In a report published earlier this year by the Swiss Watch Federation (Federation of the Swiss Watch Industry), it was revealed that the year 2022 was another record year for luxury watch sales, with the entire industry reaching sales totaling 23.7 billion Swiss francs in sales.

In comparison to 2021, this represents an increase of 11.6 percent, and as we have discussed, this is an all-time record for the luxury watch industry. As compared to 2019, the year before the Coronavirus struck the entire world, this is even more impressive - a leap of 15.5%, which translates into additional exports in the amount of 3.2 billion Swiss francs, which quite impressively exceeding the number of exports in 2019.

It is interesting to see what data has been revealed in the FHH report regarding the luxury watch industry. It is a misguided belief that the new peak reached by the watch industry is a result of the sale of more watches, but what we are actually witnessing is a continuation of the trend we have seen over the last 20 years when the number of wristwatches sold has been decreasing year after year.

There was a low point for the industry in 2020, with 13.8 million wristwatches being sold, which was an all-time low. As a result of this trend, the watch industry has not changed significantly over the past few years, with only 15.8 million watches being sold in 2022. Based on the comparison between 2021 and 2019, the number of units has increased by just 0.3 percent, which equates to just 49,000 units in practice.

For comparison, the Swiss watch industry was able to sell 30 million wristwatches in the year 2000, when the millennium began. So how do these numbers compare to one another? In order to make this possible, the average price of watches sold has increased in recent years. In the year 2022, the average price of a Swiss luxury watch sold in the country was 1,500 Swiss francs, a figure that represents an increase of 11.3 percent compared to the price of a Swiss luxury watch sold in the country in 2021. As it is important to emphasize, this is the price at which the watch was sold to the various markets around the world, when in reality, the average price that the typical consumer paid was 3,000 Swiss francs.

LVMH Report

LVMH Group, one of the world's largest conglomerates specializing in luxury goods, also published its financial results for 2022 a couple of weeks ago. The LVMH Group reports that the luxury goods market took another leap in the past year, while for LVMH, the year 2022 also proved to be an outstanding year for the French powerhouse, with revenues of approximately 79.2 billion euros, an increase of 23 percent compared to the year before.

In terms of the LVMH figures, it is important to keep in mind that they encompass the entire group as a whole, with the group's main source of revenue and growth coming from its activities in the fashion and leather goods sector (a 25 percent increase in revenue compared to the previous year, when the Louis Vuitton brand alone generated 20 billion euros in revenue alone).

However, the group's watch brands also had a successful year in terms of sales. The watch and jewelry division of LVMH reported a year-over-year increase in sales of 18 percent, which equates to approximately 10.6 billion euros in sales for the watch and jewelry division.

The watch and jewelry division of the group includes the brands Tiffany, Bulgari, Zenit, Tag Heuer, Fred, Chaumet, and, of course, Hublot.

It was a record year for the Swiss watch industry in 2022, despite one of the worst years for the entire Swiss watch industry in the past year, with Swiss watch exports to China, one of the world's biggest markets for luxury watches, shrinking by 22.5% in the past year. However, the forecast for 2023 is quite optimistic and positive, although relatively cautious.

In recent months, the Chinese government has introduced a change in its policy regarding the handling of the Coronavirus, with a slow and gradual cancellation of the zero-contagion policy and a transition to a policy of living alongside the virus, as almost all countries around the world have done. This change should wake the Chinese market to life, with the main beneficiary expected to be the Swatch Group, where its leading brands in terms of sales - Omega and Longines - are considered strong brands and the leaders in their price category.

The year 2023 is expected to be another record year for the Swiss watch industry, albeit with a more modest sales growth rate of about 3-4 percent.

Pre-Owned Market will surpass new watches market in 10 years

LuxeConsult is a Swiss consulting company specializing in the luxury watch market. On the company's website, you can learn that the company regularly monitors potential investments in the watch industry, an industry that the company's employees define as a very secretive industry, where it is difficult and even rare to find aggregated data when if you do find it, it is very difficult to understand.

The company's experts work hard to identify investment opportunities for suppliers and brands in the watch industry, and with the help of the company's knowledge, they can develop long-term strategies for brands and suppliers that better position them for investment.

During the first quarter of each year, in collaboration with the American investment bank Morgan Stanley, the company publishes a comprehensive report that reviews the sales of the top 50 Swiss watch brands, as well as the market share data. The company officials emphasize that these are the only data they can publish, as other data exposed to company officials are subject to confidentiality agreements.

The company was founded by Oliver R. Müller (Oliver R. Müller). Müller began his journey in the watch world at Omega, but after a few years found himself falling in love with the world of independent watch manufacturers. From there, Muller began to build a career in the field of consulting and strategy when the company he founded became one of the leading consulting and strategy companies (among the few that exist) in the world of luxury watches.

The current state of the market and the rate of growth

Although it seems to us that the market share of second-hand watches is much larger, these days, the size of the second-hand watch market is about half the size of the new watch market. The report begins by reviewing the sales figures for the past year, 2022. The past year was apparently a record year for the Swiss watch industry and the very small number of luxury watch manufacturers outside of Switzerland.

According to estimates, the retail value of the luxury watch market was about 52 billion Swiss francs in 2022, a figure that represents an increase of about 12 percent compared to 2021, when the retail value of the market was 46.3 billion Swiss francs.

