WEATHER­ING THE STORM

THE WATCH IN­DUS­TRY IS NOT ISO­LATED FROM SLOW­ING ECO­NOMIC MAR­KETS. GUEST ED­I­TOR SEAN LI EX­AM­INES THIS CUR­RENT CLI­MATE CHANGE AND FAC­TORS THAT HAVE LED TO IT

Singapore Tatler Jewels & Time - - Contents -

There is a storm brew­ing within the lux­ury watch in­dus­try, shak­ing up its cur­rent sta­tus quo

Watches NEED to be EMO­TIONAL ac­qui­si­tions, BUT ONES that hold their VALUE for the LONG TERM

Over the past few months, the mood

within the watch in­dus­try has been gloomy: it has been fac­ing sig­nif­i­cant com­mer­cial chal­lenges, and mar­ket statis­tics over re­cent months have shown very clearly that fewer watches are be­ing ex­ported, as a di­rect re­sult of slow­ing sales. The Fed­er­a­tion of the Swiss Watch In­dus­try (FH), which re­ports and com­ments on the in­dus­try’s ex­ports on a monthly ba­sis, is find­ing it dif­fi­cult to put a pos­i­tive spin on any seg­ment.

Fin­gers have been pointed at nu­mer­ous ex­ter­nal fac­tors, be it the global eco­nomic en­vi­ron­ment, the strength of the Swiss Franc, the re­cent Brexit ref­er­en­dum, which has cer­tainly damp­ened the mood fur­ther, you name it. If we take a longer view, it’s not the first time that the watch in­dus­try has faced such tur­bu­lence: the early days of the quartz era nearly dec­i­mated the me­chan­i­cal watch sec­tor, and the fi­nan­cial cri­sis of 2008 also put a sig­nif­i­cant dent in the lux­ury watch seg­ment. How is the in­dus­try re­act­ing though to these new, and per­haps even greater chal­lenges? What has it learned from pre­vi­ous events to help it pre­pare for the im­me­di­ate fu­ture?

It could be ar­gued that the be­gin­ning of this slip­pery slope hap­pened some 18 months ago, when the Swiss Na­tional Bank un­pegged the Swiss Franc from the Euro, caus­ing its ex­change rate to sky­rocket overnight. The fact that it hap­pened the week be­fore the open­ing of the Salon In­ter­na­tional de la Haute Hor­logerie (SIHH) caused much con­ster­na­tion and hand wring­ing from watch­mak­ing brands, which ex­tends not just to those who di­rectly took part in SIHH, but also those who took the op­por­tu­nity dur­ing that week to bring their new wares to Geneva. All of a sud­den, their pric­ing mod­els and sales fore­casts could be vir­tu­ally thrown out the win­dow. A week later though, it seemed that the fas­ci­na­tion with watches was still there, and that cus­tomers, both at re­tail and whole­sale lev­els, were gen­uinely in­ter­ested in the new prod­ucts. Ul­ti­mately, SIHH ended on a more pos­i­tive note than any­one could have ex­pected just a week prior.

How­ever, the snow­ball ef­fect was only just pick­ing up pace, par­tic­u­larly in Asia. Brands re­acted im­me­di­ately by fo­cus­ing on more ac­ces­si­ble watches, with fewer com­pli­ca­tions, and less ex­pen­sive ma­te­ri­als such as steel rather than gold. There was also a strong shift to pro­duce more women’s me­chan­i­cal watches, as ladies started show­ing greater in­ter­est in haute horology and its tech­ni­cal con­tent. Fast-for­ward to to­day, and the watch in­dus­try has only seen the snow­ball grow larger as the slope has steep­ened, al­most in spite of the in­dus­try’s ef­forts to con­tin­u­ally in­tro­duce new time­pieces.

It seems that the in­dus­try is ig­nor­ing a num­ber of fun­da­men­tal is­sues, which go well be­yond mar­ket dy­nam­ics; years of dou­ble-digit growth were sim­ply not sus­tain­able in the long run. This growth was not matched by a sim­i­lar in­crease in po­ten­tial

cus­tomers, who have al­ready been very well served and are per­haps reach­ing a cer­tain sat­u­ra­tion. Also, all this in­vest­ment in pro­duc­tion ca­pac­ity, of­ten driven by a near ob­ses­sion with in-house man­u­fac­tur­ing (more on that on p.24), led to the av­er­age prices of high-end watches out­pac­ing the rate of in­fla­tion in de­vel­oped, ma­ture mar­kets. Lux­ury watches have moved from be­ing spur of the mo­ment, al­most im­pulse buys, to be­ing planned pur­chases sim­ply due to the ex­pen­di­ture re­quired as a per­cent­age of dis­pos­able in­come. It’s a sim­i­lar ap­proach to au­to­mo­biles—af­ter all, you don’t walk past a car dealer and tell your­self that you’ll buy your­self a new sports car while your sig­nif­i­cant other is do­ing their own shop­ping (well, maybe some do!).

There are other is­sues at play, such as the re­tailer ex­pe­ri­ence that, un­for­tu­nately, can be sorely lack­ing due to the ease with which watches were sold, par­tic­u­larly in Asia, in re­cent years. While these do need to be fac­tored in, the fact of the mat­ter is that high-end watches are ex­pen­sive, and watch brands need to ac­knowl­edge that this value they like to ex­pound on needs to be vis­i­ble and vi­able in the long run. Watch­mak­ers can— and should—no longer fol­low the fash­ion in­dus­try sched­ule of new col­lec­tions for each sea­son; putting a new out­fit away be­cause it’s no longer in sea­son or à la mode hurts the wal­let con­sid­er­ably less than do­ing the same for a watch, sim­ply be­cause a new it­er­a­tion was pre­sented just a few short months later. Watches need to be emo­tional ac­qui­si­tions, but ones that hold their value for the long term; the brands that can pro­vide this will weather the storm the best.

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