McKinsey & Company, a renowned multinational consulting firm, has recently released a market report that offers valuable insights into the future growth prospects of the fine jewellery and premium and ultra-luxury watches sectors. These sectors hold a significant position in the global luxury market, generating annual revenues exceeding $330 billion. Despite suffering a decline in revenues of 10-15% and 25-30% respectively, due to the impact of the COVID-19 pandemic, McKinsey predicts a gradual recovery in the near future.

McKinsey suggests that the growth in these sectors will be primarily driven by the younger consumer demographic and the focus on domestic markets, as international travel restrictions persist and domestic duty-free zones gain prominence in China. The Asian market, which currently represents 45% of global jewellery sales and 50% of global watch sales, is expected to continue expanding over the next five years. Particularly, China is anticipated to spearhead this growth.

Within the fine jewellery segment, McKinsey highlights three key transformations. Firstly, there will be an increased presence of established brands, leading to a compound annual growth rate of 8-12% for high-end branded jewellery between 2019 and 2025, which is three times higher than the overall market. Secondly, digital channels are poised to play a crucial role in driving sales, with global online sales expected to rise between 13% and 21%. However, the report emphasizes the importance of maintaining a personalized and humanized digital experience to ensure customers receive the same level of service and attention as they would in physical stores. In fact, it is estimated that approximately 80% of purchases will still be made in physical stores by 2025. Lastly, sustainability will play a significant role, with an estimated 20-30% of global jewellery sales being influenced by sustainability-oriented consumers by 2025. Companies must embrace sustainability in order to earn the trust and loyalty of the younger consumer demographic.

In the premium and ultra-luxury watches segment, McKinsey predicts a slower growth rate of 1-3% annually between 2019 and 2025. This market is expected to witness three major changes. Firstly, the retail channel will undergo a complete transformation, with brands expanding their retail presence and adopting a dynamic omni-channel approach to enhance the overall customer experience. This shift may result in a revenue shift of $2.4 billion from multibrand retailers to brands by 2025. Secondly, the mid-range market for traditional watches is expected to contract due to increased competition from digital-native players, fashion brands, and the rise of smartwatches. This intense pressure on the mid-range market may cause consumers to shift towards luxury products, potentially leading to a decrease in aggregate revenue of $2.5 billion by 2025. Lastly, the second-hand watches sector is projected to become the fastest-growing segment in the industry, with sales estimated to reach between $29 billion and $32 billion by 2025. Industry players, including brands and e-tailers, must adapt their strategies to capitalize on the evolving dynamics of this market.

In conclusion, McKinsey’s market report delivers a positive outlook for the future of the fine jewellery and premium and ultra-luxury watches sectors. The recovery of these markets will be fueled by the preferences of younger consumers, the growth of domestic markets, and the increasing significance of sustainability. Companies must adapt to the digital landscape and enhance the overall customer experience to effectively cater to the shifting demands of consumers. Additionally, the transformation of the retail channel and the rise of the second-hand market present both challenges and opportunities for industry players. By embracing these emerging trends, companies can position themselves for success in the years ahead.

Useful Links:
– For more information on McKinsey & Company’s market report, please visit here.
– To gain deeper insights into the luxury market landscape, please refer to this report.