Mixed Signals on the Watch Front

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December 2012

Children are not the only ones who like to play at being scared. These days there are so many examples, in both film and literature, of post-apocalyptic tales that it seems as though everybody likes to scare themselves. You only have to listen to all the rhetoric about the Mayan calendar predicting the end of the world (scheduled, we remind you, for 21 December 2012, just as this issue is published) to see this. The end of time has, in fact, become a very lucrative market.

The watch industry is no exception. For several months, the darkest prophecies have been mounting. Everyone—including us—was saying that China’s appetite for watches would wane drastically. With the rest of the world in intensive care, we would see what we would see. And, then bang. At the end of November, the Federation of the Swiss Watch Industry, basing their predictions on an expected increase in exports, announced that “2013 will be a record year”. We don’t know which way to turn.

In September, everything seemed to indicate that the prophets of doom were right. Swiss watch exports did indeed decline for this month. The fact that this decline was minimal (-1.5 per cent) doesn’t really change anything. For many observers, this first decline was indeed a sign that the downward spiral had begun. But then in October exports rebounded considerably, up 13.2 per cent to CHF 2.1 billion. This pushes the probable total for 2012 beyond the CHF 19.3 billion reached in 2011, a record year in itself.

So, we might again think that all is well in the best of watchmaking worlds. Unfortunately, however, this is not the feeling among subcontractors, whose order books, which logic dictates should be overflowing, are far from full. Undoubtedly, the reason for this disparity is the increase in the average sales price combined with a decline in volume. The drop in volume, at 2.7 million pieces, was 3.4 per cent in October. But over the same period the value shot through the roof, up 17.1 per cent for watches selling for more than CHF 3,000. All together, the average unit price at export for a Swiss watch increased from CHF 590 in 2011 to CHF 680 in 2012. During the month of October, the watches that decreased most by volume (down 10.3 per cent) were the less expensive pieces, those selling for under CHF 200.

What do we conclude from this jungle of mixed signals? First of all, that no one is a prophet and that the worries resulting from the fears of a catastrophe, so apparently appreciated by our civilisation, are often the fruit of our own projections. We must also realise that the gradual abandon of the low and even mid-range categories by the Swiss watch industry is unavoidable. But this abandon may not be as painless as we might think. Over the medium term, we could actually see a weakening in the Swiss industrial fabric. Worse still, these forsaken lands will not remain fallow for long. Want an example? The (Sino-)Belgian Ice-Watch has just provocatively opened a flagship store in the heart of Geneva. A crime of lese-majesty? We hear that the watches are flying off the shelves…

Mixed Signals on the Watch Front

Source: Europa Star December - January 2012-13 Magazine Issue