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It’s never been so exciting (and dangerous!) to be in the watch business

OPINION

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October 2019


It's never been so exciting (and dangerous!) to be in the watch business

Watchmaking has now fully entered the age of digital complexity. Unlike the well-oiled networks of the past, the jungle we’re dealing with today is more or less impenetrable to everyone. The watch as an object has also been fundamentally transformed. Never before has the Swiss mechanical watch been so desired, so popular and, for some iconic models, so unobtainable. But for those actors that fall into the gap, and that are not among the happy few, stuck somewhere between the Apple Watch and the “Pepsi”, this fascinating road is strewn with obstacles and dangers.

D

isruption is everywhere, fundamentally changing our daily lives and the very essence of the existence of Homo sapiens. Seen on that scale, the current upheavals in the 400-year-old watchmaking industry might seem microscopic.

But through the microscope we at Europa Star have trained on the watch industry for four generations (more on our history here), these changes seem immense! And they are accelerating at an exponential rate, one of the most striking properties of digital technology.

Let’s start with distribution, which has been totally disrupted since the arrival of digital technology. Unlike the well-oiled networks of the past, the jungle we’re dealing with today is more or less impenetrable to everyone. So far, online sales have mainly favoured the secondary market (the watch having an unusually long lifespan), the disposal of unsold items (aka the grey market), but also counterfeiting. The options for buying a watch are so numerous today that it’s impossible not to get lost in the complexity: pre-owned or new, online or in store, from an authorised retailer or not…? There are so many questions that it’s bound to take time for that intricate web to untangle itself.

The real price of a watch is increasingly determined by its resale price. This leads to another striking effect of the digital upheaval: the growing polarisation between winners and losers in the industry.

Today, the real price of a watch is increasingly determined by its resale price. This leads to another striking effect of the digital upheaval: the growing polarisation between winners and losers in the industry. On the brand side, we are witnessing a consolidation around the happy few that enjoy the highest “ratings” from buyers, and generate unprecedented desirability around highly sought-after flagship models. On the retail side, we have seen the closure of many points of sale and the simultaneous creation of international distribution behemoths (Bucherer, Watches of Switzerland, Wempe).

In a nutshell, the players that are “in-between” (manufacturers or retailers without strong recognition from end buyers) have suffered from the upheavals brought about by the digital revolution.

After a period of doubt about its impact, the smartwatch is now asserting itself as the standard everyday watch (like the Swatch in the 1980s and 1990s).

The watch as an object has also been fundamentally transformed. After a period of doubt about its impact, the smartwatch is now asserting itself as the standard everyday watch (rather like the Swatch in the 1980s and 1990s). Of course, this will remain the case only if the “smart” functions remain on the wrist, rather than migrating to the eyes, for example, through the connected glasses of the “augmented” human being.

What does this leave for the Swiss watch industry? Fundamental rethinking, and difficult strategic choices in the face of increasingly complex sales channels and consumer habits in the digital age.

But also, as an antidote to the rapid obsolescence of any digital object, a growing fascination with the original and authentic Swiss mechanical watch, which is seen as a marker of individual personality. This is reflected in lower overall volumes, a higher average export price and a tendency for all players to move up the range and concentrate on mechanical models, particularly those with a vintage touch. Never in the history of our industry have we looked so much to the past to build our future...

Lower overall volumes, a higher average export price and a tendency for all players to move up the range and concentrate on mechanical models, particularly those with a vintage touch. Never in the history of our industry have we looked so much to the past to build our future.

Digital networks, which are supposed to make our lives simpler and more fluid, do exactly the opposite: our daily lives are both faster and more complex. Watchmaking is not immune to this ontological upheaval.

But never before has the Swiss mechanical watch been so desired, so popular and, for some iconic models, so unobtainable. This leaves the Swiss watch industry with an increasing focus on luxury mechanical timepieces in an age of digital complexity. But for those actors that fall into the gap, and that are not among the happy few, stuck somewhere between the Apple Watch and the “Pepsi”, this fascinating road is strewn with obstacles and dangers.

Our next issue will include a 50-page report on the future of the watch industry.

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