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BASEL, Switzerland — Entering the main hall of the Baselworld watch and jewelry fair in Switzerland, visitors were greeted by a large sign proclaiming: “Tag Heuer. Google. Intel.”

This story first appeared in the April 6, 2015 issue of WWD. Subscribe Today.

In other words: The smartwatch revolution is here.

Tag Heuer made headlines by unveiling its collaboration with the two Silicon Valley giants on the opening day of Baselworld, as reported. Other brands stepping into the tech fray ranged from Gucci, which is working with Black Eyed Peas frontman Will.i.am on a smartband, to Bulgari, which unveiled a mechanical watch that functions as a key to a virtual vault for sensitive data.

Though it has been around for years, the smartwatch is only just gaining traction at the consumer level, thanks to the marketing clout of Apple, which begins shipping its connected watches priced from $349 later this month.

Initially dismissive, Swiss watchmakers are now paying attention, especially as the high-profile Apple launch coincides with a slowdown in sales of traditional timepieces, hit by a laundry list of economic woes ranging from political crises in Russia and Hong Kong to sharp currency swings.

Sylvie Ritter, managing director of Baselworld, said a host of brands presented connected watches at the fair this year. The event drew some 150,000 attendees, with the number of buyers down 3 percent versus 2014, but a 7.5 percent increase in media attendance, organizers said.

“Far from dividing, these technological products will prove here at Baselworld, as they will on the market, I’m sure, that these two worlds are more complementary than opposite, and that in future they will be able to coexist perfectly and feed off each other,” Ritter predicted.

Karl-Friedrich Scheufele, copresident of Chopard, said comparing the current situation with the arrival of quartz watches in the Seventies, which decimated the Swiss watch industry, was “totally exaggerated.” The Geneva-based jewelry and watch firm is mulling how to approach the smartwatch category.

“We just don’t see the combination between precious metal and electronics, because I know from using smartphones myself that you change every so often when the new technology comes out. I’ve never met anybody who collects smartphones, and I don’t think anyone will collect smartwatches,” he said.

He was more concerned with pricing, after a challenging year in which Swiss watch exports grew by just 1.9 percent. Foreign sales of Swiss timepieces fell 2 percent in February after a 3.7 percent rise in January, according to the Federation of the Swiss Watch Industry.

Several executives said Swiss watch brands were partly responsible for their current woes, having priced themselves out of the market when the going was good.

“If you consider the price increase over the past six years for our products, it was about 50 percent in euros. I would say all brands probably are in that range or even higher, and that means that a certain amount of clients may no longer find products that they can or are ready to afford,” admitted Scheufele.

Many companies further increased prices in the euro zone following the Swiss National Bank’s decision in January to de-peg the Swiss franc from the euro, which sent the Swiss currency soaring. A handful have lowered prices in other areas of the world in a bid to correct the price disparities triggered by global currency swings — a move that generated considerable debate among exhibitors.

Philippe Mougenot, president of Chanel’s watch and jewelry division, said that in the coming weeks, it will raise prices by an average of 5 percent in Europe and more in Russia, while lowering them by 15 percent in Asia.

“It is respectful toward customers to have harmonized prices worldwide,” he said. “In markets like watchmaking, where there is obviously an important wholesale activity, you open the door to a parallel market. I know this has always been a taboo subject in this industry, but it’s there and everyone knows it.”

Patek Philippe chief executive officer Thierry Stern similarly defended the firm’s decision to cut prices by as much as 7 percent in some regions, including North America. “It’s better than watching the whole watch market collapse,” he argued.

“We are also one of the rare brands that has not lowered margins, so Patek will be shouldering the losses triggered by these exchange-rate fluctuations. I’m the one who is going to lose between 100 million and 150 million Swiss francs [$104 million to $156 million], because I think it’s right to set an example,” he added.

The move was welcomed by American buyers such as Michael Manjos, chief financial officer of Betteridge Jewelers in Greenwich, Conn. “When you start looking at $50,000 or $75,000, you’re competing with a car, you’re competing with a lot of other luxury products, and I think we started getting a little ahead of ourselves on pricing, so I’m happy to see some entry-

level pricing, some prices that are more manageable,” he added.

He said pricing issues were the main hurdle facing his business, which is otherwise benefiting from a strong U.S. economy.

“Our customer is actually faring very well,” said Manjos. “The pressure we’re going to find in our business is mostly pricing pressure based on gray market issues or pricing discrepancies that did exist before they were addressed. So as long as the company is addressing them, I think we have a very healthy outlook.”

Paolo Marai, president of the Swiss luxury division of Timex Group, which produces watches for Versace, Versus, Salvatore Ferragamo and — since Jan. 1 — Nautilus, said he preferred to devise other methods — such as reducing inventories through faster deliveries — to compensate for shrinking margins. “In Russia, prices are today 50 percent more than five months ago. So you can imagine that 50 percent is not something that you can manage by the pricing,” he noted.

Versace’s key launches include the DV25, which marks the brand’s 25th anniversary in the watch business, and the Dylos limited-

edition watch — priced at $4,295 — sported by Madonna in Versace’s spring advertising campaign.

