The Evolution of the New Watch Market: A Fragile Balancing Act

The luxury watch market has seen remarkable growth over the past two decades. However, with this growth has come a series of challenges, many of which are self-inflicted. Some brands have aggressively capitalized on their popularity, pushing prices to unprecedented levels. Now, these same brands are beginning to face the consequences of their actions.

The Unsustainable Rise in Prices

The most glaring issue is the evolution of pricing. In the past, a high-quality, steel, three-hand luxury watch could be purchased for a reasonable price. Today, it’s increasingly common to see such watches priced at over €10,000. For example, models like the Patek Philippe Nautilus 5711, Audemars Piguet Royal Oak Jumbo 16202, and Rolex Submariner 124060 exemplify this shift. Even historically more accessible brands, such as Omega with its Seamaster and Speedmaster lines, have nudged many of their offerings into five-figure territory.

This inflationary trend is not sustainable for the average consumer. The once-reasonable aspiration to own a high-end timepiece has morphed into a daunting financial hurdle. By driving prices to such extremes, some brands risk alienating the very enthusiasts who have supported them for decades.

Brands Playing with Fire

Certain brands, particularly within groups like Swatch Group (which includes Omega and Breguet) and LVMH (TAG Heuer and Hublot), have leaned heavily on marketing and exclusivity to justify price hikes. While this strategy has worked during economic booms, it leaves them vulnerable to downturns. Similarly, Richemont Group brands like IWC and Jaeger-LeCoultre have followed a similar trajectory, with entry-level prices creeping ever higher.

On the other hand, Rolex—the giant of the industry—has managed to maintain its prestige despite skyrocketing prices. Yet even Rolex may face challenges, as models like the Submariner, once considered attainable, now sell for over €9,000 at retail and often much more on the secondary market.

The Coming Correction

History teaches us that markets are cyclical. The next significant economic downturn, which some analysts predict could occur as soon as 2026, will force a correction in the watch market. When disposable income shrinks, and consumer confidence wanes, luxury purchases are often the first to be reconsidered. Prices will have to adjust to reflect reality, but for many brands, doing so without damaging their image will be nearly impossible.

For example, a brand like Patek Philippe, whose steel Nautilus models have become symbols of excess, may struggle to navigate this shift gracefully. Meanwhile, mid-tier luxury brands such as TAG Heuer and Breitling could be squeezed between rising material costs and decreasing demand for non-essential items.

Winners and Survivors

In the face of a potential market correction, not all brands or groups are likely to emerge unscathed. Contrary to what some might expect, Swatch Group and Richemont could face significant challenges. While these conglomerates dominate the industry with an array of brands spanning multiple price segments, their reliance on increasingly overpriced models may undermine their resilience.

However, within Richemont, Cartier stands out as an exception. The brand has demonstrated remarkable adaptability and consistency, maintaining strong appeal across various demographics (at an acceptable price point). Its ability to innovate while respecting its storied heritage ensures Cartier remains relevant, whether through its iconic Tank and Santos models or its more contemporary offerings. Cartier’s versatility positions it as a brand that could weather the storm and continue to flourish.

In contrast, Jaeger-LeCoultre is a cautionary tale within the Richemont stable. Once revered for its elegant designs and mechanical ingenuity, the brand appears to have lost its footing, with pricing strategies that often alienate potential buyers. However, Jaeger-LeCoultre is far from a lost cause. Its rich heritage, anchored by the timeless Reverso and other significant horological contributions, gives it a strong foundation. If the brand recalibrates its pricing and aligns its offerings with consumer expectations, it has the potential to reclaim its former glory and emerge as a key player once again.

Ultimately, the real winners will be brands like Rolex and Patek Philippe, which have mastered the balance of exclusivity, timeless design (with the exception of the new Cubitus), and customer loyalty. Rolex’s universal appeal and bulletproof branding, combined with Patek Philippe’s heirloom-worthy creations and careful production limits, position them as the most likely to thrive through any market turbulence.

In the coming years, the ability to adapt and remain relevant without compromising identity will determine which brands endure and prosper. For Richemont, Cartier’s example offers a roadmap, while Jaeger-LeCoultre’s future hinges on its willingness to reconnect with its roots and its audience.

Lessons in Resilience

The path forward for the watch industry hinges on resilience and adaptability. Brands must balance exclusivity with accessibility, pricing their products in a way that reflects their value without alienating potential buyers. Additionally, fostering genuine connections with their audience—through heritage, storytelling, and transparent practices—will be critical.

Final Thoughts

As the luxury watch market evolves, its future depends on learning from past mistakes. The next few years will likely test the industry’s ability to adapt to changing economic realities. While the allure of luxury watches will never fade, the industry must recalibrate to ensure its continued relevance. After all, resilience isn’t just a quality of great timepieces; it’s also the key to a thriving market.

08-12-2024