Swatch Group out of Baselworld


Swatch Group leaves Baselworld

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July 2018


Swatch Group leaves Baselworld

The world’s leading watch group leaves the world’s leading watch fair. Nick Hayek’s announcement raises the burning question of the future of specialised fairs, especially their share in the brands’ marketing budgets.

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n an interview with the NZZ am Sonntag, Swatch Group boss Nick Hayek announced the withdrawal of his exhibitors (18 brands, including the heavyweights Omega and Longines) from Baselworld as of 2019. Next year’s edition was supposed to be the fair’s relaunch (or rather, the last opportunity for it to save its skin), after the reorganisation of its management in response to an avalanche of criticisms (not all of them new), which included a failure to adapt to the new digital reality, and exorbitant costs (read the column “Klein Baselworld” by Pierre Maillard, which neatly summarises the situation, right here). But even this proved to be too optimistic… The departure of Swatch Group led to the resignation of René Kamm, the CEO of MCH Group and director of Baselworld since 1999.

The fair has indeed been increasingly driven by Soviet-style practices, with a staff that seemed blind to its gradual erosion, engulfed in a monopolistic state of mind inherited from the past. When it becomes a commonplace to mock the fair in any conversation among professionals, and when the mere mention of the name “Baselworld” spontaneously evokes sighs, the house is burning. When even the most reliable cheerleaders on the circuit start to shoot at you, the situation is serious. Luxury is based on brand image; in this respect, the credibility of the show has been more than eroded...

The fair has been increasingly driven by Soviet-style practices, with a staff that seemed blind to its gradual erosion, engulfed in a monopolistic state of mind inherited from the past.

Michel Loris-Melikoff, the new manager of Baselworld, had just disclosed some elements of his plan to revitalise the show. Too little, too late, too expensive? The problem is that an organisation as massive as Baselworld, not exactly known for its high degree of flexibility, cannot easily be reformed. We certainly would not wish Mr. Loris-Melikoff to end up like Mr. Gorbachev, overwhelmed by the “perestroika” and “glasnost” reforms that were supposed to save the regime! But this is the risk, when one finally reacts to discontent: it is at that precise moment that all the changes crystallise. Is reform even possible, where Baselworld is concerned?

One question that remains is whether Swatch Group’s decision is really final, or if it constitutes a bargaining tool, with a possible return if the fair agrees to financial cuts and implements real innovations. Behind the scenes, attempts to bring the world’s leading watch group back to the Baselworld premises are likely to be well under way. In Le Temps, however, Michel Loris-Melikoff did not seem very optimistic about the likelihood of this scenario: “I do not think that this is the kind of decision that is communicated without being final. But we are of course in regular contact with this partner, as we are with all major Swiss watch groups, and we will strive to bring them back.” On his side, Nick Hayek told CNBC that the decision for 2019 was made, but he seemed open to discussion for the future...

This is not the first time that the Swatch Group has left the Basel fair. But this time, it’s happening during a period when the structures of the global economy are being completely disrupted. Will this provoke a fatal epidemic of desertions among the other exhibitors? Previous years’ departures resembled a multiplication of leaks. As of now, the ship has struck the iceberg... How will Patek Philippe or Rolex react? These traditional houses have never liked sudden and brutal changes – a strategic stability that is also the recipe for their success.

How will Patek Philippe or Rolex react? These traditional houses have never liked sudden and brutal changes - a strategic stability that is also the recipe for their success.

The triumph of the “local event”

Let’s not rush to hasty conclusions, however. This latest episode of the Basel saga does not mean that the supremacy of the internet is now complete, and that “physical” meetings between brands and their retailers and end consumers are obsolete. On the contrary. After several years’ “digesting” the gradual digitisation of every part of the industry (which still has a long road ahead), watch companies also seem to have grasped the limits of the web. Instagram cannot do everything!

In parallel with the proliferation of new regional subsidiaries and brand boutiques, we are seeing a strong focus on “local events”, organised within the brands’ own walls, aimed primarily at end clients and the media – a radical shift away from global B to B “one size fits all” events like Baselworld.

Watch companies also seem to have grasped the limits of the web. Instagram cannot do everything!

Brands are now trying to strike a balance between the physical and the virtual worlds, according to the universally proclaimed “omnichannel” model. The goal is to multiply points of contact (preferably direct) with end consumers. They must see the brand everywhere and be able to buy it everywhere, via both physical and virtual channels.

In this new configuration, the brands’ marketing budgets are more split than ever, between physical and virtual investments, between the expenses of subsidiaries and those of their headquarters. This leaves much less room for an expensive event like Baselworld. The imbalance between the financial demands of the show and its actual contribution to the brands’ bottom line has widened over the years. This explains the announcement by the Swatch Group that it was pulling out of Baselworld, a few days after publishing record results for the first half of 2018.

Baselworld has been slow to take this new reality on board, while the fair’s utility has shifted from sales to marketing: brands can organise a multitude of local events that are highly targeted and correlated to their digital strategy, for the cost of one week’s presence at the global watchmaking event. The cake has become too big to swallow, even for brands with a healthy appetite...

Baselworld has been slow to recognise the fragmentation of brands’ budgets between physical and virtual investments, and between the expenses of their subsidiaries and headquarters.

To follow up, read the reaction of MCH to Swatch Group’s decision to withdraw from Baselworld right here and the announcement of René Kamm’s resignation right here.

Swatch Group leaves Baselworld
A must-read: Pierre Maillard’s column about the announcement of Swatch Group to leave Baselworld!