The luxury watch and jewelry industry has undergone consistent decreases in sales and profits over the last few years. Many people have pointed towards the advent of smart watches, the decline of the Chinese market, or the saturation of the sector as culprits, but the answers are far more complex. Here are a few insights into the decline:
- Ownership vs. Experience As millennials have inspired a change in the definition of luxury today, the economy has moved away from an ownership model and into a sharing model across all demographics. People would prefer to spend money on experiences than materials goods. Many industries, like the fashion industry, has recognized this and moved towards access to new lines and personalized products as part of their evolving luxury models. Watches are slowly doing the same, and will continue to have to adapt to meet this trend.
- Status vs. Functionality. A more expensive watch does not connote a higher degree of functionality. Swiss watches are a status symbol, meant to capture a specific lifestyle of enjoyment for craftsmanship. In order for the industry to move consumers towards appreciating their watches, they will need to focus on educating consumers on the art of complications, the heritage and history of watch culture, and how watch pieces can differentiate themselves from each other – regardless of how well they tell time.
- 2008 vs. Now While the top 1% is still investing in diamonds and gold, the US market has been suffering from a higher dollar. Since the 2008 crisis, many major brands decided to open their own flagship retail stores in America to control distribution in response to department stores and independent retailers selling their products at discounted rates to get rid of inventory. Those who had more control of their products, such as Louis Vuitton and Hermes, fared better during the crisis. Unfortunately with new stores come new overhead and a new marketing model, as watch retailers have to not only now market their products, but communicate their retail presence. Embracing this new opportunity is key.
While the watch industry has new challenges ahead, by staying ahead of the curve, they can use these new trends to their advantage.