Watch {industry}’s occasions are altering

Watch industry's times are changing

Fabienne LupoPicture copyright
G Maillot

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Fabienne Lupo, head of the group that organises the present, says the {industry} went by means of a “disaster interval”

One of many luxurious items sector’s showpiece occasions returns this week with its mixture of innovation, artwork and wealth – topped off with a sprinkle of superstar stardust from “model ambassadors” from Hollywood or sport.

It is Geneva’s annual watch truthful, Switzerland’s world promotion of an {industry} that’s nonetheless the nation’s third greatest exporter, after chemical substances and equipment.

The Salon Worldwide de la Haute Horlogerie (SIHH) is the place producers (the occasion is dominated by Richemont and its many manufacturers) and small artisan workshops show their newest merchandise to sellers, collectors and most of the people.

You will not discover a lot on present on the four-day occasion that is out there in your native division retailer. However you’ll find watches of astonishing complexity costing tons of of hundreds of kilos.

The “Made in Switzerland” label continues to be thought to be the hallmark of high quality in mechanical watchmaking. It is the place analogue nonetheless guidelines in an more and more digital age.

The {industry} gathers this week after typically wholesome gross sales in 2018, though clouds dangle over the sector.

Worries about world commerce, the rise of the smartwatch, and an industry-wide restructuring proceed to place a brake on development and funding.

Even watch exhibits themselves are altering. SIHH and archrival Baselworld have agreed to synchronise future dates in a bid to ease their competitors for the eyes of the world.

The {industry} wanted to alter after a very dismal 2016 and 2017 brought on by a downturn in key markets, oversupply of watches, a crackdown on “gifting” (bribery) in China, and subdued tourism in some European cities as a consequence of terrorism.

Fabienne Lupo, chairwoman and managing director of the Fondation de la Haute Horlogerie (which organises SIHH), says the {industry} went by means of “a disaster interval”. However after a painful restructuring and job losses, she says the “developments are trying fairly good”.

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MB&F specialises in exotica and can showcase its HM6 Ultimate Version – yours for £170,000 plus VAT

Newest information from the Federation of the Swiss Watch Trade (FH) exhibits that within the 11 months to the tip of November the worth of exports was up 7.1% on the earlier interval at 19.54bn Swiss francs (£15.5bn; $19.9bn).

The most important market, Hong Kong, was up 21% and the subsequent two largest, the US and mainland China, rose 8% and 14% respectively. The rise in exports to the US comes after three years of consecutive declines.

What’s extra, world shipments in the important thing luxurious watch market – thought-about to be something with a manufacturing unit gate worth above 3,000 Swiss francs (CHF) – are up 11%, whereas these within the sub-500 francs bracket are down about 15%.

On Friday, Cartier-owner Richemont, the world’s second largest luxurious items group, posted a 5% rise in quarterly gross sales, bolstered by double-digit development in China.

However, based on analysts at funding financial institution Morgan Stanley, such constructive headline numbers belie main challenges for giant gamers like Swatch Group (which does not take part in SIHH) and Richemont.

In a report final month, Morgan Stanley warned of a “disruptive and game-changing” few years as extra retail gross sales transfer on-line.

The analysts estimate that there’s about €16bn (£14.5bn) price of inventory with third-party retailers worldwide. Wholesalers have been aghast on the quantity of discounting on-line, which not solely hurts profitability but additionally model worth.

Firms can purchase again the stock, however it’s costly. In 2017 Richemont purchased again €200m of unsold watches – and destroyed them so they’d not be offered at knockdown costs.

Richemont, which additionally owns the Vacheron Constantin and Jaeger-LeCoultre watch manufacturers, described its buyback technique as an “distinctive measure” for “distinctive occasions”.

That radical transfer, together with administration modifications, funding in on-line, and a repositioning of manufacturers, is a minimum of making Richemont’s watch division match for the longer term, analysts say.

“The {industry} has been by means of an extended interval of consolidation,” says Ariel Adams, founding father of the influential web site “Firms have bought manufacturers as investments. However loads of manufacturers haven’t been allowed to develop.”

Some manufacturers have misplaced their approach, he says, partly due to frequent administration modifications and partly as a result of they want funding. He believes some manufacturers will not be round in a few years, such is the crowded market.

The watches being produced as we speak are loads much less thrilling than 10 years in the past, he says. “Shopper demand is nice. The issue lies with the individuals who promote watches.”

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Greubel Forsey

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Watch making is an intricate enterprise

Morgan Stanley says smartwatches will proceed to take market share from mechanical and quartz merchandise as Apple, Samsung, Fossil and others develop their know-how.

That is unlikely to harm Swatch Group’s many high-end manufacturers reminiscent of Longlines, Breguet, Blancpain or Jacquet Droz. However, with the Apple Watch priced at about 450 Swiss francs, it is a menace to low-end merchandise.

“From a structural standpoint, we’ve develop into incrementally extra bearish all year long on the affect smartwatches could have on the Swiss watch {industry},” Morgan Stanley says.

Ms Lupo says the menace from the smartwatch revolution is overplayed. “Smartwatches are complementary to mechanical watches,” she argues. “In our metropolis you see individuals with one every of their wrists.”

It is troublesome to envisage many millennials going to these lengths. However Ariel Adams says smartwatches are enjoying an necessary function in getting younger individuals “to assume and put on watches”.

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Attendance at SIHH is predicted to prime final yr’s 20,000 as a consequence of prolonged opening hours

20 years in the past, carrying a watch was going out of vogue. He sees smartwatches as “a gateway to luxurious watches”.

“Younger individuals are taking note of watches, and that provides the {industry} a possible new era of customers,” he says.

What’s extra, producers are dabbling with incorporating sensible tech in watches which have the outward look of being all-mechanical. Some have experimented with screens on watch straps.

This yr’s SIHH has a show space referred to as The Lab to showcase watch know-how and the usage of robotics, 3D printers and synthetic intelligence.

Though the Swiss watch {industry} trades off heritage and custom, Ms Lupo insists: “We’re a really fashionable technological {industry}, regardless of being a really haute [fine watchmaking] {industry}.”

And in order for you examples: Vacheron Constantin created a watch with 2,826 elements, whereas Patek Philippe has one with 1,728 elements. And these should rank as technological achievements in any age.

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