The year 2016 will be very challenging for the Swiss Watch industry. The right measures have to be taken in the right moment at the right places on earth …
All of you who listened to my interviews with the CEOs during the SIHH in January know that this year will in fact be quite challenging. Now the newest figures from January 2016 are available and we can see a very first trend of what´s going on. Have a look and then at the end of my article please read my personal thoughts for 2016 …
The statistics on Swiss watch exports are updated monthly. They are based on foreign trade statistics prepared by the Swiss Federal Customs Administration. All values are expressed as export prices, according to declarations made by the exporting firms. So unfortunately there are no figures from the Swiss market available.
After an ongoing upward trend the last years things have changed now. In short I would say that today everybody is very cautious and vigilant. Intelligent acting brands will stay in their appropriates segments and risk nothing. I expect the brands to only present a few real novelties during Baselworld. Except maybe Hublot with a new series of limited editions 🙂 New products will still be very important for the brands, but I guarantee you the novelties will be absolutely in line with the brand and its collections. I think we will see even more replicas of past icons in the near future.
What we customers can expect is “more watch for the money“. Either by new and cheaper models or radical price adaptions of existing overpriced models. Value for money really is an issue!
Brands legitimacy also, the customer will only buy a safe heaven. Brands with no history and/or background will suffer the most and/or disappear from the market very, very soon. I could name you a list of brands I expect to disappear soon …
No selling of no-names for astronomical prices anymore! No selling of ticking chimera anymore!
I think the biggest actual threat for everyone in the moment is how to react in case of any new evil tidings…
The biggest challenge is how to find the customer … how to serve the customer… how to pamper the customer when once found …
It is not clear yet where the Chinese will travel & buy this year. The industry needs to follow its biggest group of buyers and these simply are the Chinese.
The industry will have to have the right product at the right time in the right places… So intelligent and reactive logistics are needed.
The brands will have to reactivate traditional, „old“ markets that had been recklessly neglected in the last years since everyone believed in the infinite growth in China and Hongkong.
How to deal with the overstock of many retailers is also a big issue. The latter leads to more and more grey market and huge discounts.
The big and established players MUST keep the markets clean and have to help retailers that suffer under the problem of overstocks.
I am very much convinced that an increasing number of watch brands will give more emphasis to online sales channels in the next months to come.
I am also convinced that the watch brands will continue to focus on digital media in their marketing campaigns. I think social media and online blogs/forums will by far be the most important marketing channels in the near future.
The consumer wants to find more and more specific information about the quality of a product and this information necessarily must not come from one of the next official marketing campaigns. This is information in the end to rectify the price and to underline the top quality of Swiss made watches.
I don´t think smart watches will be an issue for “Swiss made”-brands. Maybe the very low price segment will suffer, since if you try sell no name/value/quality for too much money the consumer will tend to buy a smart watch instead. From the middle price segment on Swiss-made-manufacturers will not have a dramatic impact.
I expect more Swiss-made-brands to present their appropriate answers to the smart watches.
Do you agree/disagree? What are your thoughts about 2016. Write a comment and share it with all my readers worldwide…
I was a Swiss watch distributor, but come to conclusion that average customers are no longer concern the value preposition & brand story of expensive watches.
Rich people more likely to go buy a car to show off their wealth.
Also the digital evolution allows customers to check prices all over the world. A retail location is merely a showroom of the brand.
Encouraging retailers?
Well, I visited a luxury watch shop (multi brand – Rolex/Tudor/Omega and others) in the Sandton city mall in Johannesburg yesterday afternoon and was quite interested to buy a Tudor black bay black. The sales guy did not even offer me a seat, he recognized my 45 year old Olma watch as a Omega Spectre (because of the strap…) and tried to convince me that Rolex is making the movement of the Tudor in their factory. The cash price in Rand (even after the slide of the rand and without VAT) was not competive compared to what you pay on ebay for a nearly new watch with box and papers. I do not even want to image to return to that shop in some years asking for a service …
A couple of thoughts about the sales decline.
– I live in a city of maybe 120,000 including suburbs. We have one quality jewelry store downtown. Two years ago, or so, I saw that they had all of their Rolex stock marked down, maybe 50 watches. I asked why and was told that Rolex was changing to a model wherein their watches would be sold only in Rolex “boutiques.” Several other premium Swiss brands seem to have done the same, to some degree. I’m sure that some sales lost by our local store were captured by a “boutique” in a larger nearby city. I’m also pretty sure that some sales were just lost. Maybe that brand puffery wasn’t really such a good idea.
– I’ve never seen so many huge, ugly watches as I have during the past couple of years. There must be a market for these things, but it’s not me.
