In September, median watch prices surged a record 3.2%—the largest single-month gain in more than 26 years! This is on the heels of an upward revision of 1.9% for August. Today, watch price inflation has hit an annualized rate of 6.6%. Those ominous latest figures are just a continuation of an unpredictable boom and bust trend with monthly data, a typical trend for the volatile watch category. That’s primarily because recent economic changes have made urban areas better positioned to drive this trend. One contributing factor is the U.S. applying a 39% tariff to Swiss watch exports—this is no typo.
Subscription watch prices have been all over the map recently. This is all part of a larger trend of prices trending downward overall, year after year. Those increases highlight the irony and challenges of our present day economy. This is particularly the case with every dollar shifted from the consumption of luxury goods. An additional caution that analysts are quick to point out is the potential for short-term volatility. If you want to get a sense of the real market, it’s important to look beyond the short-term fluctuations.
Understanding the Impact of Tariffs
Of car tires which the U.S. has recently slapped a 39 percent tariff on imports of Swiss watches. This decision has deeply impacted pricing practices in the marketplace. Almost a third of all Swiss luxury watches are exported to the United States. These tariffs can shift retail prices and thus change the way consumers decide to spend their money.
As many industry experts have testified, tariffs raise costs on a variety of goods, which are usually passed on to the end consumer. As a result, buyers will often find themselves paying a premium when they purchase luxury watches. This boost will likely have an adverse effect on sales in the luxury market niche.
“Consumers at the higher end of the income spectrum are still spending relatively freely on discretionary services, and that is putting upward pressure on airfares and on hotel prices.” – Gregory Daco, chief economist at EY-Parthenon.
This statement underlines a key point: while consumers continue to spend on luxury goods, external economic factors like tariffs can create an environment where consumers must reassess their buying habits.
Monthly Price Volatility
The watch market is infamous for its monthly price fluctuation. Endless economic conditions and consumer sentiment can change on a dime, resulting in unpredictable prices that are a headache for both retailers and consumers. The Bureau of Labor Statistics (BLS) warns that continued federal budget cuts are forcing a fundamental change in the approach to data collection. These staffing constraints are in large part what’s driving today’s toxicity.
Though these challenges are many, analysts stress the need to focus past immediate data. These shifts reinforce the idea that focusing on longer-term trends can make for a better barometer of consumer taste and market stability. Watch retailers must continue to be mindful as they strike their balance through these changing tides. Consumers have enough trouble with unpredictable pricing without the risk of being deterred.
This new increase in watch prices is not a one-off occurrence. It’s a symptom of larger economic trends that are wreaking havoc on all consumer-facing industries. Gregory Daco notes that “the grocery segment, of course, is one of the prime ones,” highlighting how price increases are being felt across different categories of goods.
Future Outlook for Watch Prices
As the market grapples with these recent changes, retailers must adapt their strategies to remain competitive while addressing consumer concerns regarding rising prices. The luxury watch sector will likely continue to face strong pressure as the economic situation changes and as long as tariffs continue to be imposed.
Eventually, experts say the watch market will settle again. Consumers will roll with the punches under different pricing models, and manufacturers will develop new solutions to mitigate tariff effects without cutting corners on quality.