WatchPro has teamed up with Euromonitor International to bring our readers an exclusive report on how the UK watch market fared in 2012 and forecasts for the future, right up to 2017. Rachael Taylor breaks down the data.
Despite the overall buoyancy in the UK luxury watch sector in 2012, growth was slightly down on 2011 and it would seem that men were quicker to lose their nerve in economic uncertainty than women.
According to Euromonitor International, luxury watch and jewellery sales in the UK were up 5% in 2012, hitting £1.12 billion, against a backdrop of austerity.
“Despite retailers hoping for a year of celebration with London hosting the Olympics, Paralympics and the celebrations of the Queen’s Jubilee, 2012 was a year of economic uncertainty,” says Euromonitor International head of luxury goods Fflur Roberts. “This impacted consumer confidence and many reconsidered their spending.”
Although the Olympics and Jubilee did not bring the boom in retail spending that had been expected, the global events did attract a global audience and as such tourism boomed in the capital, delivering shoppers with a thirst for European watch brands.
“The increase in tourism due to the events taking place in London brought a large group of high net worth individuals from China, Russia and Brazil with a preference for the luxurious heritage of European brands,” says Roberts. “As these brands are far more expensive in their corresponding countries due to high import tax, it is a win-win situation for both the brands and the tourists.”
Luxury watch sales alone delivered growth of 4%, which when compared with total UK watch sales’ growth of 3% shows that there was a thirst for luxury brands in 2012. Euromonitor International says that luxury timepieces represented half the value of the total timepieces market in the UK last year.
“Although consumers became increasingly careful about their spending in 2012, they still showed a preference for luxury,” says Roberts. “Many TV shows focused on affluent consumer lifestyles, the likes of Laguna Beach, Made in Chelsea and Gossip Girl, have captured the attention of young consumers and introduced many of them to the world of luxury brands. The addition of many diffusion brands at more affordable prices like DKNY, Michael Kors and Marc Jacobs have given consumers a more affordable entry price into luxury timepieces. The affordability of these brands caused a higher growth in luxury watches than in the total market.”
When it came to the male-female split, men were quicker to contract their spending in reaction to the economic climate than women, leading to men’s timepieces delivering less growth than in 2011 but women’s timepieces showing growth of 4% on 2011’s figures, which had delivered growth of 3.6%.
HERE COME THE GIRLS
While the ladies’ timepiece category performed well, many ladies were tempted to place their money in jewellery over watches as highly publicised rising metals prices convinced them that precious metals and gems are a safer investment than watches.
“With the UK in a double dip recession, consumers cut back on their spending habits preferring to save up for an investment,” says Roberts. “Women’s jewellery is often seen as a less risky investment than other luxury goods, especially due to the increasing prices of precious metals, and has thus flourished over timepieces.”
Despite this, women’s timepieces was a growth sector in 2012 and has been growing steadily over the past three years, driven by the rise of self purchasing. “As women rise in professional status so do their income and expectations, with more and more women buying watches as a symbol of career success, like their male co-workers,” says Roberts. “Furthermore, brands have been responding to this demand by replicating men’s designs for women, with more complicated movements and sportier designs.”
MEN PLAYING IT SAFE
For men, it was not just a double-dip recession that made them pause before pulling out the wallet; constantly increasing prices and a saturated market also played a role in the decreasing growth in the men’s watch market in the UK. Men’s UK luxury watch sales only grew 4% in value in 2012 compared to 5% growth in 2011.
“2012 started with the UK heading into a double-dip recession, with the slight optimism that was prevalent among consumers during 2011 quickly replaced by concern,” says Roberts. “Increasing unemployment, a deepening of the Eurozone crisis and Spain entering the European Union Monetary Fund turned what was supposed to be a year of celebration, with the Queen’s Jubilee and the Olympics, into a difficult year. Consumer confidence was low and this has impacted the highly priced men’s timepieces category.”
As discretionary spending was retracting, some watch houses’ prices were inflating. Brands including Rolex and Carter pushed prices up in 2012, something that Euromonitor International believes caused men to further rethink spending on watches.
“As watches are status symbols for men, usually denoting career success, they are not frequent purchases,” says Roberts. “Most men will own one to three watches in their lifetime with only a few high net worth individuals collecting more. Collectors look for older and limited-edition models usually bought in auctions, and consumers that buy once every couple of years can easily postpone their purchase for next year. Furthermore, the banking scandals that were brought to the world’s attention during 2012 encouraged many high earners to keep a low profile and be more cautious with their spending.”
Euromonitor International has forecast that luxury watch sales in the UK will continue to grow in constant value terms at a stronger rate than in 2012. From 2012 to 2017 it expects the sector to deliver a compound annual growth rate of 1%.
It expects that over the next few years jewellery will continue to outperform watches because of its perceived steady investment value, delivering a compound annual growth rate of 2% from 2012 to 2017. Increasing prices for watches will also play a part in this.
“With unit prices for timepieces expected to continue to increase on a yearly basis consumers may opt for jewellery, in which price fluctuations are more easily justified by the volatility of precious metals,” says Roberts.
THE FASHION PACK
With steady growth forecast, Euromonitor International believes that more fashion brands will branch out into timepieces, viewing it as a lucrative sideline. “More and more luxury brands from softer luxury categories, such as fashion, are expected to branch out into jewellery and timepieces,” says Roberts. “The success of Chanel and the entries of Christian Dior, Gucci and, most recently, Versace and Louis Vuitton in high jewellery showcase how fashion luxury brands are trying to move more into the higher profit margins of hard luxury. This trend is expected to continue as brands search for profit in difficult economic times.”
The entry of such brands into the watch market will have an effect on retail strategies in the sector. At present, Euromonitor International has found that the watch sector in the UK is not using the internet to its full potential but with fashion brands seasoned in social media and multichannel interactivity the sector could be set for a boost in this area.
“Fashion brands already use more social media and e-commerce in their strategies than traditional timepiece brands, a trend which they can bring into their watch activities,” says Roberts. “Traditional timepiece brands have been the slowest of the luxury brands to adopt an online strategy, as they are primarily family or private businesses, which, in the majority, worry about losing the exclusivity factor if they go online. The entrance of fashion brands in the category could encourage more of the traditional timepiece brands to increase their online profiles and incorporate social media in their marketing.”
With all markets, categories rise and fall and while women’s timepieces have been triumphant in 2012, Euromonitor International has forecast that it will be the poorest performing category over the 2012 to 2017 period with a compound annual growth rate of less than 1%. It will also deliver the least value to the UK, forecast to amount to just £4.4 million over the period.
This article originally appeared in the April 2013 issue of WatchPro. To read a digital version of the magazine in full online, click here.