Why America is making Swiss watchmakers nervous

Swiss watchmakers are wondering about slowing sales in the United States. As the economy is recovering, with low unemployment and strong consumer spending, the reasons are a bit mystifying.

The immediate causes are mostly known. Purchases of Swiss timepieces by foreign visitors in New York and other destinations in the U.S. make up a substantial share of global sales –in the case of Hublot, a luxury watchmaker, tourists account for half of its sales in places like New York, Miami and Los Angeles.

Restrictions on travel to the U.S. from a number of countries may have deterred other tourists as well.

Some sales are certainly being lost to the Apple Watch and other devices of that type, especially in the lower band of models, those priced $300-$3,000.

On a broader point, how wealth creation works in a modern economy is virtually impossible to untangle. If less tourism leads to smaller spending, retailers in turn may need to cut costs, including closing stores. So begins the ripple effect, hitting shopping centers and other commercial venues. That causes job cuts, shrinking consumer spending: the jobless will cut out discretionary purchases, the hospitality industry serving those salespeople–from restaurants to hotels–will lose customers and so on.

The possibility of a longer term trend among the famous millennials, however, has Swiss watchmakers observing nervously. Younger consumers may be reluctant to fork out $15,000 for a mechanical piece of luxurious jewelry. But it’s not only the likes of Omega, Rolex, and Audemars Piguet who follow this development with unease. It may well impact other big-ticket items, from refrigerators to cars.

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