Report: Fashion trends influencing luxury watch sales amid declining profit margins

October 28, 2023

Hermès in January launched the Two-Tone H08 watch in titanium and rose gold, pricing the range of four models from $5,500 to $16,000. Image credit: Hermès

By Staff reports

The luxury watch market size is estimated to grow at a compound annual growth rate (CAGR) of 1.61 percent between 2022 and 2027, or an increase of $2.91 billion.

Per a new report from Technavio, the growth of the luxury watch market depends on several factors, including the purchase decision, focus on premiumization achieved through innovative product design, increasing sway of fashion trends and effective brand positioning and branding strategies.

Technavio’s researchers analyzed the data with 2022 as the base year, along with the key drivers, trends and challenges.

Size of the luxury watch market from 2017 to 2022. Source: Technavio

Key market driver
The growing influence of fashion trends is notably driving the market growth of the luxury wristwatch industry, although factors such as the decline in profit margins of vendors and retailers may impede the market growth.

Since their humble beginnings as timepieces, watches have evolved into fashion accessories.

When it comes to accessories, men tend to favor watches more than women.

One of the top revenue-generating categories in the United States market for men's accessories is watches.

Manufacturers have moved quickly to take advantage of this expanding trend and provide a variety of products to appeal to all consumer demographics, particularly young people.

Most watchmakers also regularly update and grow their product lines.

Consumers who are young and fashion-conscious are the target market for trendy watches. This propensity is likely to increase and will have a positive impact on the global market during the forecast period, per Technavio.

Not surprisingly, the market for fashionable timepieces has grown as a result of changes in consumer attitudes and consumption patterns. Both comprehensive and specialized brands fall under this category.

Many players also intend to release new models as accessories.

For instance, French luxury giant Hermès announced the Two-Tone H08 watch's introduction in titanium and rose gold in January. Therefore, such factors are expected to drive the growth of the global market during the forecast period.

Market trends
The growing demand for customized luxury watches is an emerging trend in the market growth. Customers can get this service from a variety of manufacturers around the world, including Hermès.

This approach entails changing the bands, dials, and bezels. The broad range of products that different market vendors offer enables them to draw in new clients for customization.

To improve the visual appeal of their products, many market vendors offer customized goods.

Options for customization range from straps and buckles to the watch dial's style to add a name or initials.

For instance, Rolex offers its customers the option to alter the strap, dial and color of their watches. Customers can personalize their watches through customization, which elevates them above standard watches in terms of uniqueness and price.

Hence, such factors are expected to drive the growth of the global market during the forecast period.

Market challenge
A decline in profit margins of vendors and retailers is a major challenge impeding market growth.

The profit margins of suppliers in the global market are decreasing.

The high cost of raw materials and the fierce vendor competition are to blame for this.

A significant obstacle to the expansion of the market is the widespread availability of counterfeit goods, which also causes a decline in vendors' profit margins.

The pressure on retailers to stock luxury goods such as expensive watches to gain a competitive advantage is significant.

Luxury watches are one example of a specialized product with high inventory costs.

Retailers and store owners also incur additional costs as a result of vendor promotional offers.

The rising Swiss franc value, drop in oil prices and the unstable market conditions worldwide all had an impact on the sales of several top watch markets, including Asia and the Middle East.

Hence, these factors will pose a major challenge for the global market during the forecast period.

Key regions for the luxury watch market. Source: Technavio

Europe drives growth
Europe is estimated to contribute 27 percent to the growth of the global market during the forecast period, according to the Technavio report.

The European market for luxury watches is a significant player in the sector with a long history of watchmaking and a reputation for producing high-quality timepieces.

Design innovations and the introduction of new products will support the expansion of the regional market.

The use of luxury watches as a fashion statement and status symbol is another important factor in the expansion of the regional market.

Some of the region's major markets for luxury watches include France, Italy and the United Kingdom.

The existence of a developed, organized retail industry in Europe contributes to the expansion of the regional market.

Luxury watchmakers such as Breitling and Chanel are constantly launching cutting-edge products through specialized retail outlets and online marketplaces.

Some companies such as Louis Vuitton sell their goods in Europe through both online and physical retail stores. And some vendors are also concentrating on increasing their visibility in the area.

Hence, these factors may influence market growth in the region during the forecast period.

The regional market witnessed certain challenges due to the COVID-19 pandemic in 2020.

However, in 2021, the governments of several countries such as the U.K., France, and Italy lifted lockdown restrictions, which led to the resumption of manufacturing operations of luxury watchmakers as well as distribution channels such as specialty stores, hypermarkets and department stores across countries.

Such factors are expected to drive the growth of the regional market during the forecast period.

Fastest-growing segment
The luxury watch market share growth by the men’s segment will be significant during the forecast period.

New product offerings from various market vendors are one of the key drivers of the expansion of this end-user segment. The ability to personalize and customize products will also fuel market expansion.

Share of luxury watch market by gender. Source: Technavio

The men’s segment was valued at $25.93 billion in 2017 and continued to grow until 2021.

To increase their revenue share, producers are luring customers to the segment of affordable luxury watches. These elements are anticipated to increase men's demand for high-end watches.

Some of the vendors are concentrating on the release of new models of upscale watches for men.

For instance, Hermès announced the Two-Tone H08 watch's introduction in titanium and rose gold in January. The range is priced from $5,500 to $16,000 for four watch models.

Additionally, TAG Heuer, a division of LVMH, announced the arrival of the 60^th- anniversary-edition TAG Heuer Carrera Chronograph in January. During the forecast period, such product launches are anticipated to propel the growth of the men's segment of the global market.

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Report: Fashion trends influencing luxury watch sales amid declining profit margins

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