Politics and the economy
They say that we live in a constant state of political crisis… and we cannot deny that this is true. All spring and summer the Ukrainian people have observed attempts from different politicians to interpret the Constitution in their favour. It seems that everyone has their own personal idea of the fundamental law of the country and every man has fought for it fiercely by organizing meetings, placing pickets, talking on television or from the stages on the streets. We have seen ‘orange’ meetings with thousands of people in the squares with their opponents doing the same thing from the other side of the street. Both sides have been trying to persuade the Ukrainian people that only they represent the truth, but nobody wants to listen to anymore. In the Ukraine, we say that you cannot step into the same river twice. But all the political powers of the country are trying to step in the river again (although they all claim to be stepping into different rivers).
The result of all this has been quite predictable. Ordinary people have stopped reacting to politics entirely. They haven’t changed their political convictions, they may well have gone to vote for their favourites when the elections came around, but they have become absolutely indifferent to the slogans, speeches, and promises. Is it good or bad? Nobody can say for sure. We can all only wait for the announced elections and in the meantime work hard (hoping that the leaders stop disappointing the Ukrainian people with their unpredictable actions) and try to make another step on the way to a free and prosperous Ukraine.
It seems today that the political stratum lives its own life, which is very far from reality. And while the ‘heads of the country’ try to sort out their relationships, the economy has demonstrated good results when left on its own. The GDP for the first quarter of 2007 reached 8 percent (7.1 percent for 2006). The real income of the people has increased as well as their purchasing power (information from the Ministry of Economy of Ukraine). As a result of all this we can now see the increase in demand for consumer goods. It can be clearly seen in the car market, for example. It is interesting to notice that in this politically unstable and uncertain country, during the first three months of 2007, 32 percent more cars were sold than during the same period in 2006 (which was already a record year for the Ukrainian market). A vast majority of them were purchased on credit and banks are encouraging the Ukrainians to borrow money from them. So the most sensitive system of the country is quite calm and certain.
We just have to wait until 30th September (the date of the next Parliamentary elections) to see what will happen next. In any case, the Ukrainian economy has demonstrated its power to withstand pressures from all sides: from the uncertain situation with the prices for Russian gas to local ‘flexible’ legislation.




‘Kiev Watch Salon 2006’


Watch boom
For several years we have seen strong and steady growth in the world watch industry. However, the main interest has been in the traditional leader in the field of watchmaking – the Swiss watch industry. It showed great results in 2006 in almost every market. And Ukraine is no exception. Among the growing markets, Ukraine occupied a good position. According to Jean-Daniel Pasche, the President of the Federation of the Swiss Watch Industry, it is the second largest market among the Eastern European countries. The market is booming. Compared to 2005, when Ukraine was in the 30th position for the importation of Swiss watches, in 2006 the country rose up to 24th place. In figures it means 75 million Swiss francs, which is 50 percent more than in 2005, resulting in 60,000 Swiss watches being imported to Ukraine. The average price therefore amounting to 1,250 Swiss francs.
For the first five months of 2007 the import of Swiss watches to Ukraine amounted to 29,970,819 Swiss francs (18,893 pieces). It means that the average price of a Swiss watch rose up to 1,586 Swiss francs. (Information from the Swiss Watch Federation.) We can clearly see the rising evolution of the market which corresponds to the mainstream.
Although, this trend doesn’t only concern Swiss watches in the Ukrainian market. During a seminar by Casio at the ‘Kiev Watch Salon 2006’ the representatives of the brand explained the intention of Casio to offer watches at a price range from US$ 50 to US$ 150 due to the strong demand of the market in the middle price segment. Korean Romanson has also raised the prices for its products. So the tendency is evident and can be useful for anybody who wants to penetrate the market today: the Ukrainian customer is ready to purchase watches in the middle price range.
Here we have to explain that for different social groups in this country there are different definitions of ‘middle price segment’. For example, those, who used to buy Russian watches for Hrn 25 (which corresponds to US$ 5), today are ready to spend up to US$ 150 for a wristwatch. They can be the clients of Casio, or Romanson, or some French, German and Italian watch brands, working in this segment.
The customers who started at the level of US$ 100 to US$ 150 now feel comfortable spending around US$ 1,000 for a watch, especially for a mechanical one. In addition to this, in the country’s main cities, specialized watch shops with watches between US$ 2,000 and US$ 3,000 are in popular demand. People from this stratum are buying watches more often and want to have several models for different occasions. So today’s most rapidly growing segment (and the most profitable for retailers) is exactly this second ‘middle price range’.
In this middle price segment we can see a lot of brands which correspond well, including Edox and Eterna, Longines, and Louis Erard, Maurice Lacroix and Omega, Oris and Raymond Weil to name a few.
Of course, the brands that offer watches between US$ 150 and US$ 1,000 are quite successful on the market. Especially the Swiss brands of classical design. But it is also true that today the share of such brands in turnover of watch shops is less that it used to be only two years ago. It does not mean that the retailers refuse to buy them. Atlantic, Candino, Delma, Frederique Constant, Tissot, Titoni, etc. are doing well, and better from year to year. But the growing popularity of more expensive watches in Ukraine has pushed the businessmen to pay more attention to the ‘under luxury’ and ‘entry luxury’ segment.




