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Baselworld Bounce: Watch Firms Gaining Traction in ’09

Major brands such as Rolex, Tag Heuer and Omega show at Baselworld. Retailers arrive in lighter mood.

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BASEL, Switzerland — The weather forecast from Baselworld is in: It appears the clouds hanging over the watch sector are finally starting to lift.

Delegates at the industry’s most important annual gathering, which ran from March 18 to 25, soaked in the first rays of spring sunshine with pints of beer outside the cavernous main hall, home to major brands such as Rolex, Tag Heuer and Omega.

Inside, the mood also was brighter after a catastrophic 2009.

“It is amazing what a difference a year makes,” said Cody Kondo, senior vice president and general merchandise manager of accessories for Saks Fifth Avenue. “The mood was overwhelmingly positive and optimistic about the coming season.”

However, it wasn’t exactly business as usual.

“When you walk into Chez Donati and see empty tables, that tells you something,” said Laurent Picciotto, owner of Paris-based fine watch retailer Chronopassion, referring to the Italian restaurant that is usually crowded with watch aficionados attending the show.

Swiss watch exports fell by 22.3 percent in 2009, with sales to the U.S. down 35.6 percent, according to the Federation of the Swiss Watch Industry.

But foreign sales of Swiss timepieces are picking up. Figures published by the federation on the first day of Baselworld showed a 14.2 percent rise in February, the second consecutive monthly increase.

“The mood of the retailers is, I think, cautiously optimistic,” said Ulrich Wohn, president and chief executive officer of Tag Heuer North America.

Wohn said most retailers started to see an improvement in November and the uptick extended into the first part of 2010.

“When you start to compare that against the high, high, highs of 2007, of course, it doesn’t look so bright,” Wohn said. “But when you compare it to the previous two years, it’s very good.”

Performance varied from brand to brand and from region to region.

Jean-Claude Biver, ceo of Hublot, said the maker of Big Bang watches saw a strong recovery at the end of last year — so much so that Hublot posted record sales in the fourth quarter and is set to repeat the performance in the first quarter of 2010.

Nicolas Beau, international director of watches at Chanel, jokingly complained about the crowds at his stand. “This year, everybody’s back,” he said. “It’s a bit warmer.”

Harry Winston ceo Frédéric de Narp said the outlook for the diamond specialist was mixed because it was relatively small in size and heavily weighted toward the U.S. and Japan.

“All in all, confidence is coming back slowly but surely,” de Narp said. “Some countries are very optimistic, some others didn’t even feel the crisis and some others are much more pessimistic.”

At Chopard, which celebrates its 150th anniversary this year, there was a cautious stance.

“We’re taking a conservatively optimistic approach to 2010,” said Marc Hruschka, president and ceo of Chopard USA. “The first couple of months have been very positive, but there have definitely been periods that were inconsistent and, unfortunately, it’s difficult to look at it and decide what’s making them inconsistent because we haven’t done anything differently during those inconsistent periods.”

Despite the return of Wall Street bonuses, high-net-worth individuals are still uneasy about pulling out their wallets.

“There’s an enormous amount of wealth sitting on the sidelines,” Hruschka said. “They’re waiting to feel good about spending again.”

In a bid to tease back hesitant consumers, many brands have either lowered their entry price points or looked for ways to provide added value at existing price levels with innovative features and new materials.

Marie Helene Morrow, president of the Reinhold jewelry chain in Puerto Rico, said she had increased her budget by 10 percent versus 2008 after skipping Baselworld last year. She said David Yurman, with whom she has been working for three decades, created a buzz with his new Classic ladies’ timepieces.

The watches, which come with 30 mm or 38 mm round cases in steel or white gold were presented as fashion pieces, featuring optional diamond bezels, mother-of-pearl dials and alligator straps. Prices range from $2,600 to more than $10,000.

“I think that will sell like hot cakes, and the price point is good,” Morrow said. “I bought every single watch, and that’s not something I normally do.”

On the men’s front, a conservative mood reigned. Vintage designs, many evoking the Kennedy era, were out in force in a trend that some linked to the success of the AMC television show “Mad Men,” which is set in Sixties New York. “Brands have definitely looked at their heritage and looked at their roots,” said James Seuss, ceo of U.S. watch retailer Tourneau.

Zenith was a case in point. For its first Baselworld under new ceo Jean-Frédéric Dufour, the LVMH-owned brand made a splash with its pared-down assortment based on archival designs, marking a sharp turnaround from the flamboyant style of his predecessor, Thierry Nataf.

Zenith has trimmed the number of items in its catalogue to 135 from 800, and lowered the entry price point on all its 2010 collections. It also made sure to cater to watch aficionados with the El Primero Striking 10th, featuring a central chronograph hand capable of measuring a tenth of a second that sweeps around the dial in just 10 seconds, an unprecedented feat.

The strategy reaped immediate dividends at the fair. Zenith signed a deal to enter seven points-of-sale in Australia and announced it would return to the Indian market. Picciotto at Chronopassion said he would also be picking up the brand.

Other distinctive pieces with a retro flavor included the Senator Diary from Glashütte, a mechanical watch featuring an alarm that can be set 30 days in advance — also a first.

