Morgan Stanley presents its annual report on the Swiss watch industry.
Daniel PintoAnother year, another record. It seems the dark ages are over, and the Swiss watch industry is finally officially on a winning streak.
For 2022, Morgan Stanley estimates a record CHF 23.7 trillion in export value (wholesale), representing growth of 11.6% versus 2022 and 15.5% above pre-pandemic levels.
Almost everyone won, but not everyone won equally.
Just like in the world at large, the "richest" just got richer. Rolex, Audemars Piguet, Patek Philippe, and Richard Mille went from 37% to 42% of the industry. The four horsemen of the apocalypse dominate not only your Instagram feed, but also your revenue. Curiously, they are the only four brands in the TOP 10 that are family-owned and not affiliated with a group (well, Rolex is a unique case, because it belongs to a foundation).
The "big one" that grew the most was Audemars Piguet, 27% this year and more than 300% in the last decade, undoubtedly driven by the Royal Oak's anniversary year and a general rise in its average price. The danger for them is that 90% of AP sales correspond to RO. Following them at a faster pace is Rolex with 21%, which, with its CHF 10 billion, continues to consolidate its absolute reign and can now compare itself in sales levels with global fashion houses like Gucci, despite selling only watches. Also notable is Breitling's 25% growth, which, under the wing of celebrity icon George Kern, has managed to re-enchant a younger audience. Its celebrity "squads" have resonated in the media, and its new designs escape the ostentatious aesthetics and gigantic sizes of its past.
As for the number of watches exported, the total figures rose to practically zero, even considering the contribution of nearly 1 million units of the MoonSwatch, the best-selling watch of the year, which helped the moribund Swatch grow an exorbitant 87% in sales. Even Rolex built 150,000 more watches than in 2021, good news for those still waiting on the eternal queue for their dream Daytona. Still, the total number of watches exported shows a 50% drop in units over the last 23 years. The nearly 16 million Swiss watches exported are a far cry from the more than 90 million Apple Watches sold in the same period, the supreme emperor in units, and surely in revenue as well.
One statistic that strikes me as incredible is the rising average selling price, driven in part by rising manufacturing costs, but mainly by a shift toward more expensive models, rising from CHF 990 to CHF 1,500 in three years—a 50% increase! Crazy. Much of this phenomenon is due to the success of brands like Richard Mille with its "ultra" watches, but also thanks to the resurgence of brands like Vacheron Constantin and its Overseas, and even Girard-Perregaux with its Laureato, gaining followers who hadn't managed to get their hands on a Royal Oak or a Nautilus. Lower-priced brands like Tissot and Longines fell in the rankings, affected by their dependence on China, dragging down the results of the battered Swatch Group, which survives thanks to Omega's stellar results. Apparently, the James Bond year wasn't in vain.
The story is similar at the Richemont Group, which can thank Cartier's ingenuity and elegance for its 2022 results, with more than 40% of sales concentrated at the French Maison.
Lessons learned
The trends that began to be observed in 2020 are now 100% consolidated:
- Social media dictates customer preferences.
- In times of uncertainty, shoppers turn to long-established and successful brands and designs.
- Customers are willing to go into debt to buy high-value watches from brands their peers value.
- Maintaining a clean and organized sales channel is profitable in the medium term, as demonstrated by Cartier and Girard-Perregaux.
- Smartwatches, especially the Apple Watch, have already won. For all practical purposes, they've killed the entry-level Swiss watch.
- China is and will continue to be the key player in global demand. Its reopening is good news for the industry in 2023.
- The secondary market for pre-owned watches will continue to grow faster than the primary market, and all the major groups are already making moves to participate in this industry.
- The mechanical luxury watch is more alive than ever. Its craftsmanship, beauty, and ability to convey a message about its owner continue to enchant legions of new young collectors each year.
