The latest report jointly issued by the US investment bank Morgan Stanley and Swiss consulting firm LuxeConsult shows that the Swiss watchmaking industry is accelerating its differentiation. The market share of major players is constantly increasing, and their growth rates are also clearly above average.
It’s an impressive set of numbers and at a glance: 350 Swiss watch brands compete for the market, including Swatch, Rolex, Richemont and LVMH ) Occupies a 75% share and is absolutely dominant. The Swiss watchmaking industry continues to consolidate at a high level, which is one of the important findings of the 2019 Swiss watchmaking market report jointly released by the US investment bank Morgan Stanley and Swiss consulting firm LuxeConsult.
The report estimates that Swiss watch retail sales in 2018 were 51.9 billion Swiss francs (excluding VAT). In comparison, according to the Swiss Watch Industry Federation (FH), Swiss watch exports reached 21.2 billion Swiss francs in 2018. According to the reported data, the composition of about 52 billion Swiss francs is as follows: Swatch Group accounts for 28.6%, Rolex (including Tudor) accounts for 23.5%, Richemont Group accounts for 18.4%, and Louvre Xuan Group (including BVLGARI Bulgari, TAGHeuer, Hublot and Zenith) accounted for 7.9%, leaving little room for other players in the market. Hermès watches have a turnover of 195 million Swiss francs and a market share of 0.7%. Kering (Kering, including GUCCI, Athenian and GP Girard Perregaux) has accumulated sales of 380 million Swiss francs, only 1.6% of the cake.
Industry ‘Seven Heroes’
Morgan Stanley found that only a few brands had a turnover of more than CHF 1 billion in 2018. The ‘seven men’ in the industry are Rolex (5 billion Swiss francs), Omega (2.34 billion Swiss francs), Cartier (1.66 billion Swiss francs), Longines (1.65 billion Swiss francs), Patek Philippe (1.35 billion Swiss francs), Tissot ( 1.05 billion Swiss francs) and Audemars Piguet (1.03 billion Swiss francs). The report further states that these predators performed better than the market average in 2018: According to the Swiss Watch Industry Federation, Swiss watch exports increased by 6.3% year-on-year, and Morgan Stanley estimates that ‘1 billion Swiss francs The growth rate of ‘Lang Club’ members is close to 9%.
In other words, large companies with broad price positioning do better than small companies. By seizing market share, the polarization of the watchmaking industry is accelerated; this phenomenon is also apparent within multinational companies. Of the 19 brands under the Swatch Group, three of the top-selling brands (Omega, Longines and Tissot) account for 60% of the group’s turnover and even higher profits.
The report also states that independent companies performed significantly better than listed groups in 2018, with Rolex, Patek Philippe, and Audemarssee achieving the highest sales and profits ever (according to estimates). The report states that this performance is partly a reflection of high-end positioning, with the average retail price (excluding VAT) of several watch-making brand products ranging from 12,200 Swiss francs to Rolex, 50,000 Swiss francs to Audemars Piguet, Patek Philippe’s 53,300 Swiss francs. The average retail price of RICHARDMILLE products is as high as 139,000 Swiss francs, and the brand’s sales in 2018 increased by 15% year-on-year! According to the data of the Swiss Watch Industry Federation, in 2018, Swiss watch export products with prices between 500 and 3,000 Swiss francs and products with export prices higher than 3,000 Swiss francs increased their exports by 7% and 7.3% respectively.
Price positioning is one aspect. Morgan Stanley also pointed out other reasons for its outstanding performance, namely vertical integration, long-term management, zero tolerance for gray market behavior, small annual growth in production, and select distribution channels. For example, the report specifically mentions Tudor, whose average retail price is relatively low at 3,300 Swiss francs, with sales of 280 million Swiss francs in 2018, which has significantly outperformed Breguet and Girard Perregaux in recent years. table. Morgan Stanley said the performance difference between independent companies and listed groups is reflected in profitability. The operating profit margins of Rolex, Patek Philippe and Audemars Piguet exceeded 30%, while the operating margins of Richemont Group and Swatch Group were “only” 16.45% and 13.6%, respectively. (Photo / text watch home Xu Chaoyang)