Germany has a long history of watchmaking, with the towns of Glashutte in Saxony and Pforzheim and Schwennigen in the Black Forest becoming renowned hubs for fine watches and horology innovation during the 18th century. That tradition continues today, with many German firms considered among the world’s leading brands.
Now, for the first time, Deloitte has published its German Watch Study, a spin-off of the Deloitte Swiss Watch Industry Study.
The study identifies five critical trends and drivers for the German watch industry that will determine its growth path over the coming decades:
Bridging the online/offline chasm
Social media and influencers are rapidly replacing traditional media as the channels with the most significant impact on consumers in terms of their watch purchases. Accompanying this development, a generational divide in purchasing behavior is emerging: younger consumers tend to buy online, whereas older generations prefer physical stores. To bridge this divide, firms need to develop omnichannel marketing and sales strategies. 54% of Generation Z respondents pay attention to social media and influencers, the Deloitte study revealed.
Compared to other countries, Germany consumers are highly price-sensitive. More than 60 percent of respondents were unwilling to pay more than € 250 for a watch. A silver lining is that younger Germans tend to buy watches more frequently than older consumers.
The global demand for smartwatches is growing exponentially, despite the impact of COVID-19. Younger consumers increasingly want digital wristwear with functions to track their fitness and health. Generation Y and Z, in particular, like the convenience of smartwatches for contactless payments. The study also found that 75% of the smartwatch owners wear their smartwatches daily.
Attracting new luxury customers
Innovative approaches are needed to expand the luxury market, including ideas such as offering financing plans, providing watch rentals, and participating in the pre-owned watch sector. These options all offer an entryway to the luxury market – especially for younger consumers. The study found that 23% of the consumers would consider renting a watch.
Rising green pressure
Consumers are increasingly aware of sustainability and environmental impact issues and consider these factors when buying a watch. For Generation Z, this is a key factor in their purchasing decision. Watchmakers must ensure that raw materials are ethically sourced and that the carbon footprint of the production process is considered. According to the study, 48% of Generation Z is concerned that raw materials are ethically sourced and 32% of baby boomers prefer less or recycled packaging.
While the shifting distribution landscape and changing consumer behavior and attitudes present challenges to the German watch industry, they also create opportunities. The response during the pandemic shows that vitality and creativity remain a foundation of the industry. Therefore, German watchmakers and retailers should continue to be agile and innovative, putting customers at the center of their strategy and operations to seize the potential offered by this phase of accelerated transformation.