The latest study carried out by
the Mainfirst banking institute,
published in April 2016
and entitled “Hard luxury goods: Short-term
pain, long-term gain” began with
a quote from Philippe Peverelli (ex- Tudor):
“We all felt rich for a few years while
watches were selling well everywhere,
but now we are back in the real world
and every brand is going to have to look
in the mirror and recognise its own true
value.”
In the opinion of the Mainfirst
analysts, this quotation sums up in itself
the dilemma with which the Swiss watchmaking
industry is faced. On the back
of record years, confronted at the same
time by an increase in geo-strategic
risks, the resilience of the economic crisis
and the decrease or stagnation of
their most promising markets (China,
USA, Russia…), Swiss watchmakers
effectively have no other choice than
to come back down to earth in order
to take a good look in the mirror. But
whereas some continue to act like the
queen in Snow White demanding of the
mirror to show an idealistic reflection
(“Mirror, mirror on the wall, who’s the
fairest of them all”), others, undoubtedly
more realistic, are trying to discover
their true reflection. The truth is this
image has slightly faded over time, the
gold and gems with which it is adorned
have lost some of their sparkle and the
engineering splendour of which they
were so proud is losing its lustre.
What happened?
FROM PRESTIGE
TO MASSTIGE
Without doubt we did not pay enough
attention to several clear indicators of
a progressive ebb in consumer interest.
Slowly but surely, and without us
seeing it coming, the high-end watch
sector has become, in some countries,
one of the most distinctive signs of the
corruption encountered in the leading
and elite classes: Russian oil tycoons,
Chinese high officials, Mexican drug barons,
American rap-gangsters, tax fraudsters,
corrupt politicians… all of whom
have been seen for their excessive taste
for luxury goods (and social networks
have played a key role in worldwide
publication of these facts).
Bit by bit, the extremely costly Swiss
watchmakers have seen their image seriously tarnished by this excess and, as
Philippe Peverelli said, it’s time to come
back down to earth.
SIHH 2016 already announced a step
back or maybe just a return to reality
which appears to have been clearly confirmed
at Baselworld. As a blatant example
of this new, more moderate approach
of the watchmaking industry, Europa Star
met with and interviewed Jean-Claude
Biver, TAG Heuer, who is offering a tourbillon
at less than 15,000 CHF, and
Peter Stas, Frederique Constant, who
launched his Perpetual Calendar watch at
less than 8,000 euros. [Read Jean-Claude Biver and Peter Stas interviews ]
But this is only the most spectacular
point of a more general reduction, or
stagnation of prices. We have moved
slowly but surely from the domination of
“prestige” to “masstige”. A democratisation
(which is still relative as paying
8,000 euros for a watch remains the
privilege of a small proportion of the
world’s population).
THE VINTAGE TREND AND
THE CONNECTED WATCH
Two other phenomena have greatly contributed
to this back-step of the high-end
watchmakers: the vintage trend and the
rise in power of the connected watch.
Vintage has been greatly commended by
the younger generation. All those questioned
in relation to this point gave a
similar response: watches from the 50’s,
60’s or 70’s “reassure”, “comfort”, come
across as more “human” and “warmer”,
with a size which is “normal” and
relatively “discreet”. They have a true
“history” and therefore a “deeper” meaning
as opposed to the more recent hightech
watches. The fact that most vintage
fans are relatively young, urban, well-educated
and working in the creative
sectors should ring a few warning bells
for all brands concerned as this “class”
most certainly exercises an influence on
the choice of consumers far beyond the
limited group of true vintage fans. Proof
of this is the Daniel Wellington phenomenon.
With a range of extremely affordable,
pure, simple and classic watches, Daniel Wellington has risen to great
heights without anyone taking any notice
of this new phenomenon [read more].
Another phenomenon, in the beginning
largely underestimated by the watchmaking
establishment, is the connected
watch. According to numerous analysts,
including the Vontobel bank in a recent
study, if we include connected watches
and bracelets, the watchmaking market
is now dominated, in value, in the following
order 1/ Rolex, 2/ Apple, 3/ Omega,
4/ Cartier and 5/ Fitbit! Food for thought.
