Thursday, January 29, 2009

Watch News: Global Recession Impacts Luxury Watches

The global recession has impacted the once recession-proof Swiss luxury watch business, according to reports from the Federation of the Swiss Watch Industry, the Richemont Group (Cartier’s parent), and the prestigious Salon International de la Haute Horlogerie luxury watch fair in Geneva, Switzerland.

"After several record-breaking years, Swiss watch exports in November—traditionally their best month—declined (by 15.3 percent in value, compared to November 2007) for the first time in almost four years. While all price segments dropped, the fall was greatest (down 30 percent) for watches between about $435 and $2,600 (export prices)."

The declines “clearly illustrates the curb on growth suffered by the industry as a result of the world economic climate,” an FH report said. Watch exports, about 10 percent of all Swiss exports, are expected to be less this year than in 2008.

The 18th SIHH (Jan. 19 -23) expects 15 percent fewer visitors—especially from the United States and Japan—than in 2008, when 17,000 from prestigious retailers worldwide attended the invitation-only event. Some show officials and attendees blame the global economic climate and what one Swiss newspaper calls “this challenging [watch] industry environment.”

Some also suggest holding the SIHH—usually in March/April to coincide with the international Basel, Switzerland, watch fair—in mid-January, due to a scheduling conflict at Geneva’s convention center, is also a factor.

In addition, SIHH’s exhibitors canceled their traditional evening events, normally highlights of the week, which celebrate the luxury watch business, some “to save money,” said a show spokesperson.

Info via JCK-Jewelers Circular Keystone, 1/21/2009.

Horology News & Commentary: SIHH 2009 Cometh!

As the new year rolls around here cometh the SIHH 2009! Say what?

As announced last year this January appeared first-ever SIHH winter edition which saw some new features in a pretty challenging current global recession environment.

SIHH 2009 displayed the work of the Fondation de la Haute Horlogerie, which promotes luxury watchmaking worldwide and is the SIHH’s organizer. The 2009 SIHH featured 17 of the globe’s most prestigious brands (12 owned by the Geneva-based Richemont Group). They are A. Lange & Söhne, Alfred Dunhill, Audemars Piguet, Baume & Mercier, Cartier, Girard-Perregaux, IWC, Jaeger-LeCoultre, Jean Richard, Montblanc, Officine Panerai, Parmigiani Fleurier, Piaget, Ralph Lauren, Roger Dubuis, Vacheron Constantin and Van Cleef & Arpels.

Some of the novelties and changes of the years prior:

- The Ralph Lauren Watch and Jewelry Co, a recent joint venture between the Richemont Group and the Polo Ralph Lauren fashion brand, has joined the SIHH exhibitors and unveiled its first-ever collection of timepieces. This is Richemont’s first joint venture with a luxury fashion designer and Polo Ralph Lauren’s first foray into luxury watches (more details on that later).

- Roger Dubuis will be there in a new light since the purchase by Richemont last year. The purchased manufacture movement kit facility which Richemont will continue to supply to Manufacture Roger Dubuis SA (founded and is managed by Mr Carlos Dias), under the terms of a long-term agreement. They will continue to operate as an independent manufacturer and distributor under the “Roger Dubuis” brand. It will supply the components for high end watch movements, not only for Roger Dubuis but also for Richemont’s own Maisons.

- The FH is showing the newest version of its world-traveling exhibition, “Think Time, Think Swiss Excellence,” not seen previously in Switzerland.

My visit was as well shortened to the years prior thus I didn't take as much as time to go through all the brands 2009 novelties as many of them IMO weren't truly anything groundbreaking nor was there prior years excitement due to the current economic environment affecting us all.

Unfortunately for most of us watch aficionados the main topic on most industry people minds was not the rather weak watch novelties, but instead the economic climate we are all facing in the upcoming months.

The Richemont Group, whose several prestigious international jewelry and watch brands issued a grim report this month. Important third-quarter sales dropped 12 percent overall, and 28 percent in the Americas alone, due to the global financial crisis and a decline in consumer confidence which had “a significant impact” on regional sales, it said. As a result of that the giant Cartier has put almost all 200 full-time workers making watch cases at one of its Swiss watch factories on part-time. From what I hear they are not alone either considering similar actions or already implementing planned cost cutting.

“Demand for luxury goods … has fallen dramatically,” the statement said, “and Richmond is facing the toughest market conditions since its formation 20 years ago.” With the current economic climate and uncertainties, it expects “no significant recovery in the foreseeable future” and will “take the necessary steps to not only see the difficult times through but to emerge stronger.”

From the last data I gathered there were over 600 watch related companies operating in Switzerland last year. Surely this was not all due to overwhelming insatiable demand and expansion of the watch industry seen during the last years of the horology renaissance. There were surely players in the industry that flourished yet there were some that just jumped on the gravy train and anyone (and their mother it seems) was able to get/make/buy a brand name and all of a sudden become a legitimate Swiss watchmaking company. Let's face the facts - there is no way all of them should have existed in the first place nor they will survive the current harsh environment present. This is a good thing as in my humble opinion there is about 30-40% much needed correction of these numbers. This all points that 2009 will be a undoubtedly a year of consolidation, after the unprecedented interest in technical, unique and exquisite watches of recent years had taken the industry to a level which was not reasonably expected to continue further in such manner.

So what can we expect from the year 2009 shakeout?

Only the strong and truly the value brands which were the leaders before and will continue providing not just a pretty shiny package, but a true horology advancement, innovation and value. Those leaders, as you might have suspected, are the bigger conglomerates and companies which sheer scale & magnitude of their resources puts them in the best position to adjust in order overcome this economic downturn.
Although being big company does not guarantee the survival if there is not capable or nimble upper management ready to to adjust their product to this changing market. There will undoubtedly be plenty of consolidation. Smaller fish will be eaten by the bigger and bolder competitors while other brands presenting little of actual horological or marketing value will be left alone to deservedly DIE! This weeding of the weak in the end is a good thing as it will leave us with more healthy and naturally stronger horological field benefiting us all in the end.

We have seen some minor effects already:
- Zenith announced some firings in its watchmaking workforce.
- Villemont seems to be the very first bankruptcy casualty.
- Bedat & Co. is being reported as currently being shut down.

Speaking at SIHH, Bernard Fornas (Cartier International President & CEO), told Reuters that “real, true luxury is back,” because the financial crisis is changing consumers attitudes and buying. “When people are buying something they are very tough with their choice of brands,” he said, and are now more likely to favor “strong” luxury brands, rather than lower-priced ones which call themselves luxury. Still, echoing Richemont's forecast, Fornas told Reuters, that currently “we don't see where the end of the tunnel is and we see no cause for optimism."

What to add in the end, except so very true!

Daily thoughts, musings & interests about anything (mostly horology) that currently makes my soul & grey matter tick.