editorials


The watch industry in 2009: a decline of 15 to 20 percent!

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January 2009


edito

The watch industry is going to lose ground. This is now certain. It will decline in terms of both value and volume. It will shrink for everyone, but not in the same way. There are some, perhaps, who might even gain ground.
So, how can we estimate the expected decline?
We have no intention of playing the ‘prophet’ game, especially since we have made so much fun of the famous ‘analysts’ who, not having seen the disaster coming, are now busy explaining its causes. Yet, the reading of a few signs scattered here and there will perhaps let us quantify to a certain extent this forthcoming decline.
Let’s take two very different examples of what is now happening.
Opting for transparency - which is to be applauded - Maurice Lacroix announced a decrease in management salaries and a 15% reduction of personnel. This means that 30 jobs will be lost (in passing, let’s say that it is always the same people who end up paying for the sins of others). The reasons for the brand’s actions: “a decrease in orders that will probably reach 20 percent,” and that “affects all our markets,” says the brand. The example of Maurice Lacroix is emblematic because the range of its products, with 100,000 pieces produced per year, covers a large segment of Swiss timekeeping, ranging from the middle to the high-end. This is how we arrive at the two numbers of 15 and 20 percent!
A completely different example is given by the recent decision of ETA to increase the prices of its movements: 5 percent for ordinary mechanical movements, and 12 percent for some of the most famous models in the Mecaline collection such as the Valjoux 7750, the Valgranges, or even the well-known Calibre 2895. Another increase can be added to this one, also 12 percent, which applies to “all the special decorations that are not included in the basic price.” On top of that, the company has eliminated the 3 percent rebate that was given to customers who paid within ten days. Adding it all up, we are seeing a solid increase of 15 percent in prices.
So, here again, we find our figure of 15 percent!
We know that Nicolas Hayek understands business very well and this action (which resulted in a number of complaints to the COMCO, the Swiss Commission on Competition) was undoubtedly taken for two reasons: first, to demonstrate to the stock market that the profitability of the Swatch Group - which has lost nearly 50 percent of its value since the beginning of 2008 - has not been neglected, and that its shares remain or will become attractive; and secondly, to compensate for the anticipated decline in sales volume.
ETA, the main supplier to the Swiss watch industry, and in this regard, the chief ‘expert’ in the matter, has estimated the decline in its sales to be around 15 percent. In terms of its price increases, this means 5 percent for the low-end range and 12 percent for the high-end sector. With these numbers, ETA is betting that it will be the high-end of the Swiss watch industry that best weathers the storm. This is also demonstrated by the relatively good health, up to now at least, of watches costing more than 3,000 Swiss francs (at export).
Well, I admit that my analysis is perhaps a little off-the-cuff and probably would not win the Nobel Prize in economics but, but, but. . . just like you can hear a train travelling down the tracks by putting your ear to the rails, you can decipher small signs popping up everywhere that let us predict, without too much risk - at least as ‘scientifically’ as our famous ‘experts’ - that the decline in Swiss timekeeping in 2009 will indeed reach 15 to 20 percent.
Let’s rendezvous at the end of 2009. Here’s hoping that I’m wrong.

photo: Ludovic Zahno, Institut d’Horlogerie Cartier Competition 2006, Manufacture Jaeger-le-Coultre, Le Sentier. 6th prize.


Source: Europa Star December-January 2009 Magazine Issue