Photo credits: Benjamin R
Can the Swiss pre-owned watch market, as one of the largest in the luxury pre-owned segment, take the lead in ensuring greater value chain traceability, or will the traditional sense of secrecy prevail?
The Swiss watch industry, particularly its pre-owned luxury segment, has experienced a remarkable increase in recent years. This trend can be attributed to consumers’ interest in discounted and discontinued watches, associated economic benefits, and the growing interest of sustainability-minded consumers in circularity . As estimated by Deloitte’s 2022 [1] and 2023 report [2], the Swiss pre-owned watch market is valued at approximately CHF 20 billion and, according to multiple studies, is projected to reach around CHF 35 billion by 2030, accounting for more than half of the primary market.
Various sources [1, 3] indicate that high-income Millennials and Generation Z, as well as affluent customers and High Net Worth Individuals (HNWI) are the primary drivers of this trend development. For example, the Knight Frank Luxury Investment Index (KFLI), [3] which tracks the value of ten collectible luxury investment assets, shows that purchases of luxury watches as investment raised by 18% in 2022, or 147% over ten years bringing them just behind art works (up 29%) and classic cars (up 25%). Q2 2023 showed the same growth [4]. The market of collectible watches, otherwise known as “wearable investments of passion” is dominated by a certain number of models – the Patek Philippe Nautilus, Audemars Piguet’s Royal Oak, and the Rolex Daytona. However, the reputational benefits extend to their more affordable offerings, which currently dominate the larger pre-owned market.
LONG TERM BENEFITS OF THE PRE-OWNED MARKET
Over 70% of executives recognize the secondary market’s positive impact on brand perception and brand value of primary watches, higher awareness and visibility [1]. Plus, sustainability credentials gets strengthen by the narrative created around the concept of circularity. However, the industry that exported a total of 116,3 million mechanical wristwatches between 2016 and 2023, as documented by the Federation of the Swiss Watch Industry (FH) [5], accounting for more than 50% of the global watch industry in value terms, cannot centered its sustainability arguments on the circularity of the second-hand market. In fact, the industry encompasses a wide range of sustainability programs. However, it is important to note that the various stakeholders within the industry ecosystem also actively seek to safeguard their own interests. Hence, the European Commission adopted the regulations of the “Corporate Sustainability Reporting Directive” (CSRD) on non-financial information, which will go into effect in early 2024 and will also affect Swiss companies with net sales of more than EUR 150 million in the EU and at least one subsidiary or branch in the EU. Hence, the investors and consumers have concerns beyond the authenticity and originality of the products in the second market. There is an interest that no negative social or environmental impacts find place in sustainability-related disclosures. The importance of preserving wearable investment’s financial, symbolic, and emotional value, particularly concerning the origin of raw materials and the social and relationship capital associated with it, has gained momentum.
SUPPLY CHAIN TRANSPARENCY
An increasing number of luxury watch brands are adopting blockchain technology for provenance and authenticity verification in the form of a digital passport that stores information about all events throughout the life cycle of the watch (i.e., repairs, change of ownership, etc.). This decentralized ledger ensures that warranty information is securely and transparently stored, decreasing the danger of fraudulent claims or unauthorized changes. Anyhow, supply chain technology usage for tracking and tracing the path of its products from sourcing and manufacturing processes to end users to demonstrate the company’s social and environmental impact is rare.
Evidently, circularity supports the watch market’s ethical credentials, but the supply chain’s transparency ensures its future positioning in response to increased environmental demands.
To facilitate the industry’s structural adjustment, it is essential to define the advantages of increased transparency and traceability along the value chain in both the short and long term. Policymakers should facilitate traceability while also protecting the industry’s strategic interests. Additionally, fostering closer collaboration among suppliers and other stakeholders in the value chain is essential.
References:
- [1] Deloitte (2022). The Deloitte Swiss Watch Industry Study 2022 Recalibrating for the future.
- [2]Deloitte (2023). The Deloitte Swiss Watch Industry Study 2023 A calibre of its own.
- [3] https://www.knightfrank.com/wealthreport. (n.d.). Luxury investments.
- [4] https://www.knightfrank.com/wealthreport. (n.d.). The wealth report 2023: Global launch.
- [5] www.fhs.swiss.(n.d).FH-Watch industry statistics.
Dusica Lehmann
Is an economist and a doctoral researcher at Business School Lausanne. She focuses on proactive sustainability solutions for luxury brands. Before specializing in the luxury sector, Dusica had 15 years of cross-industry experience, from managerial roles to consultancy services, including European Commission projects for high-profile clients. Dusica holds a Master of Science in International Business Development from the Faculty of Economics, University of Neuchâtel, Switzerland.
