merica has been the country to suffer the biggest blow from the pandemic. Before it struck, the country was on the way to reclaim its spot as the number one market for the Swiss watch industry.
We asked the Los Angeles-based founder of ABlogToWatch, Ariel Adams, how he thought the Covid-19 crisis would impact the watch world, and what the future landscape of timekeeping may look like.
Are you able to make some observations about how the current coronavirus crisis will affect the global watch industry? How might it change the face of the global watch industry, as we’ve known it until now?
In an odd way, I don’t think the Covid-19 crisis has added too many new problems to the luxury timepiece industry. Rather, it has created a forced amplification (as I call it) of existing issues. The global retail shut-down and focus on wristwatches as quasi-financial investments has accelerated structural fragility in the Swiss watch industry, such as having no functioning marketing arm beyond Rolex (for the most part), mistreating new norms of global sales and distribution, and having a mostly fractious relationship with the internet.
“In an odd way, I don’t think the Covid-19 crisis has added too many new problems to the luxury timepiece industry, but rather created a forced amplification of existing issues.”
An already weak watch industry that was down on its knees has been dealt a punishing blow from the virus. Indeed, the luxury watch industry is handicapped, like all other businesses out there, but it also faces a current reckoning. On the one hand, some players can creep back into “tradition” and hibernate until things get better (assuming they can afford it), or they can over-come some cultural stubbornness and lack of current focus on internet distribution and best prepare themselves for the post-Covid-19 pandemic world.
Practically speaking, I think the coronavirus will lead to an outcome that I’ve been speaking about for years now. My prediction has been that the Swiss watch industry will need to lower overall production by about 50% as compared to, say, 2012 highs. That decrease in production might happen in different ways. It might be that we have fewer brands overall, or that the industry keeps a richness of names but that each of those names produces less inventory. The reality will likely be some mixture of the two.
“My prediction has been that the Swiss watch industry will need to lower overall production by about 50% as compared to, say, 2012 highs.”
- Ariel Adams is the founder of ABlogToWatch.
What do you think will happen once the confinement measures are lifted: a quick return to normal or a more lasting effect?
“Revenge shopping” is my favourite new term. I learned it from a colleague in China, and the idea is that consumers stuck at home and hating life simply can’t wait to go out and celebrate by shopping again. My instincts tell me that the world will experience a mass trend in consumers rewarding themselves for living through Covid-19, and there being a subsequent boom in commercial activity. Since timepieces are such popular trophies, a lot of personal celebratory purchasing behaviour will be in the watch category, in my opinion.
After that period, we will either have a naturally increased economy as a function of what equates to massive investments across newly important industries around the world. This could lead to a newly empowered middle class in many parts of the world, which could be a boon for luxury watches. Alternatively, if the world finds itself at war or dealing with another crisis after Covid-19, then we have much bigger things to worry about than luxury timepieces.
How resilient do you think watch brands are in the current crisis?
Many brands benefit from being cash-rich. While there are a number of companies that will certainly go out of business if they don’t earn income for a few months, a surprisingly high number of brands can actually go into a sort of sleep mode, only handling simple orders and service requests until the economy picks up again — though this “zombie mode” for the watch industry will not be fun for anyone.
Sadly, the most creative and entrepreneurial brands and people in the watch industry are often those taking the most risk. When brands die in the coming months, it will probably be ones that many people will greatly miss. I do hope enough of them are saved.
What is your take on the recent re-focus of luxury watchmakers (Swiss but also Japanese, with the strong investment made by Grand Seiko) on the American market? Is the pandemic that started in China likely to strengthen this trend?
While it is challenging to factor in the effects of Covid-19, I do agree with you that the Japanese have been positioning themselves to make use of market holes created by the Swiss brands – especially in America. For example, the Japanese have utterly dominated the under-$3,000 segment of watches recently. This was once held strongly by the Swiss, but when brands like Omega, TAG Heuer, and Breitling went more upmarket, they failed to offer something compelling at those price points.
The Japanese are getting even more bold, given that, for many people, “Made in Japan” is just as good as, if not better than, “Swiss Made,” these days. Other than timepieces, Switzerland does not export many other main-stream consumer products that add to the collective sense of esteem in the country’s products – especially in America. Japan, on the other hand, has been winning the cultural war.
I say all this because the war to win consumers in America will be different tomorrow than it was yesterday. I don’t actually see much evidence of the Swiss focusing more on America yet. They know they need to focus on the United States - industry people here are expecting more investment - but it hasn’t happened yet. Selling watches in China and the United States is quite different on many levels, so for many brands, a re-focus on the United States will come with lots of trial and error. I hope they are prepared for it.
We see an acceleration of e-commerce due to the confinement measures. In some way, isn’t this crisis forcing the Swiss watch industry to “modernize” its distribution?
Of course, you are correct that e-commerce is the natural place for many brands to focus on when they see no business in traditional brick-and-mortar stores. That said, as I mentioned above – knowing this is different from doing it. This has been evidenced by over a decade of the traditional watch brands utterly floundering when it comes to succeeding in e-commerce.
As such, there are no stellar examples of traditional watch brands that have been able to replicate wholesale success with direct-to-consumer success – at least when it comes to overall income. That means the brands who always seek to “find someone else who is doing it right” have no models to emulate — in fact, even though the watch industry looks outside itself for examples of how to effectively do e-commerce, until now it has ignored the two most important lessons available: to have e-commerce success, you must effectively market your shop, and also provide a clear distribution environment where consumers aren’t easily finding deep discounts elsewhere.
Some new brands with cheap product and heavy (temporary) marketing campaigns are able to manage e-commerce, but so far no one has figured out how to consistently market and sell $5,000 or $10,000 watches directly to consumers at retail price online. This is really where “distribution modernisation” needs work and where the brands right now have to be the most innovative.
“So far no one has figured out how to consistently market and sell $5,000 or $10,000 watches directly to consumers at retail price online.”
As I said, I don’t personally think the brands themselves will figure it out. Rather, I think the smart ones will start their distribution from scratch and, rather than having hundreds of doors around the world, they will have a few online distribution partners that align with more modern forms of territory distribution. Rather than retailers separated by country, I think retailers in the world of e-commerce will be separated by variables such as language, niche product focuses, and specialising in particular demographics or interest groups.
How confident are you about the resilience of the Swiss watch industry?
The Swiss watch industry has learned (for better or worse) that there are always going to be some wealthy people in the world who have use for the status and collecting benefits of timepieces. This has kept a cottage industry alive, even during hard times, but the industry must always have its sources of “life support.”
Assuming people with technical knowledge and passion are still alive in Switzerland, then the Swiss watch industry is like a plant that can bounce back even after its limbs have been pruned. That said, the Swiss watch industry is not immune to pain. Right now, too much power is consolidated in the hands of a few large corporate entities who, in addition to owning most of the brands, seem to own much of the manufacturing backbone. This backbone can easily break if its owner(s) don’t have a long-term vision — not only to make money, but also to protect the industry itself.