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Sunday, April 13, 2008

Downturn in US Economy to affect Watch Sales?


Every year the watchmakers and jewelers converge on Basel, Switzerland in the spring for Baselworld and the SIHH show. It is the place where exhibitors display some of the most dazzling luxury goods in the world. But this year, fears over the U.S. economy may be dampening the usual excitement.

The show, like fashion shows, is one that looks ahead, trying to sell buyers on the goods they will want in their stores in September and October for the holiday season. Many are already predicting that the Christmas business of 2008 will be bad news for both the U.S. and Europe. The annual event has over 2,000 exhibitors and attracts around 100,000 buyers. According to Jacques Duchene, president of the BaselWorld Exhibitors Committee quoted in National Jeweler, last year was a boom year for Swiss watches: Swiss watch exports reached about $15.75 billion last year which was a 16 percent increase over the previous year, and a rise of more than 50 percent over the previous four years.

In this Reuters article, Rolf Schnyder, the chief executive of Swiss watchmaker Ulysse Nardin is quoted as saying that the slowdown in the U.S. market will generally affect the mid-range products. This reflects the general trend we have seen where luxury consumers at the top of the market are spending but those that are at the lower end of the affluence spectrum are cutting back.

For those who make watches and jewelry, bright spots can be found by looking east. Increased demand in Asia, Russia and the Middle East will likely provide most manufacturers with market growth even if other economies continue on their gloomy course. One thing that I will be curious to see is if the change in consumers will change the products. The big spenders in these markets often have particularly lavish tastes and a taste for diamond and jewel-covered watches as opposed to more subtle watches with elaborate complications. I wonder if in the next few years, the major manufacturers will be shifting their output to attract these customers.

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