Do you know what happens during a feeding frenzy? Too many people arrive for chow and in the end there isn't enough food for everyone. Compounded with the fact that there is a diminishing amount of food, a real problem can arise. This is what happened with the watch industry. Things were looking so good for a few years that unwise minds thought that either the bubble wouldn't burst, or that they would get in while things were still good. Now people aren't buying as much luxury watches, and the overall industry is feeling the bite and trying to figure out what to do with all the extra unsold watches.

Before getting to the nasty figures, this situation is also a blessing in disguise. The last few years of the watch industry was almost a set-up for disaster. You had too many brands, too little realistic values, and way more watches than we had people to service them. Thus, there was going to be a major problem in a few years anyway. Now companies are realizing that they need to have actual back-end support on the technical and customer service side of things, and they are realizing that consumers are actually interested in the fact that if they pay $100,000 for a watch, it might actually be worth close to $100,000.

So, here are the numbers from the Federation of the Swiss Watch Industry in brief. Sales in all top 30 markets are down. Here is the damages in some key markets from one year ago. US down 43%, Hong Kong down 22%, Japan down 29%, China down 36%, UAE down 34%, Russian down 61%, and Singapore down 30%. Big hits all around, but remember these are numbers just for Swiss watches.

It may look as though people just aren't buying as many watches these days. This assumption would be wrong. Recall that Swiss watches are for the most part the most expensive watches. Almost all segments of consumers are reducing the amount they are spending on timepieces, but they are still buying watches. Thus, the Japanese and American owned brands aren't doing amazingly, but aren't hurting nearly as badly. Some brands are even likely doing better given the focus on less expensive brands.

The message to watch companies is to focus on value. Make sure a watch demanding $5,000 is actually worth that, and can be communicated well to the consumer. Otherwise they will need to focus on the sub $1,000 segment if they wish to see any retail space in the next few years. Lastly, watch companies must adapt to the times and embrace the Internet as a strong sales, distribution, and marketing channel. They can learn from Rolex, the most powerful watch brand in terms of value, which also spends the most money on advertising. Coincidence? I think not. Estimates see these trends improving over the next few years, but we shall see just how much, and in what way that happens.

Via FHS report (PDF).

Ariel Adams publishes the luxury watch review site aBlogtoRead.com.