Switzerland Buys Back Its Own Luxury Watches Replica

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Shoppers browse watches on sale at a luxury concession stand in Riyadh, Saudi Arabia.

ZURICH—Switzerland is buying back its own luxury watches replica from abroad at an increasing rate, a report Thursday showed, as the industry grapples with weaker global growth, slowdowns in parts of Asia and reduced tourism in Europe.

Of the 3.3 billion Swiss francs worth of watches imported into Switzerland in the first 10 months of 2016, 1.3 billion francs, or 40%, had previously been exported out of the country, according to a report from the Swiss federal customs office. Swiss watch exports totaled nearly 16 billion francs between January and October, of which 8% were re-imported.

Much of this re-importation came from high-end watches that were exported for exhibitions but went unsold. According to the customs office report, the average price of an exported Swiss replica watch is 723 francs. The average price of a re-imported one is 7,000 francs.

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This trend has accelerated in recent years. In 2011, for instance, only 22% of Swiss watch imports were previously exported to other countries.

The luxury watch industry has been pummeled by a series of shocks in recent years. Changes to visa requirements in Hong Kong for mainland Chinese tourists have hampered tourist spending, while terrorist attacks in Europe cut the number of foreign visitors in tourist centers like Paris, a key source of shopper traffic for luxury companies.

The strong franc is an added problem for watchmakers, whose local production costs are largely denominated in the Swiss currency but much of whose revenues come from foreign countries where currencies are weak against the franc.

“A lot of factors came together at the same time and made the economic environment more difficult,” Karine Szegedi, partner at Deloitte in Geneva, said.

Switzerland’s biggest luxury watchmakers—Swatch Group AG and Cie. Financière Richemont SA—issued profit warnings this summer amid tumbling sales. Richemont owns high-end brands including Cartier and IWC Schaffhausen. Although Swatch is best known for its inexpensive plastic watches, its portfolio includes pricey brands such as Omega, Blancpain and Breguet.

Richemont said in November that it had bought back about €200 million ($215 million) in unsold inventory between April and September, mostly Cartier replica watches. The Cartier buybacks are complete, but Richemont will buy back other brands on a much smaller scale. Meanwhile, last month, the company dramatically revamped its management structure, eliminating the post of chief executive.

A Swatch spokesman said that the company hadn’t bought back unsold inventory and had no plans to do so.

“Why should we? Our products are not food products that have a date of expiry,” the spokesman said in an email.

The customs office report Thursday came at a key time, as retailers eye the critical holiday shopping season for a boost to sales. A stock market surge and signs of rising consumer confidence have raised hopes for a spending boost at the end of 2016.

The industry showed some signs of stabilizing at the start of the fourth quarter. Shares of Swatch have increased 7% in the past month, while Richemont shares are up 1%.

But the seeds of a sharper rebound appear elusive.

A September study on the industry by Deloitte found that 82% of executives had a negative outlook for the coming year—double the share from one year earlier.