One of many luxurious items sector’s showpiece occasions returns this week with its mixture of innovation, artwork and wealth – topped off with a sprinkle of movie star stardust from “model ambassadors” from Hollywood or sport.
It is Geneva’s annual watch truthful, Switzerland’s world promotion of an industry that’s nonetheless the nation’s third greatest exporter, after chemical compounds and equipment.
The Salon Worldwide de la Haute Horlogerie (SIHH) is the place producers (the occasion is dominated by Richemont and its many manufacturers) and small artisan workshops show their newest merchandise to sellers, collectors and most of the people.
You will not discover a lot on present on the four-day occasion that is obtainable in your native division retailer. However you can see watches of astonishing complexity costing a whole lot of 1000’s of kilos.
The “Made in Switzerland” label continues to be thought to be the hallmark of high quality in mechanical watchmaking. It is the place analogue nonetheless guidelines in an more and more digital age.
The industry gathers this week after typically wholesome gross sales in 2018, though clouds grasp over the sector.
Worries about world commerce, the rise of the smartwatch, and an industry-wide restructuring proceed to place a brake on progress and funding.
Even watch reveals themselves are altering. SIHH and archrival Baselworld have agreed to synchronise future dates in a bid to ease their competitors for the eyes of the world.
- Swiss watchmakers smarten up their act
- Baselworld: Watching over custom and heritage
The industry wanted to vary after a very dismal 2016 and 2017 attributable to a downturn in key markets, oversupply of watches, a crackdown on “gifting” (bribery) in China, and subdued tourism in some European cities as a result of terrorism.
Fabienne Lupo, chairwoman and managing director of the Fondation de la Haute Horlogerie (which organises SIHH), says the industry went by means of “a disaster interval”. However after a painful restructuring and job losses, she says the “traits are wanting fairly good”.
Newest information from the Federation of the Swiss Watch Business (FH) reveals that within the 11 months to the tip of November the worth of exports was up 7.1% on the earlier interval at 19.54bn Swiss francs (£15.5bn; $19.9bn).
The most important market, Hong Kong, was up 21% and the subsequent two largest, the US and mainland China, rose eight% and 14% respectively. The rise in exports to the US comes after three years of consecutive declines.
What’s extra, world shipments in the important thing luxurious watch market – thought-about to be something with a manufacturing facility gate value above three,000 Swiss francs (CHF) – are up 11%, whereas these within the sub-500 francs bracket are down about 15%.
On Friday, Cartier-owner Richemont, the world’s second largest luxurious items group, posted a 5% rise in quarterly gross sales, bolstered by double-digit progress in China.
However, in accordance with analysts at funding financial institution Morgan Stanley, such constructive headline numbers belie main challenges for giant gamers like Swatch Group (which does not take part in SIHH) and Richemont.
In a report final month, Morgan Stanley warned of a “disruptive and game-changing” few years as extra retail gross sales transfer on-line.
The analysts estimate that there’s about €16bn (£14.5bn) price of inventory with third-party retailers worldwide. Wholesalers have been aghast on the quantity of discounting on-line, which not solely hurts profitability but additionally model worth.
Corporations should purchase again the stock, however it’s costly. In 2017 Richemont purchased again €200m of unsold watches – and destroyed them so they’d not be offered at knockdown costs.
Richemont, which additionally owns the Vacheron Constantin and Jaeger-LeCoultre watch manufacturers, described its buyback technique as an “distinctive measure” for “distinctive occasions”.
That radical transfer, together with administration adjustments, funding in on-line, and a repositioning of manufacturers, is no less than making Richemont’s watch division match for the longer term, analysts say.
“The industry has been by means of an extended interval of consolidation,” says Ariel Adams, founding father of the influential web site ablogtowatch.com. “Corporations have bought manufacturers as investments. However lots of manufacturers haven’t been allowed to develop.”
Some manufacturers have misplaced their means, he says, partly due to frequent administration adjustments and partly as a result of they want funding. He believes some manufacturers will not be round in a few years, such is the crowded market.
The watches being produced right this moment are quite a bit much less thrilling than 10 years in the past, he says. “Client demand is sweet. The issue lies with the individuals who promote watches.”
Morgan Stanley says smartwatches will proceed to take market share from mechanical and quartz merchandise as Apple, Samsung, Fossil and others develop their know-how.
That is unlikely to harm Swatch Group’s many high-end manufacturers resembling Longlines, Breguet, Blancpain or Jacquet Droz. However, with the Apple Watch priced at about 450 Swiss francs, it is a risk to low-end merchandise.
“From a structural standpoint, now we have turn out to be incrementally extra bearish all year long on the impression smartwatches may have on the Swiss watch industry,” Morgan Stanley says.
Ms Lupo says the risk from the smartwatch revolution is overplayed. “Smartwatches are complementary to mechanical watches,” she argues. “In our metropolis you see individuals with one every of their wrists.”
It is tough to envisage many millennials going to these lengths. However Ariel Adams says smartwatches are taking part in an essential function in getting younger individuals “to suppose and put on watches”.
20 years in the past, sporting a watch was going out of style. He sees smartwatches as “a gateway to luxurious watches”.
“Younger persons are taking note of watches, and that provides the industry a possible new technology of customers,” he says.
What’s extra, producers are dabbling with incorporating good tech in watches which have the outward look of being all-mechanical. Some have experimented with screens on watch straps.
This 12 months’s SIHH has a show space known as The Lab to showcase watch know-how and using robotics, 3D printers and synthetic intelligence.
Though the Swiss watch industry trades off heritage and custom, Ms Lupo insists: “We’re a really fashionable technological industry, regardless of being a really haute [fine watchmaking] industry.”
And if you would like examples: Vacheron Constantin created a watch with 2,826 elements, whereas Patek Philippe has one with 1,728 elements. And these should rank as technological achievements in any age.