‘Crystal’ boutique and ‘Chopin’ boutique


Distribution
The distribution of watches in the Ukrainian market is a very important and interesting point. Today we can hardly find any classical distributors in the country; we just speak about mere wholesalers. Most of the companies working on the market as distributors have their own shops or even shop chains where they sell not only their products, but also the watches, imported to Ukraine by other distributors. If we take a closer look at the geography of the trading networks it should be clear that the agents working on the market embrace almost all the main cities in Ukraine – Kiev, Kharkov, Donetsk, Dnepropetrovsk and Odessa.
Among the most powerful distributors in the Ukrainian watch market are Noblesse, Les Montres Suisses, Crystal Group, Ultra, Royal Time, Danys, Swiss Service and Ukraine Luxury, Vector-D3, Dakros, Micropribor, Veltim, the Crimea Watch Company, Deka. Companies such as Noblesse, Les Montres Suisses, Crystal Group, Ultra, Royal Time, Danys, Swiss Service and Ukraine Luxury, Vector-D3, and Dakros, prefer to do business with Swiss watches, while Micropribor, Veltim, the Crimea Watch Company and Deka also work with the Korean, Japanese and European brands.
But even those distributors, who began with Casio, Citizen, Orient and Romanson are now trying to find their way up market. For example, last year the Crimea Watch Company introduced to the market the products of the famous Italian Morellato Sector Group with its vast range of fashion watch brands. And as fashion watches are becoming more and more popular among young and dynamic people in Ukraine, this was an intelligent decision taken by the Crimea Watch Company. Deka from Donetsk started as one of the most important distributors of Casio watches in Ukraine. Now it also works with such Swiss brands as Alfex, Christina Design London and Epos. Veltim from Kharkov – a famous Ukrainian distributor of Appella Sarl – today also imports Swiss Adriatica and Italian Haurex.
Micropribor probably has the widest price range assortment on the market: from mass watches such as Q&Q to Du Bois and Armand Nicolet at several thousand US dollars. Such diversity can be explained by the existence of two separate chain shops: ‘Secunda’, offering customers less expensive watches, and ‘Montres’ where the company presents its more prestigious brands.
The companies and partners, Swiss Service and Ukraine Luxury, work as the exclusive distributors for Atlantic, DiBur, Frederique Constant, Alpina and Schwarz Etienne. They have big plans for the near future connecting and expanding their activities with some other brands, which are going to be presented to the market by the end of this summer.
The very quiet, but well-established Dakros works with Candino, Century, Festina and Jaguar watches. Apart from a vast distribution network, it also has its own chain of shops named ‘Geneva’, located in Kiev, Ivanofrankovsk, Rivne, Sevastopol and Ternopol.
Danys from Dnepropetrovsk works with Bunz, Cimier, Eterna, Korloff, Louis Erard, Roamer and Vogard and Zeno-Watch Basel on an exclusive basis. It has two of its own boutiques ‘Vendôme’ (in Kiev and Dnepropetrovsk).
Vector-D3 from Dnepropetrovsk has great experience in watch trading. Today it represents Tissot in the Ukrainian market (along with a Kiev company Novoe Vremya), and a wide range of fashion brands including Calvin Klein, Pierre Cardin, Esprit, DKNY, Diesel and Emporio Armani. The company owns several shops in Dnepropetrovsk called ‘Geneve’, ‘Lausanne’, ‘Pulsar’ and ‘Vector D’.
One of the largest distribution networks in Ukraine was developed by a company called Ultra whose headquarters are located in Kharkov. Ultra is the exclusive distributor of Edox, Nina Ricci, NHC, Martin Braun, Oris, Perrelet and Vulcain. It has its own chain of watch and jewellery shops named ‘Chatel’. ‘Chatel’ shops are situated in Kiev, Donetsk and Kharkov. Ultra is also famous for its annual watch seminars in Yalta, which have become a ‘must’ for many retailers in the Ukrainian market.
Coming to the luxury world we can find several strong companies here which work with the most prestigious watch brands. Very often they work as dealers, for the great haute horlogerie companies, sometimes preferring not to give the exclusivity for their product to anybody. Still the company, Les Montres Suisses has obtained the exclusivity in the Ukrainian market for Aquanautic, B.R.M., Daniel Roth, De Bethune, Gérald Genta, Girard-Perregaux, JeanRichard and Maurice Lacroix. These and other high-end brands (Audemars Piguet, Blancpain, Breguet, de Grisogono) are presented in four of the company’s shops (‘Swiss Made’, ‘Chopin’ and ‘Palace Boutique’ in Kiev, and ‘Oreanda Boutique’ in Yalta). In September 2007 Les Montres Suisses is going to open two more shops – one in Kiev and another in Odessa.
Crystal Group from Donetsk represents well-known brands such as Bovet, Harry Winston, F.P.Journe, Hublot, Greubel Forsey, Paul Picot, Porsche Design, Technomarine, Jacob & Co, Glycine, Bell & Ross, Meyers, Scatola del Tempo, Urwerk and Richard Mille. The chain shops of the company named ‘Crystal’ are situated in Kiev, Dnepropetrovsk, Donetsk and Odessa. The company also has a Bovet boutique in Kiev, and a Chopard boutique, as well as a Carrera y Carrera boutique in Odessa.
One of the Ukrainian giants in the field of luxury watches is Noblesse. It has several dozen brands in its portfolio. Among them one can find Audemars Piguet, Ulysse Nardin, Franck Muller, Jaeger-LeCoultre, CVSTOS, Roger Dubuis, IWC, Zenith, Breitling, Pierre Kunz, Martin Braun, Backes & Strauss, Krieger, Maranello, Carl F. Bucherer, Baume & Mercier, Chronoswiss, Jorg Hysek, deLaCour, Jaquet Droz, Graham, Van Der Bauwede, Jacob & Co, Corum, Omega, Longines, Rado amongst other. To present all these brands to the market Noblesse opened ‘Basel’ boutiques in Kiev, Odessa and Kharkov, ‘Noblesse’ watch galleries in Kiev and Odessa, ‘Four Seasons’ boutique in Donetsk, ‘Avenue’ and ‘Konsul’ boutiques in Kiev and a ‘Ulysse Nardin’ monobrand boutique in Kiev with the complete collection of this prominent brand including its outstanding Trilogy of Time. In this boutique the national watch connoisseurs can also see the unique pieces made especially for the Ukrainian market.




