Crisis While most of us suffered during the economic crisis that started around 2008, the Swiss watch manufacturers felt no pain and did what they always do: Increased the prices of their watches year on year. In some parts of the world, where sub-prime mortgages for instance weren’t playing an economic role, or had no…
While most of us suffered during the economic crisis that started around 2008, the Swiss watch manufacturers felt no pain and did what they always do: Increased the prices of their watches year on year. In some parts of the world, where sub-prime mortgages for instance weren’t playing an economic role, or had no any meaning at all, people continued to spend on luxury goods. In Europe, for example, sales had already slowed down as people did not want to spent their money on luxury items in uncertain times. The Asian and Russian tourists made up for that at the European retailers though.
A bit of pain
Since tourism has slowed down, and Europeans are spending their money more wisely, it has become apparent that the Swiss watch industry is feeling the pain. Over the last few years, whenever the Swiss watchmaking industry felt the burn, they compensated with a price increase. Despite much criticism and raised eyebrows by collectors, enthusiasts and press, the Swiss continued to turn a deaf ear.
If we look at the latest information from Fondation de la Haute Horlogerie, we read the following from expert Franco Cologni:
- Exports are down 5% in the CHF 1,500 to 3,000 bracket (£1200-2500). An acceptable result considering the economic climate. Similarly, the CHF 3,000 to 6,000 (£2500-4700) segment fell by 6%. Such fluctuations in the system are to be expected and come as no surprise. An interesting area is opening up for Fine Watch Maisons, and that is steel, which lends itself to the simplest technical innovations (take the chronograph) as well as the most precious, with diamonds.
- Alarm bells are ringing for watches with an export price above CHF 6,000 (£4700). This segment tumbled by 15.5% to CHF 4.5 billion out of a total export value of CHF 10.5 billion. If the slope becomes too steep, climbing back could prove painful.
- As the situation stands, it appears there is no end to the downward slide, despite the results apparently being obtained at Salon International de la Haute Horlogerie in Geneva and at Baselworld.
Please see the full article here : https://journal.hautehorlogerie.org/en/from-feast-to-fast/
You don’t need to be a professor to see that this is not going well, at all. You also don’t need to be a professor to see that there seems to be a huge disconnect between some of these Swiss watch brands and their end-consumer.
They decide what’s good for you
For a long time, the Swiss watchmaking industry thought they would know what’s best for you. The end-consumer. They have been successfully selling watches for decades, some for centuries even, so what would you know? For one thing, we saw it coming that in times of crisis people are not buying in the same magnitude as before. Or perhaps not even at all.
Prices increased every year while most people’s salaries were frozen for years in a row. At some point, it gets ridiculous if the people you are clearly aiming at are not able to purchase your products anymore. This gave the market for pre-owned watches quite a push, it was booming business.
Watch buyers and collectors were able to adapt to the economic climate better than the watchmaking industry it seems. The consumer decided they wanted value for money again. Brands like Oris (understood the message, and came with interesting value propositions both last year and the previous year and their business went very well. Even Rolex understood and came up with some interesting watches in an affordable segment (for them), like the 39mm Oyster Perpetual, the new 39mm Explorer and the new Air-King.
Listen to the market
But there’s more to it than just price. People want to be able to feel the quality and real value in a watch. The famous 2011 video of ‘Zurich Minds’ where IWC’s former CEO Georges Kern happily explains that the real value of the watch is only a fraction of the price tag due to marketing stories explains it all. Even IWC realized though, and decided to come up with a new strategy to make a clear distinction between their high-end pieces and (affordable) entry watches by using different movement categories. People are tired of buying a watch over 10000 Euros (£8000) with a third party ETA or Sellita movement, no matter how good that movement is, it doesn’t feel right. People are also tired of getting to hear stories about heritage and history, while there is little to no proof for them. There is nothing wrong with a good story, but at least it should make sense. The same story goes for all the brand ambassadors or friends of the brand. At some point it gets ridiculous, to have almost more friend of the brands than actual customers. Rolex seems to be very picky on their ambassadors and they tend to make sense. TAG Heuer has a lot of ambassadors as well for example, but aiming at a young public with affordable price tags makes it an entirely different story (see the David Guetta watch) . CEO Biver understood the message from the market well, and decided to scale TAG Heuer down to affordable luxury as no-one was willing to spend 8.000 Euro on a new Carrera.
TAG WATCHES using ambassadors :
What can we expect?
Hopefully the numbers will speak for themselves and more of the brands will finally wake up to the current situation. We will see during SIHH 2017 and BaselWorld 2017 whether they learned and listened or if they keep on producing watches (and stories) like they did before. The pain is not over yet, and it is time for watchmaking brands to actually start listening to their customers, which is so common in almost every other industry. Even the luxury car industry has to listen, it’s why BMW and Audi for instance have a car for almost every budget these days? Right, not because it matches their strategy from decades ago, but because it matches their vision for tomorrow and next year and perhaps the next 5 years.
For more information on watch industry news please check out Haute Horlogerie https://journal.hautehorlogerie.org/en/from-feast-to-fast/