Another executive opposed to price cuts is Antonio Calce, who recently took over as ceo of Girard-Perregaux and its parent company, Sowind Group.

“Lowering your prices in fine watchmaking is something that should be avoided, because at the end of the day, everyone loses out: the retailer and the brand, because you also reduce the value of your retailers’ inventories,” he said.

Instead, Girard-Perregaux is offering a steel version of one of its pillar lines, the 1966, lowering its entry price point to around $8,500 from around $15,000 previously.

Indeed, there was an overall trend toward classical timepieces designed to appeal both to Chinese consumers, who are buying fewer flashy watches as a result of a government crackdown on corruption, and Europeans who have seen their purchasing power dwindle.

Rolex generated buzz with a new generation of its Oyster Perpetual Day-Date, known as the presidents’ watch, featuring a 40-millimeter case, new mechanical movement and 70-hour power reserve. It doesn’t exactly come cheap: A platinum version with a striking laser-etched ice-blue dial will retail for $62,500.

Rival Omega unveiled the Globemaster, the first timepiece to achieve its new Master Chronometer certification. With its pie-pan dial, the watch has a vintage look and will cost from $7,700 to $21,600. “At the end of the day, we’re making a product destined to last a lifetime,” explained Stephen Urquhart, ceo of Omega.

He was cautiously upbeat about prospects for the brand, the cash cow of industry leader Swatch Group, noting that Omega sold more units in China last year, albeit at lower average prices. “We had a year that, as it went on, improved and we finished with a small growth,” said Urquhart, adding he hoped to achieve the same in 2015.

However, he cautioned that any further decrease in the euro could destabilize an already fragile market by prompting tourists to buy in Europe rather than at home. “The price factor is there, we have to live with it. We hope it doesn’t get out of control, that prices go down too much. If the euro went down even more, it would really create a big disparity,” Urquhart remarked.

Hermès is banking on the Slim d’Hermès and its striking minimalist numerals, designed by Philippe Apeloig, to turn around the fortunes of its watch division, which registered an 11.4 percent sales drop last year. Guillaume de Seynes, managing director at Hermès and president of La Montre Hermès, said one of the reasons for the poor performance was the delay in delivering its Dressage L’Heure Masquée watch, launched with great fanfare in 2014.

“It will be delivered starting this spring, so improving the supply chain is a real issue at La Montre Hermès,” he remarked.

Boucheron unveiled a steel version of its Epure watch, with an entry price of 3,700 euros, or $4,000, versus 16,000 euros, or $17,500, previously. At the same time, the Place Vendôme jeweler presented Lierre de Lumière, a secret watch in a white gold bracelet sculpted in the shape of vine leaves and studded with more than 1,200 diamonds, with a price tag of 390,000 euros, or $427,000.

Corum, under new management since last year, took an aggressive tack on pricing. It brought down prices for its signature Golden Bridge line by 15 percent at the start of the year and is also expanding its offer for the Admiral’s Cup line with lower-priced ladies’ quartz pieces, said Jacques-Alain Vuille, executive vice president of the company, which is owned by Chinese group China Haidian.

“We have renegotiated conditions with suppliers with the aim of being much more attractive,” he noted.

Zenith, part of LVMH Moët Hennessy Louis Vuitton, launched the Elite 6150, a dressier watch with a 42-millimeter ultrathin stainless steel case priced at $8,300.

In a sportier vein, Gucci presented quartz versions of its Gucci Dive model, previously equipped with Girard-Perregaux movements, priced from $950 to $1,090, versus a prior entry price of $8,600.

Even Ulysse Nardin, known for its pricey grand complications, is adapting to the new market conditions. “What we see, of course, is a bit of a trend toward more classical pieces,” said Patrik Hoffmann, the firm’s ceo.

Having said that, it has already sold at least one of its most-exclusive pieces, the Hannibal Minute Repeater, crafted from platinum and genuine granite from the Alps. Available in a limited edition of 30, the watch costs 725,000 Swiss francs, or $756,000.

“Money is everywhere. You have to create the right emotion and you have to make, at the end of the day, people spend it,” said Hoffmann.

Indeed, the top end of the market appeared to be holding up.

Nayla Hayek, ceo of Harry Winston, said she was seeing an influx of new customers. “We are very positive. It was a very good 2014 and the first months in 2015 show very nice growth,” she said.

The brand, which recently unveiled a long-term partnership with HIV/AIDS research organization amfAR, has padded out its women’s offering with models including the Premier Precious Butterfly, which features dials made by harvesting the color from butterfly wings. It has also introduced a smaller-sized ladies’ quartz, the 31-millimeter Premier Lace, with a view to opening wholesale for its watches in Asia, Hayek said.

Jean-Christophe Babin, ceo of Bulgari, said the Roman jeweler posted double-digit growth in 2014 and had no intention of lowering prices. “Our business in China is booming, so why should we decrease prices in China?” he asked.