‘Ulysse Nardin’ monobrand boutique and ‘Chatel’ watch and jewellery boutique


Looking for luxury
As everywhere in the world, the most ‘delicious’ part of the watch market in Ukraine is its luxury segment. Although it is the only market segment, which is suffering today from the political uncertainty in the country (for the most part, clients of luxury watch brands are politicians or businessmen well connected in political circles), last year it was more than flourishing in this country. Ukraine’s elite today are very experienced in the field of buying prestigious watches. Some of the rich people have now become real watch aficionados, collecting novelties of watchmaking art with great enthusiasm. For such people it is completely natural to spend a large sum of money on an Audemars Piguet, Breguet, Ulysse Nardin, Vacheron Constantin or Girard-Perregaux because they know the real value of the true masterpieces.
Valeria Lysiuk, General Managing Director of Les Montres Suisses, confirms that today the clients of luxury watch and jewellery brands are very well versed in every aspect of watchmaking. When they come to buy a watch, they know exactly what they want. Very often they come for a special model in a special version. These clients travel a lot, and are aware of prices for the same products in other countries. But now (and this is a very positive sign) they prefer to buy watches in Ukraine. This is quite natural, because today almost every luxury watch and jewellery brand is presented in the Ukrainian market. Their agents have a great assortment, a very high level of service and all the novelties the clients want to receive. So today nobody needs to go for a watch abroad. It is much simpler to purchase it at home.
As for the latest trends and tastes of the elite customers, Valeria points out that big and colourful models have become a little less popular than they used to be some years ago. Classics with strict forms and colours are coming back. It does not mean that big watches are not requested. People are ready to welcome production of the relatively new watch brands, which introduce large and very complicated models with tourbillons, minute repeaters, skeletons, or sparkling jewellery watches. Francois-Paul Journe, Franck Muller, Greubel Forsey, DiBur, Pierre Kunz, delaCour, and many others are now present on the market. But elite customers are also looking for the real classical watches such as Breguet, Blancpain, Vacheron Constantin and Patek Philippe which have never tried to catch up with the fashion trends, remaining the icons of high-class brands.
Abundance of the luxury brands on the market and the large selection of sophisticated and precious models make the Ukrainian agents work hard to attract public attention to their goods. It seems that watch presentations, new boutique openings and high society parties at which the Ukrainian beau monde can see the novelties of the best-of-the-best in the watchmaking world have become frequent and regular affairs in the capital of this country. And sometimes these events are of great importance not only for Ukraine. For example, we can mention the only monoboutique of Ulysse Nardin in Eastern Europe, opened in Kiev by Noblesse – exclusive agent of Ulysse Nardin in Ukraine.




