Why Richemont’s Chairman Believes Luxury Watchmakers Need to Cut Production

Richemont chairman Johann Rupert thinks it's time for the watch world to reinstate laws of supply and demand.

The South African billionaire, who founded the Swiss luxury conglomerate in 1988, has said high-end watchmakers should reduce the supply of timepieces to counter the softening market, as reported by Bloomberg . Richemont helms several horological heavyweights, such as Vacheron Constantin, IWC, Jaeger-LeCoultre, and Cartier, meaning that a change in production strategy could genuinely impact everyday collectors.

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Rupert told shareholders at Richemont's annual general meeting that the global demand for watches "has gone past the boom," with sluggish sales in mainland China and Hong Kong contributing to a downright dull year . "One should be cautious in just trying to pursue volume," he said in Geneva on Wednesday.

Rupert went on to praise rivals for curbing output. "We have a close relationship with the private competitors and we know what they are doing and they are acting very responsibly by constraining production," he explained.

Watchmakers have long limited production and distribution to fuel consumer demand. Patek Philippe and Rolex have exerted ironclad control over their output in ways the group-owned brands cannot. Richemont is controlled through a family trust that has a majority of the voting shares, so the stock is publicly traded and the company must provide detailed financial updates. Other private Swiss watchmakers "don't have shareholders to report to," Rupert adds.

Swiss watch exports hit a record $31 billion in 2023, but sales have slowed significantly this year. The strong Swiss franc has pushed up watch prices and crimped profits for producers, Bloomberg notes.

As a result, the Swiss watch industry is turning to the government for financial aid. Watchmakers such as Girard-Perregaux and Ulysse Nardin are using a state program that allows them to furlough employees and reduce production without permanent job cuts, according to Bloomberg . (The program sees the Swiss state cover up to 80 percent of workers' wages as companies eliminate shifts and work hours.) Some watch suppliers have also taken up government support after manufacturers cut orders.

The good news is the market for pre-owned watches is in the collector's favor. Prices of second-hand timepieces, such as Rolex sports watches , keep dropping, so you can score a real bargain. That's quite the silver lining.