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GfK research: Early signs of growth for 2013

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In the first of a new series of regular quarterly analysis articles for WatchPro, Gfk’s Jonathan Hedges breaks down the performance of the UK watch market in the first quarter of the year. 

After another tough year for retail in 2012 the early signs look quietly positive for the UK watch market in 2013. .
Sales value of watches in the UK continued to see growth, up 5.9% in the first quarter of 2013. However, while value growth is hugely positive for the industry this is against a backdrop of seven consecutive quarters of decline for volume sales.

The first quarter of 2013 was down 2.8% when comparing against the same period in 2012. With value growth and volume decline it is clear to see that the average sale price continues to rise. Unlike volume, average price has now grown for the past eight quarters, up a further 9% so far this year.

With an average purchase price of £120 across the whole market this is the highest that GfK has ever tracked since launching its watches measurement back in 2008.

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Whilst on the face of things this looks like a positive start to the year it is very much dominated by two price points which are driving the sales value. These price points are for watches priced between £100 and £300 and more than £3,000.
These price points have grown in value in 2013 by 13.2% and 17.5% respectively, but of more note is the fact that these two areas have also experienced volume increase in 2013, with sales up 9% for each. This is in stark contrast to the overall performance of the total market place.

Focusing on the luxury end of the market this would look to be very robust currently, with sales of watches priced at more than £3,000 up year on year, but where the luxury market is less productive is more towards the entry point of £1,000 to £3,000. This segment of the market is down 9% in volume and value so far this year, despite no increase in average selling price. With a value market share of 13%, down from 15% a year ago, it is clear that consumers are currently prepared to trade up to higher price points with their purchases and as such the market over £3,000 is performing well ahead of the overall trends and the entry luxury point.

The luxury end of the market is of course important and does indicate the overall health of the industry but for many consumers this is an aspirational purchase and therefore in the short term their focus will be on the more affordable end of the market, under £500.

As discussed earlier, watches priced between £100 and £300 have seen strong sales so far in 2013 with some key fashion brands seeing exceptionally strong sales currently. Overall though, the market under £500 is up by 3.9% in value for 2013 so far but the entry level end of the market remains challenging with watches priced under £100 down 4% in volume and value. This again then indicates a willingness to trade up from the consumer point of view, perhaps buying less often but spending more when they do for higher priced items which come with perceived longer term benefits such as quality and reliability.

So, while the sales on the high street have been positive in many ways so far in 2013, sales of watches online have had a slow start by comparison with both volume and value declines when comparing against Q1 2012. Value has been more robust with a 2.3% decline compared to volume which is down 4.6%. However, the longer term trends of sales online continue to look strong, with year-on-year growth rates at 8.9% and 24.8% for volume and value respectively.
What is clear from these numbers is that the average online sale price is continuing to rise, now standing at £66 for the past 12 months compared with £57 for the previous year. With an increase of 14.6% this is well ahead of the growth on the high street which is 10.1% for the past 12 months. Having said that, the average sale price is still £42 lower online, than on the high street.

Without a strong presence from the high-end Swiss brands online, the average price will continue to be below the high street average but it is clear that people are becoming more confident in shopping online and there is more and more product available to the consumer through this form of retailing.

For retailers then, the need to multichannel retail is now very clear, especially when looking at the market for watches priced at £500 or less.

Jonathan Hedges is global product manager at retail analyst GfK, which specialises in research on the UK watch market and well as global watch markets.

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