WHAT’S NEXT?


Favre-Leuba: “Complexity is the new normal”

WHAT’S NEXT WITH VIJESH RAJAN

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December 2019


Favre-Leuba: “Complexity is the new normal”

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 Vijesh Rajan, CEO of Favre-Leuba.

POLARISATION
“Technology gives a new meaning to watches”

“Three factors are crucial. Technological innovations are giving a new meaning to watches: a few brands lead the market and consumers are gravitating towards them. On the other side, some traditional brands have failed at implementing meaningful innovations, which has led consumers to shy away from them. Third, oversupply of stocks with problems of discounting etc. has led to a shift in the consumer mix, which has fewer ‘true’ watch enthusiasts. Brands must engage with a new generation of globally connected consumers who have been totally swept up by better efforts from other connected categories.”

"Consumers still attach importance to the touch and feel of products, to the physical shopping experience..."

Vijesh Rajan, CEO of Favre-Leuba
Vijesh Rajan, CEO of Favre-Leuba

DISTRIBUTION
“E-commerce will grow but eventually settle down”

“Complexity is the new normal in all parts of the value chain of business, including distribution. However, traditional distribution methods will continue to remain lead channels over the next 5-10 years. E-commerce will grow rapidly, undoubtedly. But it will settle down at low double-digit contribution levels in most places. Consumers still attach importance to the touch and feel of products, to the physical shopping experience, and these are vital aspects which brands must also promote responsibly. Direct-to-consumer channels will similarly grow but plateau at some stage. Retailers too need to enhance the consumer shopping experience, and invest in increasing trust and convenience factors if they want to stay relevant in the scheme of things. Those who do better will grow and consolidate.”

OPPORTUNITIES
“Go beyond Swissness”

“Global penetration of Swiss watches is still low in many countries. But brands will have to take a local view of markets and dig deeper to leverage opportunities. This is especially true of Asian markets and lot of other rising economies, where the Swiss tag has a lot of aspirations. Brands will have to take a more serious view of these ‘low priority’ markets. They will also have to go beyond Swissness and take a look at how their value proposition is more meaningful for end consumers.”

“Global penetration of Swiss watches is still low in many countries."

HIGH-END
“Don’t abandon a large demographic dividend”

“The survival of an industry is a factor of the costs and premiums available. It does not matter which end of the segment is operating. There is a very large demographic dividend available in operating at the mid- to low-end of the market, which Swiss brands should certainly strengthen. The cost challenge is important but, if modelled correctly, it can pay back attractively. The high-end market will be a timeless one, where consumers will always be looking for something special and price will not be a constraint. Having said that, ecosystems need to evolve and many new directions start from unrelated industries that end up affecting the watch industry too.”