The luxury watch market - Italy

1.2 A Robust Global Marketplace

The global luxury watch market is a large market now considered mature. In ****, it reached a total value of ** billion euros, driven particularly by consumption in Asian countries-China in particular. However, as we can see from the chart below, the market for luxury watches has shrunk slightly over the years, only to return to **** levels in ****.

The global luxury watch market France, ****, in billions of euros Source: ****

Among the determinants of demand in this market , the most important is undoubtedly the level of consumption of households, especially the wealthier classes. The price of products, the growth of supply and the ability of players to renew their ranges and innovate are also factors that determine the evolution of the market. The main exporting countries are Switzerland, followed by Hong Kong and China as shown in the chart below.

Main exporting countries for luxury watches World, in ****, value in billions of USD Federation of the Swiss Watch Industry

In terms of imports, the top are Hong Kong, the United States, China and Switzerland.

Main markets for luxury watches World, ****, value in billion USD Federation of the Swiss Watch Industry

1.3 The Italian Market

The Italian luxury watch market reached a value of *.** billion euros in ****, as evidenced by research conducted by GfK Italia for Assorologi, the Italian Watch Manufacturers and Distributors Association. As can be seen in the chart below, which shows the evolution of the size of this market between **** and ****, the data of the last year certainly show a recovery compared to ****, a year of stop due to the health crisis, but still do not reach the numbers of ****, a record year for the sector in this country that represented a growth of **.* percent compared to ****. The gap to close is in fact still ** percent, but the sign of recovery is definitely positive.

Size of the Italian luxury watch market Italy, ****-****, in billion euros Source: ****

The aforementioned observatory also pointed out that Italian consumers, in ****, purchased *.* million watches, with total sales for Italian watchmakers of **.* million if purchases by consumers of all nationalities are also taken into account.

In terms of consumer preferences, the most important features for Italian luxury watch lovers are: design (***).

Most important features for Italian consumers Italy, ****, in % Source: ****

1.4 International Trade

The HS code corresponding to luxury watches is ******: wristwatches; with or without chronometer function, self-winding. Analyzing the international trade flows related to this HS code, the following trends emerge.

Imports, exports and coverage rate of luxury watches Italy, **** - ****, in millions of euros and % Source: ****

As can be seen from the graph above, international trade flows for luxury watches in Italy have followed particular trends. In fact, as far as imports are concerned, we see a progressive decline starting in ****, which represented a **.* percent decrease between the same year and ****, the year of the pandemic. Despite this, ****, the year of recovery from the hard blow inflicted by the health crisis on international trade, represented a return to pre-**** import levels. In contrast, luxury watch exports were following an upward trend, having increased by **.* percent between **** and **** only to come to an abrupt halt between **** and **** and begin a descent that was only halted in ****. This past year's data, for both trade flows, thus bodes well for the health and recovery of the international luxury watch market.

As a general conclusion then, the mentioned graph shows a negative trade balance, with the coverage rates always less than *** percent testifying to the fact ...

1.5 Impact of COVID-19

he luxury goods sector was hit hard by the coronavirus crisis in ****. In fact, for the first time since ****, the main luxury goods market declined ** percent to *** billion. [***]. The entire luxury market declined by more than * trillion euros on a global scale. The luxury watch segment fell **%. The coronavirus crisis amplified already significant and lasting changes in consumer patterns: more authentic products; more connected, etc.

Looking at recent annual sales, Swiss watch exports, an indicator of overall market health, have plummeted in many markets except China. Cumulative exports to China in **** through September were even up ** percent from the corresponding period in the previous year, due to the recovery of the Chinese economy. Exports to all other regions fell, as can be seen in the graph below.

L'Impact du COVID-** sur les exportations de montres suisses pour les principaux marchés Monde, **** vs ****, variation annuelle en % Source: ****

Despite this,the recovery in **** was fast, much more than other sectors, and the effects of the pandemic on consumer habits shook the market, with a strong increase in online sales.

Demand for luxury watches such as Rolex and Patek Philippe has remained stable and uncertainty has caused prices to fluctuate over the past ...

2.1 Italian Luxury Watch Lovers' Preferences

We have already mentioned that the most popular website in Italy for buying luxury watches online is Chrono**, which has strengthened its position also thanks to the closure of physical stores due to the restrictions put in place by the Italian government in **** and **** to deal with the COVID-** pandemic.

The ranking compiled by this platform regarding the most popular luxury watches in Italy is therefore certainly useful to understand the preferences of Italians.

