Pink Kimberley Australia
Pink Kimberley Australia
Pink Kimberley Australia
Goto your account
Search Stories by: 

Feature Stories

Articles from WATCHES (779 Articles)

Image courtesy: BaselWorld
Image courtesy: BaselWorld

Watch supply policies damage ‘Swiss Made’

Optimism may have reigned at BaselWorld 2016 but MARTIN FOSTER says the troubling market conditions of the Swiss watch industry can no longer be ignored.

The big Swiss watch houses are finally sharing in the global consumer recession. After two or three decades of very solid double-digit, year-on-year gains there is a shake-out causing boardroom jitters and the Swiss are unpractised at the unpredictability assailing their markets. Their anxiety does not flow from the correction – indeed it was a pleasant surprise there have not been more – but rather that the correction may have longer-term resilience and may become a trend. That trend is down.

Commenting on recent Swiss export figures at the Salon International de la Haute Horlogerie (SIHH) in January, Federation of the Swiss Watch Industry (FH) president Jean-Daniel Pasche said, “So far this downturn has been less painful than in 2008 and 2009, when the Swiss watch industry lost more than 5,000 jobs.”

However, Pasche acknowledged the danger that market conditions could worsen, stating, “Looking at this year, much will depend on how the geopolitical situation evolves.”

To be sure, there will always be a market for high-end Swiss watches but given global economic uncertainties, few now see this as a short-term downturn.

The current situation didn’t appear to faze those presenting at this year’s BaselWorld, the world’s largest watch trade show, which ran from March 17 to 24. The event was an exciting exposé of the spectacular watches, clocks and jewellery being released by the big and small manufacturers across the luxury industry in 2016.

As in past years, it was on a scale that takes one’s breath away. Visitors entering Hall 1 were immediately presented with the impressive stands of Patek Philippe, Bulgari, Zenith, Rolex and Swatch Group, which all had new products to share – many with eye-watering price tags.

While demonstrating that marketing optimism of beautiful products is easy on the day, pessimism among the top brands has reached a four-year high, according to a new industry study published by Deloitte. Although 2015 was difficult, Karine Szegedi, the report’s Geneva-based co-author, cautions, “This [2016] is looking to be a very challenging year.”

Since 2009 the export value of Swiss wristwatches has increased 63 per cent, showing an underlying strength but off a very weak baseline after the 2009 global financial crisis. Today, there is a worrying pattern emerging in the years 2015 and 2016.

The latest figures released by the FH indicate that the slippery slope of the earlier months of the year is continuing and the trend of watch exports remained sharply negative in April. Exports value was down 11.1 per cent to CHF1.6 billion (AU$2.2 b) compared to April 2015, and over the first four months of the year, the downturn stood at 9.5 per cent. This is huge.

Precious metal watches were hit hardest in April and exerted a clear downward effect on the overall result. The slump in stainless steel timepieces, although 50 per cent less than the precious metals category, was significant nonetheless. In volume terms, stainless steel products and those in the category of ‘other metals’ registered steep declines.

Comparison of swiss export growth (overall and for watches) over the last decade. Source: Federation of the Swiss Watch Industry
Comparison of swiss export growth (overall and for watches) over the last decade. Source: Federation of the Swiss Watch Industry

Underlying concerns

There is a concern rattling the industry that is less openly talked about and that is a self-inflicted cause of the downturn – there is huge glut of inventory. The robust sales in recent years created a hyped-up market, spurring manufacturers to increase their production.

Having misjudged the growing trends, manufacturers unintentionally created the hated ‘grey market,’ where new models, unlike those sold by authorised retailers, can be bought at steep discounts of up to 60 per cent.

“Watch brands saw big numbers everywhere, and they started overproducing,” says David Sadigh, the founder and chief executive of Geneva-based market research firm Digital Luxury Group. “But sales have not been at their level of expectations,” he adds.

The surplus stock ends up in these grey markets. Thus, the flourishing of the grey market is taking away the patina of exclusivity and rarity – the very core of the ‘Swiss Made’ promotions supporting the stratospheric aura and pricing of the Swiss watch industry.

The downturn in export value was due mainly to watches costing more than CHF3,000 (AU$4,200), despite their better showing in the first quarter. April performance fell well short, both in value and volume terms. The CHF500 (AU$700) to CHF3,000 (AU$4,200) segment registered a rise; however, this had little effect on the negative trend of recent months. Watches between CHF200 (AU$280) and CHF500 (AU$700) showed a less pronounced downturn than in March.

Despite popular press attempts to find a causal link, there is no discernable connection between the fly-by-night smartwatch promotions and the malaise gripping the Swiss luxury brands.

Nevertheless, independent watch repair workshops are quick to point out that although there is no doubt the Swiss produce the best and the most beautiful watches in the world, independent watchmakers are being squeezed out by Swiss restrictive parts supply policies and their voracious appetite for the inflated monopolistic returns this produces.

‘Swiss Made’ is no longer the wonderfully honest epithet of the last ten decades and it may be that buyers are becoming more aware of the cost of being attracted to a beautiful Swiss watch – the subsequent invoices are Swiss Made as well.

The seeds of the current Swiss problems are deep-seated and were sown 10–15 years ago, and as we know, ‘as ye sow, so shall ye reap’. It will take decades to correct the sliding trend if it is not reversed swiftly, and the Swiss – however superbly beautiful their watches may be – have only themselves to blame.  

Martin Foster attended BaselWorld as an accredited media representative.

Martin Foster

Martin Foster is a freelance journalist and Jeweller’s resident watch ‘guru’. Based in Sydney, Martin attends major international exhibitions covering the watch and timepieces categories.

Duraflex Group Australia

Read current issue

login to my account
Username: Password:
LJ West Diamonds
Pink Kimberley Australia
Blush Pink
© 2021 Befindan Media