The year 2019 was rewarding for the Swiss watch industry. Exports rose by 2.4 percent and by the end of last year, stood at $22 billion. 2020 began on a good note, but by February, the industry stood on shaky ground as the spread of coronavirus infection shut down countries.
The luxury watch industry has had to deal with the fall-out of a pandemic and a sudden transformation.
The pandemic first: the Boston Consulting Group estimates a $600 billion decline in watch sales for 2020 worldwide. Not just are the sales declining in one of their biggest markets, China, but their supply chain has been disrupted; the Swiss industry imports several watch parts from the Southeast Asian giant.
The second big disruption that the luxury watch industry has had to deal with is an en masse exit of big brands from the popular Baselworld trade fair to Watches & Wonders (formerly known as SIHH).
Last year, the Swatch Group (Breguet, Omega, Longines, Rado, Tissot, Swatch and more) and Breitling abandoned Baselworld for SIHH. This year, other marque brands such as Rolex, Patek Philippe, Chanel, Chopard, Tudor, and the giant among the giants LVMH ( Bulgari, TAG Heuer, Hublot and Zenith) decamped from Baselworld, a trade show with a history that dates back to 1917, for Watches & Wonders (W&W) in Geneva, with the Fondation de la Haute Horlogerie (FHH).
The dispute arose when Baselworld refused to return the money taken for bookings for the 2020 edition, which stands cancelled due to the epidemic. Jean-Christophe Babin, CEO of Bulgari Group, believes that the move will prove beneficial for the industry, which has the opportunity to gather under one umbrella, in one location, Geneva, known as the cradle of fine watchmaking. “Too many divergent interests had hurt the Swiss watch industry. It is time to regroup and re-strategise.”
Most watch industry leaders, such as Favre-Leuba’s CEO Philippe Roten, have indicated that they will focus on increasing their online sales. The brands that have eschewed the digital space for a physical touch-and-feel one, befitting the luxury experiences they love to create on-ground, are left with very little choice.
Many watch brands have introduced new variants and collections, including $280,000 tourbillons, on platforms such as W&W, Instagram, YouTube and Zoom. Breitling’s chief executive, Georges Kern, in his first digital summit on April 16, said watch brands like him are trying to work to restore some sort of normalcy to the industry by logging into the digital space.
This is where the digital platform offered by the powerful W&W trade show helps the industry reach out to old patrons and new collectors. Member watchmakers have used it to introduce new collections, as well as showcase content about their heritage, aesthetic superiority and technical prowess.
The platform has elicited a lot of interest even from India, with collectors and buyers logging in. Surat and Mumbai-based diamond merchant Shivam Mehta, owner of SMA Jewels, reveals that he has picked the watch he will buy this year, once the lockdown opens: a beautiful piece from Jaeger-LeCoultre’s Master Control Chronograph Calendar, costing around €15,000 in the global market. “I like its rounded case and a high level of finish. It is a stainless steel watch that features a chronograph and complete calendar. I am a collector of JLC watches and have booked one, which I hope to receive soon after exports begin.”
The growing popularity of the digital platform and W&W has pushed Pascal O. Ravessoud, External Affairs Director and Watchmaking Expert at Fondation de la Haute Horlogerie (FHH) into the limelight. He is a man on a mission with a task to ensure that the digital initiative reaches out to consumers with stories and content that inspires them to keep investing in watches while helping brands introduce new collections.
He hopes to reach out to new consumers, particularly from Gen Z, who are far more proficient with the digital world and look for watches that are either vintage or swathed in history. Ravessoud speaks to us about the losses the Swiss watch industry is facing, the challenges, and why this phase is only a blip in its two-centuries-old history
Given the worldwide lockdown and the halting of all economic activity, what does the year look like for the luxury watch segment?
We are in the middle of an unprecedented crisis with a very unpredictable outcome. Nobody knows when we will be back to normal. In certain areas, it may take a year or two. The tourism and transport sectors may take even longer. For luxury businesses, I believe the situation will take at least the entire 2020, and perhaps even up to one more semester to get back to the sales figures we were used to.
I would love to have a crystal ball and be able to give you numbers for the future. What I am sure of is that 2020 is going to be a difficult year for everyone in the watch industry. The industry leaders will emerge from the crisis even stronger in terms of market share, as well as those who have been agile and prompt to successfully anticipate the ever-changing situation.
I believe that, as is the case with each big crisis we have witnessed in the quite recent past, a big decrease is followed by a huge rebound, as soon as the Point of Sales reopen. I see the entry-level (i.e. below 2 to 3k USD retail price) being harder to recover than the 3k range and above. Maybe in the upper end (25-50k and above), we might experience only a minor decrease for the whole of 2020.
What are the challenges that watch brands face?
I can see a few: First, the supply chain has been disrupted. Supply chain in watchmaking is very complex, and to produce one watch you sometimes have to rely on several internal or external suppliers, each very specialised. If even only one is failing to deliver its part, the entire watch cannot be finished.
But then, when your novelties are ready, how can you present them to the world? The major trade fairs have been cancelled. Then you have 95 percent of the Point of Sales closed, half of mankind is in lockdown.
In such circumstances, you need to change your mental software. And think digital. The cash flow will be a major issue for smaller players for obvious reasons.
How will the situation affect the watch industry?
The Swiss export figures of the Federation of the Swiss Watch Industry FH (i.e. Swiss watches exported in the world markets — not sold to final clients) have shown a negative trajectory: -9,2 percent decrease in February, -21.3 percent in March. April figures are not available yet.
Taking into account that the global lockdown will probably ease after a few months, the year 2020 could face a -10 to -20 percent decrease overall. To be compared with the major “quartz crisis” that prompted a -15 percent decrease and a -22 percent decrease in 2009, where the industry successfully recovered in the next few years, I am not overly pessimistic for the time being. As for India as a market, we believe it will grow as much as industry leaders grow.
How do you expect to help the watch brands deal with the fallout of the pandemic?
I think the Watches & Wonders digital platform was a big help for the brands to launch their 2020 novelties. It will continue to be a vitrine to showcase more novelties to come and more exclusive and insightful content in the future. watchesandwonders.com is a permanent digital ecosystem for the Watches & Wonders brands and echoes the offline physical W&W events, such as Geneva and Miami.
Will the online platform be able to achieve any sales? Are you even looking at sales?
This is a communication and content platform exclusively. But brands have developed strategic partnerships with major digital e-commerce platforms such as Alibaba and Net-a-porter to take advantage of the digitalization of Watches & Wonders to create momentum for sales events.
Why do you think the watch brands have abandoned Baselworld and joined hands with W&W?
It is not our role to comment on these brands’ decisions and strategy. Generally speaking, we are very happy for Geneva to play an increased role, as it is the cradle of fine watchmaking.
What sort of role do you see Fondation de la Haute Horlogerie playing in a world changed by the pandemic?
The mission of the FHH is to develop the awareness and appreciation of watchmaking excellence since its inception in 2005. We have always tried to gather the main players because together we are stronger. This will never change. The current situation calls for more cooperation within this wonderful sector, particularly at a time when digitalisation is both a help and a threat. Hopefully, this will help to get more traction on our role and reinforce the industry as a whole towards our clients.
Deepali Nandwani is a journalist who keeps a close watch on the world of luxury.
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