#Resilience


“It’s not only the Apple watch: the iPhone is a tough competitor when targeting millennials”

GEORGES BRUNET

January 2020


“It's not only the Apple watch: the iPhone is a tough competitor when targeting millennials”

In our latest report about the transformation of the watch world, we selected six major issues which are having a profound impact on the industry’s present and also on its future and discussed them with about forty stakeholders of the industry. Here is the take of Georges Brunet, CEO of ZRC.

ENTRY-LEVEL
“Focus on Millennials who already own a smartwatch”

“I consider it is a good thing that Apple, Samsung and Huawei are developing watches since they are targeting Millennials. The youngest generations are not used to wearing watches, which could endanger the global industry eventually. On our side, we need to focus on their needs when they reach their mid-thirties or forties and start looking for a mechanical watch. A Swiss mechanical watch is not a fashion product nor a technological one. It is a jewel. The challenge for the whole industry is to develop new communities of fans: if each brands wants to keep the whole cake for itself, this behaviour will be destructive in terms of advertising, product development, after-sales service and logistics for everyone.”

POLARISATION
“Few companies are really doing well, a lot are in survival mode”

“This phenomenon is not unusual. Few companies are really doing well and a lot of companies are struggling to survive. In this situation, some think it is best to ‘follow’ the leading brands to make sure they are going to keep the sales figures up. It is a common re51 action when crisis arrives. But leading brands are getting stronger and ramping up their advertising presence, while weaker brands rein in their expenses and product development to focus on a ‘survival mode’. Of course, in the short term, it might be profitable, but in the long term it is destructive for the brand image and ultimately it will certainly create more identity problems than solutions.”

Georges Brunet, CEO of ZRC
Georges Brunet, CEO of ZRC

"Few companies are really doing well and a lot of companies are struggling to survive."

DISTRIBUTION
“Above a 2,500 euros investment, you still talk to a human”

“This is a big question! We are witnessing the emergence of huge distribution groups, following the postcrisis concentration. I believe that the watch industry is increasingly dividing into three main categories: everyday consumption, premium and high-end watches. Big brands are now taking care of their own distribution, ‘eating’ retail margins to promote and sustain their sales levels. Retailers should consider more sustainable brands with history and originality, and focus on niche markets. Very few brands are really succeeding online, except on the US and Chinese markets. So I believe that above a 2,500 euros investment, consumers still need to talk to retailers and feel the watch first. The problem is that in the past 20 years, at least 25% of retailers have disappeared in Europe and in the USA…”

PRE-OWNED
“It’s like a powerful secondhand advertising method”

“It all has to do with price! It is an easier way to start collecting watches. Big brands have to sell hundreds of thousands of units per year, it is not that easy. So controlling pre-owned watches helps as well as raising brand awareness and presence. It is like ‘second-hand advertising’ if I might say so. More people are willing to wear your products and if they cannot afford it, they may go for a pre-owned model. Increasing demand and maintaining a higher pre-owned retail value: strategically, it is quite smart. For example at ZRC, a MN64 model dating from 1964 was selling at 400 euros five years ago. Today, you need to spend more than 6,000 euros to acquire a model in good running order. It means that our brand value has multiplied by 15 in five years and since not too many are still available on the market, this value is actually stable. Controlling the pre-owned market value is a key to increasing brand demand.”

"In the past 20 years, at least 25% of retailers have disappeared in Europe and in the USA…”

OPPORTUNITIES
“Easier today for independent brands to expand”

“The most powerful brands keep demand higher than supply. Very few brands are able to do it. In fact, many brands have faced shrinking sales in the past five years and since the global economy is not booming, it is becoming hard for them to maintain volumes and hit their commercial targets, with the financial pressure they are facing. Independent brands like us have more room and freedom to expand: we can easily double our quantities for the coming years, since we just restarted. The solution is to succeed in convincing millennials to start purchasing Swiss watches, although they are now focused on the new iPhone 11, which is a super hard contender.”