Irina Lukyanchenko, Director of ‘Chatel’ watch and jewellery shop and Kleynod factory


Customer portrait
As we have said, a modern Ukrainian customer is much more experienced and informed than he was several years ago. Internet, travelling and (we hope) specialized magazines have made him almost an expert in the watch industry. He knows a lot about watches, can easily understand why a Swiss watch is more prestigious and expensive than others and has several models for different occasions. It is also very important to notice that more and more people are now buying watches for themselves. So the final decision can be made right in the shop, and an experienced consultant has all the possibilities to influence upon the choice.
Irina Lukyanchenko, Director of ‘Chatel’ watch and jewellery shop, situated in Kharkov, explains: “Our clients are people of 28 to 45 years old, mostly businessmen, with higher education, intellectual and informed. They know our salon very well and come to spend a certain amount of money for a watch, which they want to correspond to their style, image and inner state. We are very proud that our shop has a good reputation and people trust our advice”.
In general this is a current trend: with the incredible variety of brands presented on the market, customers prefer to buy watches in the shops they trust. There they have some choice of the brands selected by the retailer and are ready to listen to a consultant they know quite well, while making the decision.
Speaking about the preferences of the Ukrainians, we can notice that the sales of modern classical watches account for about 60 – 70 percent. And the rest goes towards sports watches and unusual models with specific functions. “Men purchase watches more often than women,” continues Irina. “And of course they pay more attention to the technical aspects of a watch, while women buy ‘with the heart’, looking more at the appearance of the models, their colours and forms. So for a woman it is, for the most part, not important which movement is in the watch – a quartz or a mechanical one. But it is very important for men, who preferably ask for mechanical watches (especially in our best-seller segment – from US$ 1,000 to US$ 3,000)”.

Kleynod – symbol of Ukrainian independence
It used to be a tradition to say, that there is no watch industry in Ukraine. It was really the truth some years ago because after the disintegration of the USSR there weren’t any watch factories in the country. But everything changed some five years ago, when a young but very dynamic watch factory situated in Kiev launched a national watch brand named Kleynod. For five years of the Ukrainian brand’s existence 100,000 Kleynod watches found their owners, among which we can see Katherine Yushchenko (First Lady of Ukraine), famous brothers Klitchko, the first President of Ukraine, Leonid Kravchuk, and many other prominent people. Today it is good form among the state people to have a Ukrainian watch. More than that: Kleynod watches are decorated with the National Emblem which is often used as an award in protocol events of the President of Ukraine. So, being a national brand in design, assembling and testing, using the best Swiss movements, Kleynod has become an integral part of the Ukrainian watch market.

Ukraine is a developing market
One can easily see that the Ukrainian watch market is developing very quickly like the rest of the world’s markets. Strong demand for the production of watches in every price segment has generated great interest in this sector of the economy, from the side of producers and distributors to the retailers of watches. But it is also clear that today all the players have to work under great pressure because the market is full of different watch brands of all styles and value.
Under such circumstances it is vital to elaborate on some common rules and follow them. And now Ukrainian watch companies understand things more clearly. Last year in November they decided to unite in an Association which would be very helpful in solving the problems arising in front of them: beginning with training for consultants and finishing with the work with the state organs. We can say that today the players on the Ukrainian market have all the possibilities to influence their surrounding including the state institutions (if needed) in order to develop their business in a civilized manner.
The Ukrainian Watch Association is a co-organizer of the annual specialized watch exhibition ‘Kiev Watch Salon’. The exhibition enlarges from year to year and has now become a real business forum where distributors can meet their retailers and customers, conduct seminars and training courses, discuss different questions and find new partners. This year ‘Kiev Watch Salon 2007’ will be held at a new modern exhibition hall, where all the exhibitors will have more space and possibilities to realize their ideas. So it is the right place to make business contacts for those brands that want to come out on the market. Ukraine is ready to welcome them.


Source: Europa Star August-September 2007 Magazine Issue