wiss watchmaking has historical proof of its remarkable resilience. In the 19th century, it was quick to adapt to the high American productivity that threatened to put it out of business. In the 20th century, it devised a two-pronged response to the sudden emergence of the electronic watch and Japanese centralised mass production, taking both the low road (with the seductive and affordable Swatch) and the high road (powerful marketing for the luxury mechanical segment).
Several figures still revered today led the charge to save a product that had become an essential part of Switzerland’s image around the world. In a noteworthy article, the historian Pierre-Yves Donzé examined the impact of some of those people, including the entrepreneur and politician Ernest Francillon (Longines), the ’bureaucrat’ Sydney de Coulon (ASUAG), the ’organiser’ Nicolas Hayek and the ’storyteller’ Jean-Claude Biver.
In the 20th century, the Swiss watchmaking industry pulled through by taking both the low road (Swatch) and the high road (powerful marketing for the luxury mechanical segment). This legacy remains with us today.
In an equally noteworthy documentary entitled “Marche ou crève” (sink or swim), shown on Swiss television, about how the Swiss watch industry was rescued in the 1980s, Jean-Claude Biver is seen with Nicolas Hayek around the time of the sale of the high-end mechanical watch brand Blancpain, whose relaunch he masterminded. Biver notes that the way out of the crisis was to strengthen the industrial base, with Swatch at its core, in order to consolidate the entire structure, including the high-end segment.
The Swiss watchmaking industry has relied on this legacy, the Swatch / Blancpain paradigm, for nearly forty years: Swatch for its large volumes and its gateway role, laying the foundations for a burgeoning interest in watches; and Blancpain as the pinnacle, the ultimate destination for the monied aficionado. Nicolas Hayek even says in the documentary that, although he wouldn’t necessarily pay a million for a watch himself, he could find dozens of customers who would.
Today, the industry is only just keeping its head above water. According to FH statistics, some 20.6 million watches were exported from Switzerland in 2019 – a drop of 3.1 million units in one year (-13.1%). Mechanical timepieces remained more or less stable, while sales of electronic watches fell. The total value of exports, however, rose to 20.5 billion Swiss francs (+2.6%).
The calculation couldn’t be simpler: 20.6 million watches worth 20.5 billion Swiss Francs. That gives us an average export value of one thousand Swiss francs per watch.
Somewhat counter-intuitively, volumes are dropping sharply, while revenues are increasing and employment is rather healthy. As Fabrice Eschmann points out in the Journal de la Haute Horlogerie, 4,200 additional jobs have been created since 2017 (albeit mainly in the high-end mechanical segment, of course). The calculation couldn’t be simpler: 20.6 million watches worth 20.5 billion Swiss francs. That gives us an average price of one thousand francs per Swiss watch exported.
The big existential question is therefore the following: will the Swiss watchmaking industry continue its march to even loftier peaks? Or is there a tipping point beyond which falling volumes will weaken the entire structure (the subcontracting chain needs minimum quantities if it is to function), thereby jeopardising the health of the high-end segment?
Alongside this structural change, 2020 looks set be a difficult year that will put the Swiss watch industry’s famous resilience to the test. Both the weakening of the Hong Kong hub and the coronavirus lockdowns in the middle of the Chinese New Year celebrations have struck at the very heart of the system that enabled the Swiss watch industry to transition into the mechanical luxury segment – namely the strong Asian demand of the past two decades. If these external factors trigger a slump in watchmaking’s high end, on top of a structural decrease in volumes, it could prove too much for the industrial fabric to handle.
The luxury segment is certainly showing the way ahead for the Swiss watch industry, which has succeeded in building a very strong image in a globalised world.
The fascination for mechanical models from the 60s and 70s, magnified by social media, shows no signs of abating. Some commentators also see the secondary market as a new source of growth for an industry that will always have a powerful sense of imagination. However, digital globalisation has not been good for everyone. The losers are the entry level brands, independent companies with no global visibility, financially vulnerable suppliers, disillusioned traditional retailers, as well as players that have been unable to retain their identity within powerful groups that are either too homogenising, or have become too dependent on Chinese clientele.
The winners are a smaller group. These are the brands that are seeing an increase in their second-hand prices which, with the incontrovertible transparency of the digital age, currently determine the actual cost of buying new.
The winners nonetheless need an ecosystem in which to flourish. However, with decreasing volumes and the external risks currently threatening the luxury segment, the “esprit de corps” among watchmakers is weakening. This can be seen in the plethora of individual events, the decline in global events and the disintegration of the calendar (read more on these issues in our special dossier on the future of watch fairs, in Europa Star 1/20).
This model should nevertheless be a clear choice, not an imposition. Let’s hope it has the same resilience that has sustained Swiss watchmakers for centuries.
The luxury segment is certainly showing the way ahead for the Swiss watch industry, which has succeeded in building a very strong image in a globalised world thanks to some front-line players, and the growing middle and upper classes in emerging countries. As we face the start of what threatens to be a rather trying year 2020, this model should nevertheless be a clear choice, not an imposition. Let’s hope it carries the seeds of the resilience that has sustained Swiss watchmakers for centuries.