clock shop Hard Times for Swiss Watches

At the world’s largest timepiece trade show, Swiss watchmakers aren’t too worried about new wearable devices like the Apple Watch. But slowing luxury sales in China have been painful.
A 'GMT-Master II' luxury wristwatch, produced by Rolex SA, on display at the Baselworld luxury watch and jewelry fair.

Jean-Claude Biver, head of the watch division at LVMH luxury goods, is one of the few in the industry who believes Swiss watchmakers need to make their own smart watches.

“The Apple Watch is invading the price segment of TAG Heuer and competing with the brand. So I have to counter with something,” Mr. Biver explained last week at Baselworld, the world’s largest watch trade show.

At Paris-based LVMH, Mr. Biver is responsible for the TAG Heuer brand, in addition to pricier Hublot and Zenith watches. His response to Apple and other wearable digital devices is TAG Heuer Connected, a luxury digital timepiece that sells for about $1,500.

Without a doubt, 2016 will be another difficult year. Marc Hayek, Swatch group

But others in the Swiss watch industry doesn't seem particularly worried by the tech giant’s attempt to revolutionize the watch trade.

“The Apple Watch hasn’t harmed us at all,” said François Thiébaud, head of the Tissot brand, whose multi-functional watches compete directly with smart watches.

In fact, computer watches outsold Swiss watches for the first time in the fourth quarter of 2015, according to experts from Strategy Analytics.

But the Swiss industry has bigger worries, and they begin in China. Ostentatious displays of luxury are under attack by the Beijing government and pricey gold timepieces are falling out of fashion. And because of terrorism fears and other travel obstacles, fewer Chinese people come to Europe, which further dampens sales.

Meanwhile, Russia is in crisis, war rages in the Middle East and the industry continues to suffer from the high value of the Swiss franc.

In 2015 exports fell by 3.3 percent, and were down another 8 percent in January. But most managers at the Baselworld show refused to use the word “crisis” in describing the downturn.

“I’m not unhappy and would prefer to speak of consolidation on a high level,” said Stephen Urquhart, president of the Omega brand, which like Tissot belongs to the Swatch Group.


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Tissot’s chief Mr. Thiébaud, who heads the exhibitors’ committee at the Basel trade fair, believes the industry could actually see a 2 to 3 percent sales increase this year.

Other top managers expect their sales to stagnate in 2016.

Apple’s attack scarcely plays a role any longer, industry leaders said. No large brand announced a new smart watch at this year’s trade fair, which opened March 17 and continues into this week.

Kazuhiro Kashio, the new president of Casio, is scarcely impressed by the Apple Watch, which generally ranges from $400 to just over $1,000 in cost. “It’s just a smartphone on a wristband,” he said.

But Swiss manufacturers are experiencing problems with their most expensive watches, roughly ranging between $50,000 and $170,000.

This market segment has been under pressure in China for two to three years, said Marc Hayek. He is responsible for luxury watches such as Breguet and Blancpain at the Swatch Group, which was founded by his uncle Nick Hayek.

Slowing economic growth is part of the problem. “Also, gold watches aren’t selling as well because many Chinese people no longer want to be seen wearing them due to the government’s anti-corruption campaign,” he said.

For this reason, Blancpain now offers lower priced steel models.

Mr. Hayek believes the industry has also made problems worse with huge price swings in recent years.

“The exchange rate volatility causes even long-time watch companies to frequently alter their prices, in both directions,” he said. “This price yo-yo makes customers uncertain and holds them back from buying.”

Mr. Hayek also isn't optimistic for the short term. “Without a doubt, 2016 will be another difficult year,” he said.


Holger Alich is Handelblatt's Switzerland correspondent, covering the financial industry. To contact the author: [email protected]