#Resilience


Time for the watch industry to dig deep

ANALYSIS

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February 2020


Time for the watch industry to dig deep

The announcements of the cancellation of Watches & Wonders and Baselworld, and the bankruptcy of RJ Watches, are symptomatic of the deep troubles affecting the watch world. The coronavirus has brought even greater concern to an industry already affected by numerous structural and economic challenges. Will the watch industry be able to demonstrate a new form of historical resilience??

T

he cancellation of Watches & Wonders and Baselworld adds to the already long list of coronavirus victims. 2020 was set to be the year of renewal for watch fairs, whose challenges we’ve just highlighted in our March edition. Most of these innovations will no doubt have to be postponed until 2021, assuming, of course, that the watch world holds up in what promises to be an extremely tough year.

Several challenges are piling up, some structural, others cyclical. On the structural side, we can note the increasingly marked retreat of Swiss watchmaking towards the high ground at the top end of the market, in the face of smartwatches and new modes of consumption (which have led to a sharp fall in volumes). As for the ever-growing temptation to embrace a direct-to-consumer strategy (via directly-operated boutiques and e-commerce), it is leading to a reconfiguration of traditional watch trade networks, and the weakening of primarily B2B universal trade fairs such as Watches & Wonders and Baselworld.

An industrial network under threat

Added to these structural challenges, we are now facing a very serious (and hopefully short-term) economic crisis for the sector, with a globalised coronavirus that gained a foothold in the largest market for watchmaking, China, before attacking the whole world, starting with northern Italy, another strategic point. The first cases detected in Switzerland, including one in Geneva on the very day of the announcement of the cancellation of Watches & Wonders, do not bode well. As for the Hong Kong hub, it remains under pressure not only from the pandemic, but also from a much more structural political standoff with Beijing.

Faced with storm clouds on every horizon, some are throwing in the towel. This includes organisers of watch events, but also certain brand owners, including the main shareholder of RJ (ex-Romain Jerome). The 33 employees of this audacious company, which broadened the industry’s creative horizons, and which we have followed since its very first steps, find themselves unemployed overnight. Company directors everywhere will be losing sleep. Their employees even more so...

In the short term as well as in the longer term, the watch industry will have to demonstrate a capacity for resilience at the level that has enabled it to hold its own for several centuries. It must demonstrate the ability to adapt to external factors, of course, but care must be taken to preserve the industrial structure that will enable the sector to get back on its feet, once it has weathered the storm.

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