Although this is a record year for the "traditional" or "primary" luxury watch industry, when we of course, mean new watches, the report reveals to us that the second-hand market is experiencing an equally impressive growth. LuxeConsult estimates that the market value of second-hand watches grew to about 25 billion Swiss francs, a figure that shows an increase of about 20 percent compared to last year.

The more interesting figure refers to the market value of second-hand watches in ten years, in 2033. The company's experts estimate that the market value of second-hand watches will triple its value by 2033 and reach a value of approximately 79 billion Swiss francs. The company explains this with an average annual growth rate (Compound Annual Growth Rate, CAGR) of 12 percent (also called a compound annual growth rate), over the next decade. The company emphasizes that this is their relatively conservative forecast and that they will not be surprised to find out that they "missed" their forecast and that in fact, the market will grow significantly more.

The company says that the second-hand watch market grew by about 40 percent in the first half of 2022 and by 20 percent for the entire year. The growth rate estimated for the company's forecast is three times that of the initial market, while according to the estimation of the company's people it is estimated at about 4 percent. This figure is based on the historical CAGR of the primary market from 2000 to 2019.

As mentioned, the acronym CAGR refers to the expression Compound Annual Growth Rate - average annual growth or compound annual growth. This expression is actually a formula or calculation, which allows us to examine the average growth of a company over time periods of more than one year. In addition, CAGR can be used to calculate the return achieved on various financial assets. This average actually makes it possible to smooth out various fluctuations that apply to the growth rate of a company (or a certain market in our case) and get the trend line over a period longer than one year. The slope of this trend line usually helps make predictions for the future.

For example, in the world of luxury watches, if we examine the data for every year and focus on 2020, the year of the Corona virus, we will think that this is an industry in collapse. But if we look at the CAGR of this market over a decade, we will find that it is growing at an average annual rate of 4 percent.

The advantage or actually the importance of using CAGR is in the fact that it actually represents the growth rate of an investment or company each year, as if it were growing at a constant rate. This is despite the fact that investments, companies or industries, do not grow at a constant rate, but in fact they go through peaks and valleys over the years (rises and falls due to environmental variables such as the corona virus), when in fact the CAGR is an average of all the changes along the way.

Rolex and Patek Philippe investments beat S&P gains over the last 5 years

A recent report by WatchBox and Boston Consulting Group has revealed that prices for Rolex, Patek Philippe and Audemars Piguet watches have surged, appreciating by an average of 20% per year since mid-2018, outpacing the S&P 500. During the period from August 2018 to January 2023, pre-owned luxury timepieces grew at more than twice the pace of the stock index, which averaged annual returns of 8%. Despite some pre-owned models, including Rolex Daytonas, Patek Nautilus, and AP Royal Oaks, experiencing price declines of up to a third since the market peaked in the first quarter of 2022, a basket of so-called independent brand watches, including FP Journe, H Moser & Cie and De Bethune, returned 15% over the same period. The report highlights luxury watches as a viable alternative asset class to stocks, bonds, art and wine. However, over a longer period, stocks have outperformed watches as an investment asset, with the S&P 500 having a compound annual growth rate of 12% between 2012 and 2022, while Rolex, Patek, and AP watches averaged 7%.

According to a new report, the pandemic led to a surge in secondary-market watch prices, as millennial and Gen Z consumers, who were cash-rich and confined to their homes, turned to Swiss watch collecting as a new and expensive hobby. The report also notes that the value and transparency in the secondary market have driven liquidity. More than 60% of transactions for pre-owned watches were made online, compared to 15% for new purchases. Although men still make up the majority of buyers, the number of younger and female collectors is rapidly growing. WatchBox, a Philadelphia-based pre-owned watch dealer with operations in Switzerland, Hong Kong, and the US, is one of the top sellers of pre-owned watches globally, with former NBA great Michael Jordan and activist investor Bill Ackman as backers. Additionally, the report finds that the rise and fall of cryptocurrency values has been correlated with used watch prices.

The report, which was co-funded by Boston Consulting Group and WatchBox, found that prices for Rolex, Patek Philippe, and Audemars Piguet watches have appreciated by an average of 20 percent per year since mid-2018, outpacing the S&P 500.

The report noted that pre-owned luxury timepieces surged in value, despite some pre-owned models experiencing price declines of up to one-third since the market peak in the first quarter of 2022.

The rise and fall of cryptocurrency values has also been correlated with used watch prices. The report highlights that the secondary luxury watch market grew to $24 billion in 2022, compared to the primary retail market, which was worth $55 billion.

Moreover, the pre-owned market is expected to grow by 9 percent annually to $35 billion by 2026 as prices rise and more people begin collecting watches. The report notes that more than 60 percent of transactions were online compared to 15 percent for new purchases, and the number of female and younger collectors is growing rapidly.

The report also mentions that LuxeConsult, an independent Swiss analyst and consulting firm, recently forecast that used luxury watch sales would overtake the primary retail market by 2033, with sales surging to $85 billion. The secondary luxury watch sector was boosted in December when Rolex announced it would start authenticating pre-owned watches for resale through its network of authorized dealers.


The website is NOT affiliated in any way with Audemars Piguet, Franck Muller USA, Inc. Richard Mille or Richemont Companies, Seiko, or any other brand which is not Davosa Swiss. Rolex is a registered trademark of Rolex USA. Davosa-USA website is not an authorized dealer, reseller, or distributor for Rolex and is in NO WAY affiliated with Rolex SA or Rolex USA or any other brand besides Davosa Swiss.
March 28, 2023 — Ron M

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