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Worn in the USA: An Analysis

January 1, 2018

By Julie Petit and Marielle Fontbonne

It is probably the avant-garde of world markets in terms of smartwatch sales: American buyers are looking both for connection and for vintage prestige. Is the watch market moving towards greater fragmentation?

The U.S. watch market registered a decline in imports back in 2016 (-11.8%), reflecting the challenging situation experienced by this market in terms of sales. This downturn is mainly attributed to the soft local demand, the increase in sales at bargain prices from outside authorized distribution channels (e-commerce sites), the strong U.S. dollar and the political tensions which negatively impacted the flow of tourists, who are key consumers of watches in the US.

This trend continued as of June 30, 2017 with a decline in the sales of watches of 6% in both volume and current value, although the last few months have shown the first signs of stabilization.

The U.S. remains one of the biggest markets worldwide for personal luxury goods and high-end watches.

It is the second-largest buyer of watches (by value) with 10.2% of the market after Hong Kong (20.4%). The fourth-largest global watch manufacturer is an American brand, Fossil, with 5.2% market share. Indeed, the US still represents the third most prominent market after China and the rest of Asia for watch brands, mainly due to its potential in the smartwatch market.

Trends among brands

The U.S. watch market is mainly driven by American purchasing power, with young consumers willing to invest in traditional watches as soon as they increase their disposable income. In contrast, the decrease of foreign tourists contributes to the under-performance of overall watch sales.

Despite the growth in smartwatches (+10% in 2017), high-end watches remain very popular in the U.S., representing 77% of total watch sales. Rolex, Cartier, Omega, Breitling, Patek Philippe and TAG Heuer are the most popular luxury watch brands in the United States. Such watch models include popular classics like the Rolex Submariner, Rolex Daytona, Patek Philippe Calatrava, Omega Speedmaster, Breitling Navitimer and TAG Heuer Carrera.

Apple Watch (Watch Series 3), Fitbit (Fitbit Blaze) and Samsung (Gear S3) are the most popular smartwatch makers.

The U.S. market offers a wide range of watches in all price segments, from high-end Swiss luxury brands costing hundreds of thousands of US dollars to cheaper watches from Hong Kong priced at $4. The best-seller smartwatch hovers around $300. 2017 purchase statistics show that U.S. consumers still favor classic watches. Despite the decrease in volume of overall watch sales, unit prices of luxury brands held up well.

The U.S. is the second biggest destination country for Swiss watch exports after Hong Kong; however, the value of this trade continues to decrease. Total value fell by 9% in 2016 compared to 2015 and by approximately 5% for the ten month period ending October 31, 2017, as compared to the same period in 2016. Weaker demand for watches in the U.S. is one of the main reasons for the decrease in Swiss watch exports.

Impact of the smartwatch

The appeal of connected watches is big in the U.S., where nearly 9% of US consumers over 18 years of age own a smartwatch. Apple Watch accounts for 55% of smartwatch global market share, with 11.6 million sales in 2016, priced between $300 and $1,400. Apple discontinued the Gold model Apple Watch priced at $10,000. In September 2017, Apple claimed they had become the largest watch brand in the world, ahead of Rolex, although their official sales figures were not released.

However, smartwatches are not seen as a threat by luxury brand watchmakers (77% of total sales are mechanical watches) but more as an opportunity to develop high-end smartwatches. Indeed, TAG Heuer successfully launched its connected smartwatch, which starts at $1,500 more than other similarly priced smartwatches. Hermès and Apple are continuing their partnership announced back in 2015 to create Hermès straps for Apple Watches and retail them in Hermès boutiques, priced at around $2,000.

 


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