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RESEARCH: Luxury watch sector drives growth across American market

Reginald Brack, NPD.

After two years of declining sales to the United States, Swiss watchmakers enjoyed their best year since 2015 in 2018 with imports on track to reach $2.2 billion according to the Federation of the Swiss Watch Industry.

But import figures tell only half the story. The total is a wholesale figure for watches entering the United States, which are less than half the value of all the watches sold through at full retail prices.

Much more important data today is from point of sale systems that track actual transactions with consumers, which is where NPD steps in with instant information from an aggregate of thousands of retailers across the country.

The numbers provided by The NPD Group a market research firm that tracks over 21 industries across the globe are not only a picture of the present, they provide trend information that helps retailers predict what will sell best in the future, as Rob Corder discovered in conversation with Reginald Brack, executive director, industry analyst — watches and luxury — for NPD.

Reginald Brack joined NPD at the beginning of 2018 with a mandate to turn point of sale information from thousands of retailers and ecommerce businesses into data that not only paints a picture of the past and present, but also provides pointers to future trends that businesses can use to make better buying decisions.

He came to the research and analysis firm after a stint at online trading platform StockX and before that he was SVP, international head of retail, watches at global auction house Christie’s. Mr Brack knows his watches, and has become even more passionate about the data that watch businesses need to succeed.

“We are the only company tracking point of sale data for watches in the US,” he says, and he likes the look of this year’s numbers. “It is so good to see the total watch market in the US doing so well. Watch sales for the first half of 2018 were up 8%. That is the first time in at least three years that sales have been up year-on-year,” he reveals.

The NPD business model is to sell subscriptions for its data to businesses, while protecting the anonymity of individual retailers so Mr Brack cannot be too granular when it comes to the detailed breakdown of watch sales, but he does provide a fascinating insight into the broader trends shaping the American market.

“Growth has really been driven by higher average selling prices,” he says. “The only part of the watch market still in decline is the under $300 price point. Everything else, as you go up the food chain gets better and better, and into double digit growth rates when we get above the $10,000 price point. The $10,000 to $25,000 price band is up by 17%. When you get above $25,000, the growth is up 20%. That is amazing to see. These growth figures are for the first half of the year, and the second half will generally be larger. So, we are really bullish going into the holiday season that it is going to be a blockbuster,” he adds.

The volume end of the market, which is dominated by the department stores is still shrinking, but is starting to find a floor. The luxury retailers, meanwhile, are pulling clear. “The big chain department stores are still significant in the watch industry, but at a lower level than in previous years. Department store chains’ decline was only 3% [in H1] this year, which is a big improvement over the rate of decline last year

When it comes to which watch brands are doing well, it will surprise nobody that Rolex is on fire, with demand hotter this year than at any time in living memory. Patek Philippe, which makes around 70,000 watches per year compared to more than a million for Rolex, is also booming. “It is like nothing we have seen in the history of wristwatches. We can go back decades and never see another time when you have this sort of demand and shortages in the market. The same is true for Patek Philippe sports models.

Slightly under the radar is a huge surge in demand for Cartier watches, which, unlike the most popular Rolex and Patek Philippe models, have the benefit of being available. Cartier is especially popular for female customers, a part of the market where there is less competition and its cross-sector brand recognition is untouchable. “Women’s models are also growing, especially at higher price points where growth was in the double digits. Cartier has the top selling model in four out of the five price bands we track, which is amazing to see. Cartier’s men’s watches are doing extremely well too. Cartier does not have the shortage of supply problems that some of the other brands do, so retailers always have stock, and the productivity of Cartier at retail is really impressive,” Mr Brack explains.

“People are starting to realize that they can get a brand new Cartier from a store for under $3000. They have so many popular models now that are under $5000. If you go up through all the price bands, it is number one in every one right up to $25,000+,” he adds.

Unprecedented demand for the top luxury brands is forcing retailers to change their approach. In recent years the focus of training sales staff would have been on gently guiding people towards the best purchasing decisions, this year they are having to handle disappointed and sometimes angry customers who cannot get the watches they want while managing stock for the most loyal clients.

“The shortages are driving something I call relationship retail. If you do not have a long term relationship with a Rolex AD, you are going to have a hard time getting any Rolex [steel] sport model. Retailers are getting shipments, but the watches are not seeing the light of day and going on display because they are all spoken for.

With Christmas just weeks away at the time of this interview, the problem looked likely to only going to get worse, but some dealers, according to Mr Brack, did what they could to keep stock for the holiday season. “I would love to say that this issue is going to pass, but I think it is going to be some time before we see re-stocked cases. There is just such an overwhelming demand for Rolex and Patek Philippe sports watches,” he adds.

There is some trickle down in demand for other leading watchmakers. As well as Cartier, Hublot said it was having an exceptional year. Jean-François Sberro, president of Hublot North America, told WatchPro that sales were up 20%  in 2018. Audemars Piguet and Omega are also seeing strong growth in the United States, according to NPD.

But at the top end of the market, Rolex and, to an extent, Patek Philippe dominate. “If you combine Rolex and Patek Philippe, and look at the sector for watches selling at over $5000, they own the majority of that market. That is amazing. If you are any other brand in that price point category, you are either working to take some of that share back or you are fighting over the remainder.



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