How Dangerous Could The Coronavirus Be For The Watch Industry?

Chinese consumption of watches has plummeted as people have been advised to stay home. Offices and shops are closed, and people are only going out for essentials. Stories from Wuhan, where the outbreak began, are apocalyptic as people have been confined to their homes for over two weeks now, and authorities are struggling to take care of the sick. Luxury purchases are surely the furthest thing from people’s minds.
 

David Chang, fellow journalist, founder of Watchina and director of the Beijing Collectors’ Association spoke to us from his home in Taiyuan, “Recently I have been staying at home and rarely go outside. I know many shops are still closed, and very few people are willing to go out. It is a big problem. I also worry about how many Chinese journalists will not go to Baselworld.”
 

Following the Swatch Group’s cancelation, fears are starting to circulate about the upcoming Watches & Wonders and Baselworld fairs. For other luxury industries, such as the fashion industry, it is business as usual as the 2020 Fall Fashion Weeks are in full swing – just without the presence of the Chinese. This is what happened with the watch shows during the 2003 SARS epidemic.
 

Baselworld’s Managing Director Michel Loris-Melikoff hasn’t noticed any reactions from the watch industry, “Baselworld is in May this year. Registrations are going with a normal rhythm. We're keeping a very, very close eye on the situation.”
 

Watchonista's co-founder Marco Gabella added, "With the rescheduled dates of Baselworld and SIHH (now Watches & Wonders) we knew that 2020 would be a transformative year for the watch industry – but none of us expected a virus to have this kind of effect. Only time will tell if the other tradeshows will be canceled or postponed."

In 2003 the SARS epidemic had an important impact on the world economy. Economists, Lee and McKibbin, put the global loss at $40 billion. But China’s role in the global economy has changed quite considerably since then. China represented 4% of Global GDP in 2003, where today, that percentage has quadrupled to 16%. Add to this the fact that the Chinese consumer is wealthier now than in 2003, and the impact of this virus on the luxury sector could be far more significant.
 

“What I remember from SARS in 2003 was the sharp drop in sales in Hong Kong and the disruption that affected Baselworld,” shares Jean-Daniel Pasche, President, Federation of the Swiss Watch Industry. “Exhibitors in the affected region were barred from opening their stands by federal authorities. I remember participating in an official mission with Federal Councillor Joseph Deiss to the Hong Kong authorities to prevent the affair from escalating and to restore the peace with the Hong Kong watch industry. Hong Kong exhibitors returned to Baselworld the following year. Fortunately, the market recovered well after the epidemic.”
 

Hong Kong is in a particularly vulnerable position with its proximity to China, but also due to the recent unrest. As Martinet shared, “Hong Kong is like a petri dish right now. Business is completely dead, especially after the social upheaval we have had. Arrivals in the country are down 50% from 5 million per month to 2.5 million. There is nothing more frightening than an epidemic as you have no control over the situation. People are avoiding populated areas, such as shopping centers.”
 

“We have an office in Shanghai, and it is worse over there. No one is in the offices or the shops. Sixty percent of our business is digital, but I don’t know if the situation is having an impact on that, but I would imagine people have other things to focus on right now, and there is also the problem of shipping. Are people working in the warehouses to ship goods, for example?”
 

The brands with a healthy geographic split will weather the storm the best. Panerai’s CEO Jean-Marc Pontroué noted, “First of all, we take the situation seriously in consideration and specially the health of our employees in China. They are not particularly affected so far but we are in touch with them every day. Their wellbeing is our utmost priority."

"From a business perspective, Panerai has built an international network and one of the brand strength is the diversification of its clientele around the world. China is of course an important market but we have other opportunities that will minimize the impact of the existing crisis such as USA or Europe. Indeed, our local clients and markets represent the majority of our business. We are keeping monitoring the situation regularly and remain confident in the long term."