Most Popular Brands

As for brands, the ranking compiled by Chrono** puts in the top *:

Rolex Omega Breitling Seiko Audemars Piguet

Most Popular Models

The ranking of specific models of luxury watches preferred by Italians, considering purchases on the Chrono** platform includes, in order:

Rolex GMT Master II "Batman" Rolex Submariner Date Rolex Datejust Rolex Daytona Rolex Submariner "Hulk"

As can be seen from this ranking, the Rolex brand definitely leads the way. The first non-Rolex watch in the ranking is the Omega Speedmaster Professional Moonwatch, in sixth place.

As for the criteria or features preferred by Chrono** users, the most important ones are case material (***), dial, and case size.

Main motivations for buying luxury watches Italy, ****, % Source: ****

2.2 The push from collectors and reselling

The buying and selling of luxury watches has given a strong boost to the overall market thanks to platforms that facilitate trading and thus make it easy to give up a used watch to buy a new one. This market is booming as also shown by studies by McKinsey and BCG that state that the market today is worth between $** billion and $** billion with a CAGR of **% to ****. There will also be strong growth in e-commerce specializing in this niche market, again according to the same study, about ** percent of used watches sold will take place online, a ** percent growth from what it was in ****.

Growth of the used luxury watch market World, **** - ****, in billions of euros Finanacial Lounge

A clear example of how important the market is becoming are the investments of major players. The Richemont Group in **** acquired Watchfinder, a British platform specializing in buying and selling used watches, both online and in boutiques. Richemont's operation anticipated the reselling revolution. E-commerce on the one hand and different consumer attitudes on the other are redrawing the boundaries of luxury retail, which sees more and more brands landing in secondary markets with their own retail store. Openings have also been ...

2.3 Millennials and luxury watches

There are many luxury brands that are trying to connect with the younger generation. This entails a different approach to marketing to the past with great emphasis on influencer marketing, the use of celebrities as brand ambassadors or approaching sustainability issues.

More and more millennials are approaching this market, given also the increasing relevance in the job market. On the Chrono** website, the average age of consumers is **. Over the past three years, the percentage of registered users on the site who are part of generations Y and Z has seen a steady increase: in **** they were about *.* percent, while by **** they had reached nearly * percent. In terms of total sales, the volume of users in these age groups has seen the same increase: from about *.* percent to *.* percent. The most significant increase is in the percentage of young watch enthusiasts between the ages of ** and ** who took part in all purchasing processes on Chrono**: in **** it was *.*%, while in **** it rose to *.*%. If in addition to registered users with a myChrono** account, we also consider all those who make transactions on our platform, the **-** age group currently makes up about **% of active users on Chrono** [***].

A strong competition for ...

3.1 Simplified outline of market structure

Source: ****

3.2 The production of watches in Italy

Although the luxury watch market represents a niche in the larger generic watch market, it is still useful to take a look at data related toAteco code**.**: watch manufacturing .

In Italy, in ****, the last year for which ISTAT makes data available for this Ateco code, there are only ** companies specializing in watch manufacturing, as is also evident from the export data highlighted in the first section. As the chart below shows, the number of companies operating under this Ateco code has been declining in recent years, dropping by **.* percent between **** and ****. At the same rate, the turnover of firms has also followed a decreasing trend, showing how the decrease in the number of firms has not corresponded to a concentration of them in larger and therefore more profitable firms.

Evolution of watch manufacturing firms and their turnover Italy, ****-****, in number of units and millions of euros Source: ****

Regarding the breakdown of companies in this sector in the various legal forms, we see how the majority of them (***) are Limited Liability Companies, i.e., in most cases, small and medium-sized companies. Another important part of the market is then represented by sole proprietors who usually run small businesses.

Breakdown of luxury ...

3.3 Retail Trade

Having analyzed the side of the market concerning the production of luxury watches, we have concluded that the number of businesses engaged in this activity is small. Instead, let us now go on to analyze the side of the market that deals with the marketing of watches, which is often side-by-side with that of jewelry and thus includes jewelry stores, watch stores, and other types of stores. Such businesses operate under Ateco code **.**: Retail trade in watches and jewelry in specialized establishments.

Evolution of watch retail businesses and their turnover Italy, **** - ****, in units and millions of euros ISTAT

Here the market is much more fragmented with a huge number of enterprises and high industry turnover. It can be seen that the number of enterprises in the sector is steadily decreasing over the years. Cause of this is the huge on the success of the online channel, which as we shall see, is destined to become one of the preferred purchasing channels for luxury watches.

