Once king, Swiss bling hits harder times
Watchmakers add more affordable models to the luxury mix to shore up sales
CLAUDIA BRUNNER, Nikkei Staff Writer
GENEVA -- Despite all the glitz and glamour at this year's Salon International de la Haute Horlogerie, a trade show for luxury watches held in Geneva in mid-January, it is gloomy times for Swiss watchmakers.
Swiss watch exports plunged 9.9% on the year in 2016, their biggest slide since 2009, according to the Federation of the Swiss Watch Industry. China's economic slowdown and crackdown on corruption, coupled with declining tourism brought on in part by terrorist attacks in Europe and the soaring Swiss Franc, made for one of the most challenging years since "the quartz shock" that rocked the industry in 1970s and '80s.
It was against this bleak backdrop that the 27th edition of the watch fair opened its doors to the public for the first time ever on its fifth and final day. The move was aimed at making the event, once reserved only for distributors and the media, less exclusive and more accessible to a broader range of potential customers.
In her opening speech, Fabienne Lupo, chairwoman and managing director of the SIHH, acknowledged that the watch industry faced a long-term crisis. She said opening the event to the public was not a trivial decision but rather an "absolutely necessary" measure to help brands better understand their clientele.
Given the industry headwinds, it is hardly surprising that many brands have been forced to rethink their domestic and global strategies this year. At the fair, basic entry-level watches had a strong presence among the more sophisticated and extravagant timepieces so eagerly awaited each year by watch enthusiasts.
Watchmakers at the event were clearly aware that entry-level watches are where the stronger demand lies.
Flavien Gigandet, spokesperson and member of the executive committee of Parmigiani Fleurier, a privately owned watch house, said 2016 was a challenging year for the company, and that it slashed the size of its global distribution network.
While Parmigiani's core watches cost around 30,000 Swiss francs ($30,376) each, the company introduced a new entry-level range of watches based on its classic Tonda 1950 and fitted with a thin movement. The steel version starts at 9,900 francs for men and at 8,900 francs for women.
"When things are getting a bit tricky, when people are feeling a bit uncomfortable because of the economic situation, we notice that this is a general trend. Go back to simplification, back to basics, back to our core business," Gigandet explained.
For small player Greubel Forsey, last year was tough as well. "An atmosphere like 2016 has a direct effect on watchmaking," David Bernard, the company's chief of operations, said.
Greubel Forsey now offers four versions of its most affordable watch, the award-winning Tourbillon 24 Secondes Vision. The company usually creates only one edition of its platinum timepieces.
Though its price tag of 310,000 Swiss francs is clearly not aimed at bargain hunters, Bernard said the timepieces might attract aficionados and those seeking understated luxury. "Chinese collectors are really experts, and they also like seeing what is inside [the watches] to see the complexity of the mechanism," he said. "This kind of product, which is round, symmetrical and with a classical dial, maybe seduces other collectors who don't want to necessarily show off what they are wearing."
Faring better than most was independent brand Audemars Piguet, whose sales climbed more than 5% last year to nearly 900 million Swiss francs. "When everyone decided to go into the Chinese market, we said, 'maybe not,'" said Vice Chairman Olivier Audemars. He added that while the company may have benefited from the huge growth in personal spending there, it had learned from the past "to split the risk."
The premium strategy has paid off for Audemars Piguet. It limited annual production to 40,000 watches and significantly reduced the number of stores selling its products. The company plans to further trim the number of sales outlets from the current 300 to 200-250, Audemars said. The company has also been increasing its focus on women's watches, expanding the number of offerings for women by 30% in the last three years.
No matter how much rethinking has had to be done, however, most of the watchmakers are not ready to embrace smartwatches.
"There is a fine line between becoming irrelevant and destroying our raison d'etre," said Audemars.
Said Greubel Forsey's Bernard, "I'm a watchmaker, and the connected watch doesn't make me dream." He said the world may be changing, but staying true to oneself is also important. "There is traditional watchmaking, there is high-end finishing and sophisticated architecture, and our clients are awaiting us there."
2016 was a turbulent year for the Richemont Group. The company behind such brands as Piaget, Cartier and Vacheron Constantin reported a 7% drop sales for the nine months ended December last year and was forced to buy back unsold inventory from retailers, cut jobs, limit production and abolish the CEO position in its biggest management overhaul since 2009.
The harder times may explain why entry-level watches featured so prominently among the group's offerings at the show. Baume & Mercier introduced new variations of its Classima Collection, eight of which came with a leather strap and started at 950 Swiss francs, making them among the most affordable watches at the event. Jaeger-LeCoultre also offered lower-price models, such as the Master Control Date, starting at 5,900 Swiss francs. In Montblanc's revamped Timewalker collection, the Chronograph UTC for men cost around 5,000 francs.
For Richemont, each independent brand has its own strategy. IWC Schaffhausen, traditionally a specialist in men's watches and which made headlines not long ago with slogans such as "Almost as complicated as a woman, except it's on time," is now counting primarily on its female clients. Its new Da Vinci series, for example, is designed specifically for women.
Insiders revealed at the trade show that Richemont is adopting a new business model in China. Dissatisfied with its wholesale business, the group is said to have introduced a unified system with its dealers that allows for precise monitoring of sales to prevent the buildup of stock. The strategy started with Cartier and will be expanded to other brands this year.
Despite all the challenges, watchmakers at the show -- which drew record numbers, including 2,500 visitors from the general public who paid a hefty 70 Swiss francs per ticket -- were largely optimistic about the future.
"We know it is going to be a tough year; the whole economy will certainly not recover in 2017," Parmigiani's Gigandet said. "But there are signs that things are going in the right direction."