– While on the subject of size, not so long ago, a Submariner, at 40mm, was a big watch. In today’s market, it’s on the small side. Who decided that wristwatches should be the size of a pocket watch with a strap. On a positive note, I looked at the IWC web site just to check watch diameters, and noticed that they’re making a point of saying that a few of their watches have been made smaller. Perhaps the corner has been turned.
Well said.
Very accurate view Alex, if you ask me. I think it’s going to be about having people who have two attributes: 1. An ability to read the market, and 2. A brand that they can take down in price w/o harming it. Jerome Lambert seems to put this mix to profit very well at MB. Rolex’s and Omega’s recent launches point into the same direction. I think Tag would also be a good example if the brand had not already been harmed so badly in the past. In any event they now have one of the most agile industry leaders at the helm. Looking forward to how he’ll turn this around.
This is going to be a difficult year for many industries. I think that brands that control their manufacture will come out stronger out of these difficult years.
From what I have hear from people like Mr. Hayek is that we are going to see some new developments in the automatic movements (longer autonomy) and also in the quartz as new capacities for the battery.
I believe that the next few years are going to be probably the best years ( in term of development ) for the Swiss watch industry.
It is sad to see how the market has evolved. Most swiss watchmakers have given the power to chief financial officers. Range of products are the same all over the planet, involving a tremendous increase of prices all over the planet.
Watchmakers have just had an opportunistic attitude, forgetting that you should always preserve your traditional markets (Europe). Consumers are pragmatic, and I think most of them feel betrayed, and tend to lose interest.
So what’s next? Watchmakers can’t deny themselves and the only way for them to lower prices is to create new products… But for lower production costs! Therefore for less perceived value to clients.
The conjunction of current events is rather negative for watchmakers: uncertainty in China and different other countries, swiss franc fluctuations, and connected watchmakers that are firmly determined to develop their sales (especially those of high value added products) won’t help.
Last but not least, swiss watchmakers will have to pay for their extreme selective distribution policies: people do not get up in the morning thinking about a Brand… Scarcity hardly ever creates popularity!!!
I will give Swiss watch makers the following message: cut the cost
I thought not, but I changed my mind. The Smartphone from Apple, to get cheaper, will rule the world.
In lower-income countries, for example, watch type “middle”, cost as much as a luxury watch in Europe.
Thanks Alex. As always-an excellent article. As I eye my potential list of watches to collect, I debate with myself used vs new and what might be an appropriate discount to offer for a watch in this buyers market. As usual, big companies will survive to fight another day. But then again, if you can pick the right independent that will survive one might just get a great deal. Good luck with that! Nevertheless, I believe that many people would agree that the value proposition for watches in general has decreased quite a bit in the past few years. Perhaps this might correct.
It looks like the Swiss watch ship is in stormy weather, may start to take in water and risk of sinking. The issue the Swiss watches are very expensive. In 2015 I visited many watch shops world wide, everybody informed it can go days without any customs walking through the door and get them to buy a watch is a uphill struggle.
Funny, as I posted on Twitter these same stats from the same Official web site earlier today. I follow them each month. Yep, price points have gone too high and missed targeting the savvy connected consumer. Over supply is also, as you’ve said, a real problem. Online is the way to go for most consumers, so brands best follow. Another issue is after sales service which I’ve found to be deplorable as in too costly, time consuming and plain slow to tortoise like. Bells and whistles in watches are a no go for the vast majority of consumers, so leave them as a ‘niech’ market segment. Lets all get back to good quality watches at sensible price points with great sales methods and speedy and fairly priced after sales servicing. Otherwise I fear it ‘all over red rover’ for Swiss watches, except for the very rich, a decreasing market as ecomomies tighten, as they’re already doing, ergo, Asia and Eastern Europe and the USA. Lastly, it’d be great if brands better supported and were represented in those places where there is some growth, like Africa and Australia/Oceania. Small markets, Yes,must they’re growing, and offer future hope in an otherwise sorry scene.
Agree, if you own a high end Patek that need to be serviced by Mr Stern himself, likely you have to sell your house to be able the bill. The prices for Swiss watches have become so high, only for super rich. If Swiss industy don’t get the wake up call to start to make watches for working people again, most likely lot of brands will bankruptcy and have to reduce the head counts to stay in business.
The economic downturn in china has an important effect on these luxury goods.
I don’t agree on your assessment of the impact of smartwatches. the apple watch is said to have sold more than 5 million pieces in q4 2015; you can often see it here in hk, often on the wrist of people who traditionally wore a more luxury watch which they now keep aside for more special moments – meaning also that adding a new luxury watch is less important for these people.
Btw the industry will need to do better than tag in coming with a smart watch answer. I tried the tag and it is not in the best taste, the screen emits light like a flashlight and the fake metal dial surface art is kitsch. Furthermore the functionality is pedestrian.
I agree with all you say Alex & I think it there is going to be a wake up call for brands who overprice products. Tag heuer is ahead of the game in this & others need to offer more for less.