STAGNATION… AT BEST
The spectacular announcements of the
likes of TAG Heuer or Frederique Constant
should nevertheless not conceal the more
notable fact: a general stagnation of
prices. According to the aforementioned
study carried out by Mainfirst,
the prices of Rolex and Cartier have not
increased between 2015 and 2016,
following a slight reduction in price
in 2015 compared to 2013. Another
example: Patek Philippe has increased
its range of steel or bi-metallic watches
by 11% in 2016, which illustrates that
even this most prestigious brand has
not ignored the downward trend in
terms of pricing.
Based on the latest statistical results
of the Watchmakers’ Federation, the
downward trend recorded in the month
of March has reached 16.1% compared
to last year. “This is the lowest month
of March since 2011,” commented FH,
stipulating that “all watch casing materials
have been affected by this downward
trend and this price reduction has
been particularly influenced by timepieces
made of precious metals or steel.”
Further proof that the high-end market
is in decline is the fact that watches of
more than 3,000 CHF (export price)
have dropped by around 20%, in the
same way as low-end watches. The medium
range, i.e. watches between 500
and 3,000 CHF have fared the best with
a drop in value of “only” 7.1%.
These figures, unfortunately, only confirm
the general stagnation, a state of
stagnation which may persist according
to all prognoses.
DIVERGENT
STRATEGIES
The views of René Weber, Vontobel
in an interview with Serge Maillard
"If we consider the reaction to the strong franc in 2015,
one notes that there were two strategies:
on the one hand, Rolex and the
Swatch Group were content to simply increase
their prices in euros; whereas on the other
hand, most other brands, including Richemont
and Patek Philippe, increased their prices in
euros while at the same time reducing their
prices in dollars and Swiss francs. Rolex and the Swatch
Group did however encounter certain problems as it was still
cheaper to buy a watch in Germany rather than Switzerland
for example; they therefore tended to increase their prices
in euros in order to reduce the gap. This is what Rolex did in
February. As for TAG Heuer, they applied a more aggressive
price cutting policy, around 10%, in the second half of last
year in order to gain in competitivity. In general, Rolex and
the Swatch Group both have a policy of not lowering their
prices as opposed to Richemont, LVMH and Patek Philippe.
I think the price differences have now been corrected: what
we noted at Baselworld was primarily brands launching
new, cheaper models and concentrating more on their low-end
product range. TAG Heuer and Frederique Constant are
good examples of brands which presented complications with reduced prices.
Another good example is Montblanc. At
the same time, even if Patek Philippe complained about the
tourbillon introduced by TAG Heuer, one cannot really compare
the manual production of the first with the automated,
highly industrialised production of the second. It is thanks
to the industrialisation process that TAG Heuer is able to attain
these prices for the tourbillon; it’s a completely different
story for Patek Philippe... Another example: Maurice Lacroix will
launch the quartz model “Aikon”, which will be
positioned at the entry price level for the brand.
In 2015, I noted a difference in performance between
brands that I had never witnessed before.
Normally, whether the sector is doing well, or not,
everybody tends to pull in roughly the same direction.
But here we see considerable differences.
For example, Rolex has increased its market share, whereas
Omega was rather flat and Cartier has lost share compared to
Omega. This may partly be explained by its limited
exposure to the Chinese market which has considerably slowed
down. Today, Cartier has a problem with excess stock, dependency
on Hong Kong and high prices, even more so than the two
other brands. For the retailer Hengdeli (no. 1 in China, no. 2 in
HK) 70% of its sales in mainland China are of Swatch Group
brands, whereas in HK 60% with Richemont brands. They decided
to reduce their stock level, but at the same time sales
have decreased and the unbalanced situation persists... Hong
Kong has enough stock for 300 days! They are also shutting
down outlets due to exorbitant rental prices and the drop in
demand, but in some cases their rental contracts do not allow
them to close down an outlet quickly”.
Source: Europa Star June 2016 Magazine Issue
Español
Français
Pусский
繁體中文
简体中文
Select another language
