Speed lim­its

Growth to­day isn’t just mea­sured in fi­nan­cial value

MVMT - - Momentum - Words dar­ren ho

Depend­ing on who you’re speak­ing with in the watch­mak­ing in­dus­try, the sit­u­a­tion is dire, or per­haps in a de­cel­er­a­tion. But it’s not en­tirely dis­as­trous. “The mar­ket is slow,” is the line that flies off the tongues of dozens of re­tail­ers. “Stocks are mov­ing but glacially and at a very mo­not­o­nous pace,” an­other points out. Con­sumers get ex­cited about prod­ucts, but without direc­tion or trend and this ran­dom­ness is con­fus­ing to watch brands that need to cap­i­talise on a large base. Plus, just be­cause con­sumers are ex­cited about a prod­uct doesn’t mean they are buy­ing.

Add to that news of the Swatch Group’s re­cent an­nounce­ment that half-year prof­its are down 50 per cent (they are not in the red, just with sig­nif­i­cantly re­duced prof­its) and the FHH (the Fed­er­a­tion of the Swiss Watch In­dus­try) re­port that Swiss watch ex­ports fell faster in the first half than ever be­fore (16.4 per cent). These are tough num­bers to swal­low for an in­dus­try that has been en­joy­ing pop­u­lar­ity.

What’s most sig­nif­i­cant is the dip in pre­cious metal watch ex­ports, nearly a third down. The biggest hit mar­kets were Hong Kong and Italy, two tra­di­tion­ally ma­jor im­porters of time­pieces. Italy nearly single-hand­edly swung the Swiss watch world back from the dead back in the ’70s. In fact, the sports luxe icons of our time were cre­ated to cater to Ital­ian de­mand for el­e­gant sporty watches.

But there are bright spots in the world that are shin­ing op­ti­mism on the in­dus­try. Australia is a steadily grow­ing mar­ket and one that shows lit­tle signs of los­ing steam.

Other mar­kets in the re­gion (Cam­bo­dia, Myan­mar, et cetera) are still in their in­fancy, but grow­ing steadily. The United King­dom, tra­di­tion­ally a mar­ket that has had lit­tle in­ter­est in lux­ury watches, is de­vel­op­ing an

ap­petite for such prod­ucts. And in the North Amer­i­can con­ti­nent, a sim­i­lar change is tak­ing place among the up­per mid­dle sec­tor. As brand flash­ing once again be­comes ap­par­ent on the run­ways of Paris and Mi­lan, shop­pers are now more ready for the brand up­grade or state­ment piece. The lux­ury cy­cle is re­new­ing it­self.

Con­tribut­ing Fac­tors

Cer­tainly the in­sta­bil­ity in the Euro­pean con­ti­nent has added to the re­gion’s eco­nomic woes of the past few years and sig­nif­i­cantly af­fected con­sumer con­fi­dence. The Latin Amer­i­can con­ti­nent’s fail­ure to de­liver on its pos­si­bil­ity of be­com­ing the next great emerg­ing mar­ket has also im­pacted growth. But one most sig­nif­i­cant fac­tor is the evo­lu­tion of the Chinese con­sumer and the gov­ern­ment’s clam­p­down on cor­rup­tion.

Al­though Chinese con­sumers have be­come more care­ful about flag­ging them­selves for the scru­tiny of of­fi­cials, they are buy­ing into other prod­ucts. Chinese shop­pers to­day are as likely to buy good qual­ity pro­duce or liv­ing ne­ces­si­ties from over­seas as they are to be pick­ing up a gold Rolex. ( Even clean air, bot­tled, is a lux­ury.) At the same time, China’s chang­ing lux­ury tax code, with tax re­funds of up to 11 per cent, is mak­ing con­sump­tion within the coun­try more palat­able.

The lack of pickup in other emerg­ing mar­kets like In­dia is an­other pres­sure point. But it’s a de­lay. As econ­o­mists point out, con­sumer con­fi­dence in­creases when social and po­lit­i­cal sta­bil­ity co-ex­ist or ap­pear to come to a steady state in our minds. So be pa­tient, and in the mean­time, the FHH points out that peo­ple are still hap­pily spend­ing in the CHF500-3000 range of watches, which has been min­i­mally im­pacted.

the lux­ury cy­cle is re­new­ing it­self... and bright spots are shin­ing op­ti­mism on the in­dus­try

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