Meanwhile, Rolex has given its iconic Submariner a facelift with a distinctive new green dial, and Tissot unveiled an updated version of its Visodate 1957 Automatic.

“This year is a lot about the heritage of the brand,” said Sharon Buntain, U.S. brand president at Tissot. “Our slogan is ‘Innovators by Tradition,’ so this business of doing a heritage collection is new for us.”

Brands are also gambling on color to inject some excitement on the retail floor, with a rise in blue and gray dials for men, purple for ladies and white across-the-board.

Sequel, which holds the licenses for Guess and Gc Watches, is counting on a mix of “modern vintage” and high-tech sporty looks to help energize the Guess men’s category, which it hopes will eventually account for 40 percent of sales worldwide.

Swarovski, which entered the watch category last year, said the color prune was rapidly becoming a signature for women’s styles after its Octea Sport model recorded unexpectedly strong sales in that shade. Its new limited edition Rock ’n’ Light, featuring a solid crystal case with 32 facets, comes in white, black and prune.

Hanspeter Hanschik, director of the watch division at Swarovski, said the brand sold 100,000 watches in its first year despite launching during the recession. “Some 30 percent growth would be nice for this year,” he said, predicting Swarovski would sell between 125,000 and 140,000 pieces.

Though many retailers have been reluctant to take on new brands because they are tightening inventories, niche brands with an original concept generated interest.

Doug Meine, executive vice president at Rolex Watch USA, said the brand deliberately held back stock to give retailers some breathing room. “We could have forced ourselves upon them and had a good year, but we had seven years in a row of record-breaking business and it was time to adjust to the times,” he said.

Seuss at Tourneau said he would expand distribution for British company Bremont, which specializes in watches for aviators.

In the search for unusual materials, Boucheron emerged as a frontrunner with its Reflet XL Château Latour, which features a dial made from the wood of a wine barrel containing traces of 2005 vintage Château Latour.

“I don’t believe in sobriety as far as products are concerned,” said Boucheron president Jean-Christophe Bédos. “Trumpeting a return to vintage watches is trite, in my opinion.”

Fendi was also banking on the appetite of its core luxury consumer with its Crazy Carats watch, which features a rolling mechanism that allows the wearer to change the color of the precious stones on the dial. One version alternates diamonds, rubies and blue sapphires.

Fendi will make the timepieces available in fewer than 10 percent of its points of sale worldwide. “The watches have to follow the Fendi strategy,” said Gaetano Sciuto, licenses and accessories division director. “We are one company, and Fendi is luxury.”

Indeed, the upper end of the market appeared immune to economic headwinds as prestige watchmakers pulled out the stops with high complication movements such as tourbillons, perpetual calendars and minute repeaters, which made their first appearance at Hublot and Corum.

Picciotto at Chronopassion expects sustained demand for the type of pricy niche timepieces in which he specializes. “I am fairly confident regarding very limited editions and exceptional timepieces,” he said. “Globally, I think I probably spent the same amount as last year or a little more.”

Harry Winston continued its Opus series with the Opus X, featuring a system of rotating indicators mounted on a revolving frame, inspired by planetary movements.

Hermès reported all its exceptional pieces had sold and that it was upping its initial production estimate for the limited edition Cape Cod Tourbillon as a result — though delivery will take up to 18 months.

In many cases, brands had a hidden agenda for showcasing their expertise. Swatch Group ceo Nick Hayek has threatened to stop supplying the rest of the industry with movements and components, and the issue of who makes the parts that go into the engine of a watch has become a hot topic. Most brands rely on Swatch to supply them with movements, although other suppliers exist, namely in Asia. Hayek warned that the Swiss watch sector faces a crisis unless there is more innovation and investment.

Tag Heuer, one of Swatch’s biggest clients, is not only taking steps to increase the number of its suppliers, it has launched its own movement, the Calibre 1887.

Bulgari, which has long wanted to gain control over its watch manufacturing, announced it had finally achieved that goal with the launch of the Calibre 168, its first movement designed, developed and produced in-house.

The firm has also strengthened its presence in high-end watchmaking sector by absorbing the Daniel Roth and Gerald Genta collections, which will also carry the Bulgari name in prime position on their dials.

Meanwhile, Hublot has hired 30 former employees of BNB, the maker of high-end complications that went bankrupt last year, and taken over its machines. “This is an enormous advantage for us,” ceo Biver said.

Hublot also unveiled its first in-house movement, a column wheel chronograph mechanism called the Unico that appears in the King Power model of its iconic Big Bang style. “We expect to produce 20,000 pieces per year from 2012. It’s a movement that should equip all our pieces in the end,” he said.

Chopard, one of a handful of brands that can genuinely claim the “manufacture” status of watchmakers that produce their own movements, has emphasized its commitment to training future generations of watchmakers by developing a hand-wound caliber in collaboration with the Geneva Watchmaking School that will be used both for school projects and for a limited edition watch commemorating its anniversary.

The L.U.C. Louis-Ulysse, named after founder Louis-Ulysse Chopard, is a white gold pocket watch that clips into a wristband, using a system originally invented by Chopard owner Karl Scheufele in 1912.

“There’s an attempt from all of the brands to really show the history,” said Andrew Block, executive vice president at Tourneau. “It’s up to the brands to ensure the consumer understands as well as we do.”

 

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