Swiss watches Going Full Circle

After four lean years as a result of a strong franc, Swiss watchmakers may have turned a corner. Growth is heading back in the direction it was before the slump, and several brands are now looking to make the most of the lucrative online market.
Optimism had returned at this year's Salon International De La Haute Horlogerie watch fair in Geneva.

Juan-Carlos Torres, the director of the watch brand Vacheron Constantin, had no intention of denying how bad 2016 was. Last year had been a very difficult business period, he said at the 27th Salon International De La Haute Horlogerie, a watch fair in Geneva. “Production was rolled back to 25,000 units and we hope to maintain this volume in the coming two years,” he declared.

That’s no boom, but the makers of luxury timepieces are forced to think in smaller terms nowadays after years of stagnation. The last financial year was a disaster for many. Export sales plummeted by 10 percent, as the Swiss watch industry racked up its fourth year of low growth or stagnation. Large manufacturers reacted by cutting back on investments, others curbed production of new watches. These are hard times for an industry that was previously used to growth rates of 20 percent.

“There’s nothing providing thrust,” André Bernheim, chief executive of Mondaine, said last summer. His independent firm makes timepieces inspired by the famous clocks at Swiss train stations. “The most important regions of the world are all having problems – from the U.S. to Europe all the way to China.”

We expect export sales for 2017 in the same volume as 2016. Jean-Daniel Pasche, president, Federation of the Swiss Watchmaking Industry

China, in particular, was responsible for global watchmakers’ previous stunning growth. But the strong Swiss franc, which increased the price of exports to other countries, put an end to that. In October alone, sales volume sank by 16.4 percent compared to the previous year. That was the strongest drop since the financial crisis in 2008.

However, there are now at least signs of an end to the downward spiral. “We expect export sales for 2017 in the same volume as 2016,” said Jean-Daniel Pasche, president of the Federation of the Swiss Watchmaking Industry.

Mr. Torres likewise confirmed that last November and December were better than the rest of the year. In January, the upward trend stabilized. In China, where Vacheron Constantin has been present since 1845 and is sold in more than 30 outlets, watch sales improved, said Mr. Torres. The same applied to the Middle East region, he added, whereas in Europe and Southeast Asia sales declined.

As a result, Vacheron Constantin plans to put more emphasis on online sales in the future and boost Internet trading in the coming three years. “We’ll start in a country that has a good basis for it and at the same time has the necessary service points,” he said in Geneva. The U.S., for example, fits the bill.

Another problem is terrorism. “Nice will hurt tourism,” said Jon Cox, an analyst at the financial services company, Kepler Cheuvreux, referring to the jihadist attack last year in the French resort that cost the lives of over 80 people. “Tourists won’t be traveling to Europe and above all not in the summer to France.” Such events not only have an impact on the number of tourists, they also affect their shopping mood. There have already been “numerous purchase order cancellations,” Mr. Cox added.

In December, rumors cropped up for the first time that the independent manufacturer Breitling, based in Grenchen in Switzerland, was looking for a buyer, suggesting the company was lacking fresh financing. The firm, founded in 1884, has so far refused to comment on the rumors that are stubbornly persisting in the industry. The company has been owned since 1979 by the Schneider family and employs 400 people.

It wouldn’t be the first time that a Swiss watchmaker with a long tradition has given up its independence. Well-known brands such as Tissot, Omega and Longines have for some time belonged to the Swiss mass-producer Swatch, while Tag Heuer, Zenit and Hublot now belong to the French luxury goods giant, LVMH. And the Swiss watchmaker Richemont controls the brands Cartier, Piaget and IWC Schaffhausen. So consolidation has been going on for a long time.

The future head of IWC Schaffhauser also expressed optimism. Chris Grainger-Herr, who will be assuming his post in around two months, sees a positive development for his brand. He is hoping to boost demand primarily with reasonably priced models. He has a positive view of 2017, and said the company plans to open a new factory as well as additional stores. He also sees opportunities in the online market. “We are still at a very early stage and see e-commerce as a complementary channel for our existing sales channels,” he said.


Ozan Demircan is a Handelsblatt correspondent in Switzerland. To contact the author: [email protected]