3.4 Distribution Channels

Regarding distribution channels, the data highlighted in this market study, especially those regarding the recovery of retail after closures due to the pandemic crisis, testify to the strong importance that this distribution channel maintains for Italian luxury watch consumers. In fact, about **.* percent of quantity sales of these products still remain anchored to the various physical channels in ****, testifying to the importance that for Italian luxury watch enthusiasts still has the purchasing experience, especially for the higher brackets[***]. Sales transited by the web (***), as shown in the graph below, thus stand at **.* percent by volume.

Breakdown of distribution channels for luxury watches, by type of channel Italy, ****, in % Source: ****

The Jewelers and Watches channel (***)[***].

4.1 Type of the offer

The luxury watch, can be considered a neat and precise instrument but also a real aesthetic or technological jewel, with a strong symbolic and status value. In general, this type of product can take many different forms.

For example, the luxury watch can be made of precious jewels, some models are made of precious stones, equipped with high-precision mechanisms or even more durable materials. Luxury watches are mainly manual or analog watches, which use a mechanical gear system. Some models are produced in limited series or on demand.

Thus there is a wide variety of luxury watch models, but the following non-exhaustive list can be compiled:

Classic watches such as the Montblanc Tradition Automatic Date Products with watch complications such as the Piaget Emperador Cushion ; Antique watches such as the Patek " Asprey " ; Military watches like the Hamilton Khaki Field Auto or pilot watches like the Hamilton Khaki Pilot Auto Day Date ; Women's watches like the Bvlgari Bvlgari ; Connected watches such as the TAG Heuer Connected Modular .

4.2 Pricing

The analysis of the pricing of luxury watches is very interesting. Indeed, many experts consider these products to be safe-haven assets, capable of withstanding periods of crisis in value and thus in price. In fact, this is confirmed by the price trends of this category, which seem to always trend upward, thus reassuring us of their value as investments.

We see this trend, for example, with the Rolex Submariner whose very limited availability has contributed to its price being up to ** percent higher than its advertised price. The same is true with the Patek Philippe Nautilus: in the last three years, the price of the watch has doubled. Some references are worth more than **,*** euros. In the same time frame, Audemars Piguet's Royal Oak has seen a ***% price increase and now sells for around **,*** euros on Chrono**.

Prices for men's and women's luxury watches vary widely depending on the brand, model, and specifications. Some of the most affordable luxury watches in terms of price are TAG Heuer watches, available at an average price of €*,***. Omega also offers very high-quality watches that are still affordable, at an average price of €*,***, while Breitling models are more expensive, with an average price of €*,***. In ...

4.3 Connected watches and the disruptive effect on the market

The connected watch segment is becoming increasingly important, attracting many players. In fact, in addition to the big technology players-Apple, Samsung, Google among others-traditional players in watchmaking are offering connected watches. After a long period of ignoring the competition from these connected watches, it is now evident that the traditional watch segment has changed dramatically, experiencing a gradual decline in sales volume.

The graph below shows the evolution of sales volumes of Swiss watches worldwide. As can be seen, the decline in sales volume appears to be structural: in ****, **.* million Swiss watches sold compared to **.* million in ****

Part of this gradual decline can be explained by competition from connected watches. For example, since Apple entered the market with its Apple Watch in ****, the core market segment of Swiss watches with a retail price of less than *** Swiss francs (***). At the same time, the California giant expanded dramatically. This year, it is expected to have sold about **.* million of its Apple Watch. Five million more than in ****. And **.* million more than five years ago, when it did not market anything that could claim to be a watch.

5.1 Counterfeiting at the heart of luxury watch regulation

Luxury watches are particularly affected by counterfeiting and smuggling. In Italy, counterfeiting is a crime as stipulated inArticle *** of the Civil Penal Code. Specifically, a retailer who sells counterfeit items is punished with imprisonment of up to two years and a fine of **,*** euros. In addition, confiscation of the counterfeit goods is provided for. Case law has ruled out the punishability of a seller who offers the public a counterfeit product so badly that it cannot be passed off as original in any way [***]. This is the so-called gross forgery, i.e., that counterfeiting which is so obvious that it cannot fool anyone. A classic example is the street vendor who sells in the street (***) watches of great prestige for a few euros.

Whoever buys a counterfeit product risks a fine of *** to * thousand euros. If payment is made within ** days of the violation, a reduced payment of *** euros and administrative seizure of the goods pursuant to Articles **-** L.

6.1 Segmentation

• Richemont Group
• Swatch Group
• Rolex
• Patek Philippe
• Audemars Piguet
• Ruzza Orologi
• Diffusione Orologi SRL
• Chrono24
• LVMH ITALIA S.P.A.