said. Retail prices range from $900 to $50,000, with average consumer purchases falling into the $5,000 to $7,000 range.
“Watches are really turning into jewelry,” Cronin said. “Timepieces are carrying higher metal contents and gem weights. The leaders in the watch world are seeing that people are coming into jewelry stores to purchase jewelry. So in order to make watches sell better in the jewelry stores, they are making them more jewelry-like.”
Despite the price increases, sales of brands such as Cartier, Rolex, Baume & Mercier, Breitling, IWC, Jaeger-LeCoultre and Tag Heuer remain so strong that Cronin anticipates upping the space dedicated to watch sales in the Shreve, Crump & Low flagship by 10 feet in the next year.
Cronin also said watch complications, which were once a feature sought out primarily by men, are gaining interest among women buyers.
“Women are getting more educated,” Cronin said. “Women really want to know what they are purchasing, and the more sophisticated watch buyers are going after the more sophisticatedwatches.”
She said the women’s market still represents a huge area for growth for Swiss watchmakers, a point brands are finally recognizing. She cited advertisements by Baume & Mercier that feature Meg Ryan and Tag Heuer that spotlight Uma Thurman as positive steps in increasing a female consumer’s interest in purchasing fine Swiss timepieces. “They are absolutely making the right decision with the right consumer,” she said. “It’s about a three-pronged approach: the sophistication of the watch, the spokesperson for the watch and the fashion focus of the timepiece.”
Tag Heuer dedicated half of its media budget this year to the women’s category, hiring Thurman and tennis star Maria Sharapova as ambassadors for the brand, said Daniel Lalonde, president in North America of LVMH Moet Hennessy Louis Vuitton, which owns the brand.
“In the past, Tag Heuer has been mainly a male-skewed brand,” he said. “However, we’ve had tremendous growth in the women’s category this year. Prices have gone up, and the customer is trading up. Women’s average price points have gone up in the double digits, but they are buying more expensive watches and recognizing the value in how a watch defines a person.”
Sharapova even had input in the development of Tag Heuer’s $1,895 Formula 1 diamond watch, which premieres for the holiday retail season and features 125 diamonds on the bezel.
“The theme of this year and especially the last two months are that diamonds are a girl’s best friend,” Lalonde said. “We expect a huge sell-through on the Formula 1. We are bullish on the collection for the next six weeks.”
Lalonde said the luxury watch business in the U.S. is largely underpenetrated with only 5 or 6 percent of the population owning a watch that retails for more than $500.
“In Europe, that figure is two to three times higher,” he said. “Therefore, the U.S. market represents huge growth potential. We have a lot of great years ahead of us in the watch category, and especially on the women’s side. I think the women’s business will grow a little faster and what you will see happening is that brands will start defining themselves more to stand out, especially brands that have a heritage and a history to tell as they will be able to use that story to continue to outpace [competitors].”
Julien Tornare, president in North America of Vacheron Constantin, which has celebrated its 250th anniversary this year, said the brand’s message has been about showing the good points of being old.
“We are very proud of our history and our savoir faire, as well as our ability to run our business in a contemporary way,” Tornare said.
The holiday season is important for the brand, not only because business peaks, but also because many of the brand’s new models that premiered during April’s Swiss watch fairs begin arriving in retail stores, Tornare said.
One model Tornare said represents the direction of the brand in the ladies’ market is the new Malte silhouette with a moonface complication. The moon itself comprises diamonds. It retails from $20,000 to $30,000.
“Women are interested not only in jewelry, but also in the nice movements of the watch,” he said. “It’s a trend for the ladies’ segment.”
Tornare expects double-digit percentage growth from last holiday season to this holiday season.
Hank Edelman, president of Patek Philippe in the U.S., said the brand is also optimistic about the holiday season.
“It’s becoming an ongoing thing, but this year it is more so, especially among women,” he said. “There is more consciousness among female American consumers for a quality watch.”
Edelman said the brand’s Twenty-4 silhouette continues to be its bestseller, but the men’s-inspired sporty oversized Aquanat Luce with a colorful rubber strap and diamonds at the bezel is a new piece that has received positive consumer response at $29,950 retail.
“It’s a different look for the American market for us,” he said. “However, women are enjoying it.”
At Michele Watches, creative director Michele Barouh continues to focus on the brand’s strength in ladylike looks with the introduction for the holiday season of its new Attitude silhouette.
“We have steady business all year-round, but we do have growth at the end of the year because the brand’s watches are in a great gift price point of $500 to $7,000,” said Barouh. “We are also doing better every year in general, with our sales increasing. Women shoppers are definitely more savvy than they were a few years ago. They want the quality there, along with the great aesthetic.”