Certainty is the lubricant of all economic engines, and the Swiss watch industry is lacking because exports of Swiss watches have fallen since 2015. Some experts believe that sales in 2017 will bottom out but nothing is guaranteed; 2016 was a year of panic for the industry with midyear figures showing a 16.1 percent decline from the previous year and The Swatch Group suffering a more than 50 percent drop in sales; by the end of the year Swiss exports suffered a 9.8 percent decline in export sales overall.
Since 2000 Swiss exports have slowly declined, but why the dramatic swing in 2016? As Jack Forster describes in his Hodinkee article, “Mid-Year Swiss Watch Sales Results Show Industry Beset By ‘Perfect Storm”, many factors affected the market. Changing consumer tastes, the shrinking of consumer incomes, the rise of the smartwatch, and declining tourism are all factors. Another factor is the continuing China is the fastest growing world consumer of luxury Swiss watches, and luxury gifts are commonly used as political bribes. Protectionism could also be a factor as new regulations require all watches labeled “Swiss Made” to have a Swiss-made movement and at least 60 percent of the manufacturing costs generated in Switzerland.
Despite all the gloom, the Swiss watch industry has proved that it can defy trends. In 1983 the Swiss watch market appeared doomed as inexpensive quartz movements from Asia flooded the market. More than 50 percent of watchmakers were out of work as Swiss manufacturers struggled to compete. In response the Société Générale de l’Horlogerie Suisse SA, ASUAG, was formed. Out of that union came the Swatch watch that saved the Swiss industry and firmly reseated it as true market competitors. Latest figures show the average price of a watch made is China is $7, whereas the average price of a Swiss watch is $749. Although it is shrinking, the continued demand for mechanical Swiss watches is an economical and technical conundrum and a masterstroke of marketing genius.