Singapore Tatler Jewels & Time
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
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.