In this series of guest columns, Ariel Adams, owner and editor-in-chief for aBlogtoWatch, answers questions on behalf of WatchPro readers. Click here to Ask Ariel anything you like!
Ariel replies: If there is anything the watch industry is collectively searching for, it is some indication of what the future has in store for sales, consumer demand, and the overall global market place for luxury goods. Disruptive times (to put it lightly) have shaken up a number of traditional business practices for watch retailers and manufacturers, and it is human nature to ask “how long will it all last?” I’m not really personally sure, but we should always ask ourselves how known future occurrences will potentially shape our market.
Next year in 2020 the United States will be ramping up for a new Presidential election. The question will be whether or not Donald Trump will secure a second term or if a yet-to-be-determined Democratic Presidential candidate will be chosen. How might the outcome of an election create opportunities or challenges for the global watch market?
The two relevant factors the watch industry should be thinking about is whether or not a trade war – fought anywhere in the world might have an effect on sales and prices, and more importantly how consumer confidence and buying power will be shaped over the next several years. Let’s briefly explore both of these issues.
Donald Trump has on more than one occasion used tariffs as a tool for political leverage. These tariffs result in immediately increased costs for effected goods. Theoretically speaking tariffs might raise prices for luxury watches in the United States or other places. It isn’t likely for the Trump administration to target something as innocuous as wrist toys many of his friends probably like to play with, but I wouldn’t be the first to refer to his leadership style as erratic. Tariffs on watches (or related components) would likely have an effect to slow commerce. Tariffs do not seem likely, but they are certainly something to watch out for.
More important is how a sitting United States president can affect consumer confidence and spending power. This is the real question the watch industry should concern themselves with when looking at how to plan for the next United States President. In other words, are consumers going to be in the mood to buy luxury timepieces, and will they have the disposable income to do so? High consumer confidence is needed for the majority of people to feel comfortable purchasing luxury items that by definition do not serve a utilitarian need.
Consumer confidence is really about anticipated future earnings and the ability to afford more luxury items moving forward. Consumer confidence is an emotion, and can be high when spending power is down, and low when spending power is high. Consumer confidence is about a social attitude and a feeling that “good times are here and that good times will stay.” Any president able to convey the feeling that good financial times are coming for the economy in general will likely result in more luxury watch purchases as a result.
We then have the question of how consumer income will result in better or worse conditions for the purchase of luxury timepieces. Two outcomes will be positive for the watch industry. Anything a president does to increase middle-class income will have a naturally positive effect for the sale of more mainstream luxury watches (most under $10,000). The sale of more valuable luxury watches tends to be linked to the creation of “new money” consumers. People who suddenly start to earn much more money than they are historically used to are those who tend to most immediately on luxury goods such as high-end timepieces. The creation of new money is often a function of growing new industries and investor zeal.
President Trump or any other United States President will no doubt make increasing consumer earnings as part of their campaign goals – but in recent history actually doing that has proven very challenging. While a stronger middle class is the best thing the luxury watch industry can hope for (because it means more consistent, high-volume sales over time), actually experiencing that over the next several years will be unlikely. That means the best the watch industry can hope for in American are political and economic decisions which help consumers feel more confident about their spending power not just today, but also tomorrow.