March 2016

In response to a questionnaire sent out by Europa Star, 50 CEOs from Switzerland, Europe, Japan and the USA reveal their strategies for dealing with the dangers and opportunities that await in 2016.

"Do you see 2016 as a red flag year, or a year of amazing opportunity? Or of vital and inescapable transformation? Given our changing lifestyles, the pace of technological innovation and the geopolitical situation, what are your expectations and what strategies do you intend to implement?"

At the beginning of the year Europa Star sent out a questionnaire to more than 50 watch industry CEOs, both large and small, from Switzerland and elsewhere in the world, to find out their opinions with a view to sketching out a watchmaking ‘mood map’ for our international readers, as we embark upon what looks set to be a perilous year.
Although the great majority of those we contacted responded openly and willingly, some did not deign to share their opinions. This was true of the Swatch Group brands, who were perhaps under orders not to reveal their intentions, however vaguely. Others declined our invitation on the grounds that this kind of information is not for public consumption, or that they had a general policy of media abstinence (not where their products are concerned, obviously, just their policies...) We respect their choice. We are disappointed, however, because our intention was not to uncover trade secrets, but to gain a better understanding of the mood of the watch industry, in order to be able to map out the international landscape as fully as possible for the benefit of the entire watchmaking community. But, as they say, “those who are absent are always in the wrong”!
We are therefore particularly grateful to those who were generous enough to respond, on the understanding that sharing their opinion was unlikely to prove to be a bad business decision. And, in passing, we should like to take our hats off to Jean-Claude Biver, who evidently has the quickest reflexes in the business, and was the very first to send in his reply.


The first point is that everyone, or almost everyone, agrees that 2016 looks set to be a very difficult year. The worldwide stagnation is just one ingredient in a toxic cocktail made up of falling oil prices, a bloodbath in the Middle East, the refugee crisis in Europe, plunging stock markets, a slowdown in China, economic freefall in Russia... need we go on?
Despite this precarious situation, the majority of our CEOs remain “cautiously optimistic”. Swiss brands, which saw exports drop by an average of 3% to 4% in 2015, are hoping for a slight upturn in the second quarter. This may be a vain hope, however, given that retailers’ drawers are overflowing with unsold stock, and the future is somewhat opaque, to say the least. But Switzerland is not the whole story. Our Japanese contributors were upbeat: 2015 was a very good year for them. Sales in Japan increased substantially (thanks largely to Chinese tourists), as did exports. They claim this is because of their positioning: high-quality products at a lower price-point, combined with complete indifference to the taboos of Swiss watchmaking, which means they can happily produce fine mechanical timepieces alongside technologically advanced multi-function tool watches.
When asked about the smartwatch, almost all the CEOs were dismissive of the danger. No, they chorused, mechanical watchmaking is not under any existential threat, it fosters an emotional connection, it is reassuringly immune to obsolescence... Vigilance is still needed, however: entry-level models and simple quartz watches could fall prey to the ogre of connectivity, and the institution of Swiss fine watchmaking itself could be damaged if its fabric of subcontractors and specialists is weakened. As a consequence, Swiss watchmaking could find itself confined to the ultra-luxury niche which, however comfortable, is still restricted.
(For more discussion, read our exclusive analysis of Swiss statistics for 2015 by our friends at Opus Magnum, which reveals that for the first time, Swiss watch exports were led by watches with a retail value of over CHF 35,000!)


The industry leaders we talked to represent a broad cross-section of watch products. It is therefore entirely understandable that their strategies should differ substantially, depending on the sector they represent and their size. Nevertheless, one thing was clear to all concerned: in turbulent times it is wise to focus on one’s strengths, reinforce one’s position and clarify one’s message, rather than forging ahead with risky new ventures.
Similarly, very few of them mentioned opening new shops. The trend seems to have reversed rather abruptly: a boutique is expensive – very expensive – and there’s no guarantee that customers will come through the door.
One thing seems certain: retailers, those dearly beloved multi- brand retailers so often treated with indifference or contempt in recent years, are likely to find themselves assiduously courted in 2016 – those operating in the USA particularly. In the face of a complex situation in China, an equally uncertain outlook in Russia, and the ongoing catastrophe in the Middle East, all hopes are pinned on the United States and the Asian hubs. Europe may appear to be weathering the storm but no one expects a miracle. The vital motors of growth are more likely to be found across the Atlantic or on the Pacific rim. We can expect a certain amount of congestion ahead.
Finally, we asked our CEOs about the importance of fairs such as Baselworld, and their relevance in an interconnected world. Are physical platforms such as these still vital to the conduct of business? Despite some reservations, it appears that they are. Almost everyone considered events such as Baselworld to be central, even essential (those present at the SIHH considered their own fair equally vital). On average, the brands involved conclude 50–80% of their business during these salons. There is nevertheless growing interest in more modest local events, like London’s SalonQP, whose star appears to be rising rapidly. Whatever the case, it’s encouraging that the need for these gatherings is recognised. In the digital world towards which we are racing, the ability to touch, meet, converse, see, and share a drink or a meal remain as important as ever. And that’s quite reassuring.


1. What are your predictions for 2016? Do you think that exports will recover, or will the markets stagnate or continue to decline after the slump we saw in 2015? And what do you think were the reasons for the downturn in 2015?

2. What are your priorities for the coming year: consolidating your existing markets, actively exploring new markets (if so, which), rationalising / consolidating / expanding your distribution network, launching new products, PR initiatives, etc.?

3. Over the longer term, do you believe that mechanical watchmaking will gradually die out, hybridise, or continue to occupy its own exclusive niche? Do you see the advent of smartwatches as a potential threat, or an opportunity for growth and diversification?

4. What exactly do you hope to achieve from your participation in Baselworld 2016? Do you feel your presence at the fair is essential to your business, or are such forums less important now than they were in the past?


Source: Europa Star March/April 2016 Magazine Issue