Luxury watchmakers found plenty to cheer about at their recent Baselworld trade show, with attendance up 2.5% -- bringing attendance at the trade show to its second-best year ever. And amidst the usual celebrity fanfare -- including Jacob & Co. introducing actress Milla Jovovich as its new "Jacob Girl" -- attendees say sales of time pieces and high-end jewelry were brisk. Buyers, especially from Asian regions, seem confident that consumers are ready to step up and splurge on more bling.
Patek Philippe says it achieved record results, for example. Chopard also says its sales were up, and TAG Heuer claimed double-digit gains over the previous year's show. And Chanel says the show was the most successful sales in its history.
But there's also clear evidence of an industry struggling to keep pace with a changing luxury market. "Luxury watches and jewelry are an extremely vulnerable category," says Pamela N. Danziger, author of the forthcoming Putting the Luxe Back in Luxury. "And it's not just because of the recession. They face significant demographic threats. In older consumers, especially men, a fine watch is a mark of status they felt they needed in business. But younger affluents -- those in the 35-to-44 age group, which is the most acquisitive time -- don't feel they need them. They're much more practical." Instead, she says, they're more casual in their dress, and more likely to invest heavily in personal technology, not a flashy watch.
Another problem, adds Danziger, who is president of Unity marketing, is that fewer younger people are getting married -- "which has big consequences for this market, and we expect it will through 2020."
For example, in Danziger's latest data on planned jewelry purchases among affluent shoppers, 17% say they plan to increase spending over last year's levels, and 4% say they will spend significantly more. But 26% say they will spend less, 13% significantly so. In all, 57% expect to spend about the same. (The survey is based on a sample of 553 affluent adults, with a household income of $75,000 or more.)
"More mature affluents -- those in the 44-to-54 age group, which is when people typically reach their highest level of earning -- already have plenty of stuff. Their focus is shifting to spending on experiences. So we're really seeing a luxury drought," she says. "It's going to be much harder for marketers."