Striking a Balance

It was business as usual at Geneva’s annual SIHH, reports Sean Li, despite Switzerland’s decision to go its own monetary way

he watch industry is one that abhors significant changes, whether on a micro or macroeconomic level. If you peel back the layers of glitz and glamour applied by partnerships with international celebrities and the stories of mechanical wizardry gained from age-old techniques, it’s an industry that is still, at its core, reliant on some very small links in the supply chain. Entire deliveries of a new watch collection can be brought to its knees by something as seemingly trivial as a pin buckle—all that needs to happen is for the supplier to make a small mistake in the production of a part, and the supply chain comes to a grinding halt. There are very few substitute parts, even in a watch with hundreds of components, so everything has to come together in a precise schedule before the watch is even delivered to the boutique.

You can imagine, then, how it went down when the Swiss National Bank pulled the rug out from under the Swiss watch industry on January 15, when it decided that it would no longer peg its national currency to the euro and would let the markets determine the exchange rate. Pandemonium ensued, with the value of the Swiss franc rocketing up by 30 per cent, before settling at a level roughly 20 per cent higher. You would think that those holding Swiss francs would be ecstatic. However, for an industry that relies on exporting more than 90 per cent of its production, it means that the cost of those goods rose instantly, just a few days before the “opening bell” of the new watch introductions for the year at the Salon International de la Haute Horlogerie (SIHH) in Geneva.

The stock markets took this immediately into account, hammering the stock prices of both Richemont and the Swatch Group, mirroring the rise of the Swiss franc. Unfortunately for those shareholders, while