It has been a difficult time for the watch industry. The most recent figures released by the Federation of the Swiss Watch Industry (FH), which tracks exports out of Switzerland, show 15 straight months of falling numbers. September shows a 5.7 per cent drop, but the trend is flattening.
On the retail and consumer end, some large groups have been buying back stock to support their supply chain partners.
The Deloitte Swiss Watch Industry Study for 2016 cites Hong Kong as the most important export market, and has produced figures that show export levels to the city that approach those not seen since the global economic downturn in 2009. The United States became the big mover for July, and this looks to continue for the rest of this year.
Much of the atmosphere is a result of moving too quickly to take advantage of new markets and increased demand without having the fundamentals in place. The past 10 years have seen wristwatches incorporating all sorts of trends to appeal to the Russian market or the Chinese market. Brands jumped in at great cost looking for profit or market share.
They also started taking over stores and distributorships as opposed to having the local partners (and local knowledge) that allowed watchmakers to enter organically.
The potential market has grown dramatically. Yes, Hong Kong is down, but mainland China figures for lesser-priced watches have declined less.
Right now, the economy has been affected by anticorruption programmes and there is much speculation of an economy that has grown without the necessary business infrastructure development. While the high end sales have come and gone, the overall effect of the massive communication push has been to help fuel an interest in watches in general.
Technological advances have also opened quality watchmaking to middle and lower price point watches which benefited then. Watches with affordable price tags are now better than before, and they are inexpensive enough to be considered small purchases.
Perhaps because of fear of new technology, many brands jumped head first into new markets. The past dozen years or so though have been aberrations.
“We should not forget that the market was amazing. It went up, up, up non-stop – which is unrealistic,” said Thierry Stern, president of Patek Philippe during the year’s Baselworld. “Yes it will be a challenge this year, but when I say ‘challenge’, I don’t mean disaster ... It just has a small decrease, and our distributor is not worried, he is prepared.”
This has benefited watch buyers, says Jean-Claude Monachon, vice-president and head of product development of Omega. “When the economy is soft, customers become more quality conscious. That is good because brands that have invested in innovation tend to gain customers who are looking for value. So they tend to learn more or be better informed before making the purchase and that is good for the watch industry.
“More steel and titanium watches are also being presented and bought instead of those of precious metal. This means more value is in the movement, which means there is more attention and education needed to appreciate the product and make the purchase. This makes that purchase mean more to the buyer, which draws them into a more long-term commitment.” This market may also be good to those at the very top.
Patek Philippe can move its watches to where other buyers eagerly await, and as it is an independent family-owned company that can choose to work for a future and not just a number. Rolex is also a beneficiary of the flight to quality in times of trouble. Rather than spend the past 10 years trying to produce exactly what the new economies wanted, it worked on making its basics better with growing support for service centre, communications and an openness that allows it to point to developments with pride and authority.
“It is not an easy situation for the watch industry, but I believe that hard times hide great opportunities for the brands who offer real value to their clients” says Angelo Bonati, CEO of Officine Panerai, which is part of the Richemont Group, but has always been steered independently by Bonati. “My suggestion is always focus on the fundamentals: stay coherent with your identity, keep on increasing the contents and quality of our watches.”
He stresses communication as key to keeping passionate collectors and welcoming new enthusiasts as well as always improving their products. “We have our path and we follow it,” he says.
Even the high-end independents seem positive, as their businesses were usually entered into with more passion and entrepreneurial spirit. They carry less inventory so they have less exposure in that sense. They act in many ways like the big brands did when the big brands were just starting, and as such have a keen understanding of the ebb and flow of the market.
“Retailers now more than ever need the independent brands to have a point of difference” says Maîtres du Temps founder Steven Holtzman. “The current market can represent a window of opportunity for the niche as it can still be a place that stores can offer something that is not everywhere.”
David Guten, co-founder of independent brand Manufacture Royale, concurs. “Nobody needs a watch today per se,” he says. “You can read time everywhere – from your car, desk, phone. A mechanical watch is all about emotion. It’s one of the few products left that is mechanical. You can have a fancy car full of electronics, but will it run in 50 years time? But a mechanical watch – 100 to 200 years from now, there will still be somebody tinkering or repairing it. It’s eternal. For us, it’s horological art.”
Additional reporting by Pin Lee