The brand’s Diagono Magnesium watch, developed with Swiss encryption specialist Wisekey, will operate with the Bulgari Vault application on the owner’s smartphone to unlock personal data. “Compared to a smartwatch, which will become obsolete, we have taken the obsolescence factor out of the watch,” said Babin, noting that the timepiece runs on a chip that lasts for decades.

Fawaz Gruosi, founder and creative director of Swiss jewelry and watch brand de Grisogono, said the company posted 30 percent revenue growth in 2014 with fewer customers, but a higher average ticket. “And that means those people bought it for their pleasure, but also considered it an investment,” he noted.

Accordingly, de Grisogono is expanding its Grappoli range with four new colored gemstones, with prices going up to 641,700 Swiss francs, or $669,500, for the ruby version.

Hublot celebrated the 10th anniversary of its Big Bang watch with a collection of 10 high jewelry timepieces, each priced at $1 million, which promptly sold out. Hublot ceo Ricardo Guadalupe said the brand registered 12 percent sales growth in 2014 and revenues were up 13 percent in the first two months of the year.

Nonetheless, he maintained a cautious outlook for 2015. He has budgeted a growth rate of 5 percent, but says this forecast could be derailed. “In the end, if we do a flat year, we’ll be happy,” he said.

Speaking on the fourth day of the fair, Marc Hayek, ceo of Breguet and Blancpain, said the two brands had sold 10 percent to 25 percent more in volume terms at the event than the previous year. He predicted Breguet would have trouble keeping up with demand for its Tradition Minute Repeater Tourbillon, which costs $460,700. “Exceptional pieces and these high-end collector pieces, they are working fine. The demand is high,” he said, noting that Breguet was also reaping the benefits of its policy of keeping prices relatively stable, even during periods of strong demand.

“That’s also why we don’t have to decrease prices now in certain markets, because we didn’t profit,” he said.

He welcomed the excitement created by the Apple watch, noting that it has gotten everyone talking about “wearing something on the wrist” — no mean feat at a time when many young people no longer do. “I think it’s great,” Hayek said. “It will bring new clients.”

He can afford to be laid-back: Fellow Swatch Group brands Swatch and Tissot are addressing the smartwatch segment, meaning he doesn’t have to.

Tissot ceo François Thiébaud showed a prototype for a smartwatch that will be housed in its T-Touch Solar Expert and will hook up to a Bluetooth outdoor weather station, in addition to small locators that can be attached to wallets or keys.

He calculated that the risk of the smartwatch to the industry was small, since Switzerland exported 28.6 million watches in 2014, just a fraction of the estimated 1.2 billion produced worldwide. “We do less than 3 percent. Don’t you think the remaining 97 percent will be the segment most touched by connected products?” he said.

Indeed, among the midpriced players, the stakes were clearly higher.

Swarovski, which has developed a fitness tracker with Misfit, also launched two lower-priced women’s watch lines, the Daytime and the Alia Day, designed to help it conquer market share in the United States. Robert Buchbauer, chairman of the board and head of Swarovski’s consumer goods business, said it hopes to eventually open a flagship on New York’s Fifth Avenue.

“It is already our biggest market, but considering its size and its potential, there is still a long way to go for us,” he said of the United States. “So far we’ve not really penetrated the market very well with our watches. I think we were lacking some of the price points that are required by the market, and we have that now.”

Fossil Group said it would introduce smartwatches for three of its brands — Fossil, Emporio Armani and Michael Kors — in time for the holidays as part of its partnership with Google and Intel. “Everyone’s obsessed with it, which we love. As a fashion company, anytime you have those opportunities where consumers and designers are all focused on kind of one big idea, that’s very rare and it’s a great opportunity for us,” said Preston Moxcey, vice president/general manager, wearable technology at Fossil Group.

However, Seiko and Citizen, which both offer GPS watches that sync with satellites to indicate the correct time anywhere in the world, said they were not interested in the smartwatch field.

“We’re not playing in the gadget business,” said Jeffrey Cohen, president of Citizen Watch Company of America. “We’re in the business of timekeeping and precision, and the best accuracy in the world and easy delivery.”

The company’s key launch is the Citizen Eco-Drive Satellite Wave F900 in titanium, which will retail for $2,400.

Seiko, meanwhile, is seeking to grow its top-tier collections — Grand Seiko, Astron and Prospex — overseas. “I sense that we are at the start of the golden period of Seiko,” said Shinji Hattori, president and ceo of Seiko Watch Corporation, noting that the company posted a double-digit revenue gain worldwide last year.

Grand Seiko accounts for half the turnover at its boutique on New York’s Madison Avenue, which opened last summer, and Seiko hopes to score another hit with the 62GS, based on the first Grand Seiko with an automatic movement released in 1967. Only 900 will be made, including a limited edition of 600 in steel, priced $4,300.

It was just one of many models at Baselworld designed to keep the spirit of traditional watchmaking alive.

Indeed, Stern compared the prospect of smartwatches replacing mechanical timepieces to television screens replacing works of art. “There will always be a place for art,” the Patek boss said, concluding: “We survived quartz, we will survive Apple.”

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