GENEVA — Caution ruled at this year’s Salon International de la Haute Horlogerie here as many of the world’s leading watchmakers grappled with volatile financial markets, macroeconomic wobbles and deep doubts about China – the motor for surging Swiss watch exports in recent years.
Their sobriety contrasted with the ebullience of former shows and was mirrored in the absence of bold new themes. Even the potential threat from smartwatches — last year’s talking point had it not been for the shock rise of the Swiss franc — was overlooked. There were also changes in the format of SIHH — a showcase for group brands in the Compagnie Financière Richemont stable alongside some independents — with the departure of Ralph Lauren watches and the arrival of nine upmarket artisanal watchmakers.
But the subtle adjustments to the decor and lighting did little to lift the gloom. Swiss watch exports to November 2015 — the most current industry data available — reached S19.8 billion Swiss francs, or $19.45 billion at current exchange, down 3.3 percent year on year. Full 2015 figures will be released Tuesday.
“Industry sales will drop 5 percent in our price category,” predicted François-Henry Bennahmias, chief executive officer of independent brand Audemars Piguet, who remained confident his company had outpaced rivals. Unfettered by Richemont’s ban on its companies discussing financial performance, Bennahmias revealed revenues had exceeded 800 million Swiss francs, or $787.6 million, last year, up from more than 700 million Swiss francs, or $689 million, in 2014, on stable output of 40,000 pieces. Underlining its confidence, Audemars unveiled Diamond Fury, a successor to last year’s attention-grabbing Diamond Punk piece.
The pain for Swiss watchmakers has come from Asia, with exports to Hong Kong — still the biggest single market — down nearly 25 percent; Mainland China off 5 percent, and Russia more than a third lower. Richemont’s own third-quarter trading statement, issued shortly before SIHH, revealed “challenging” conditions in Asia-Pacific amid “continued contraction” in watch demand there. Only “good demand” for jewelry had limited the watch weaknesses.
Executives differed over the extent to which sales to Chinese buyers might have been “lost” permanently. Most acknowledged Hong Kong and Macau might never regain their former status. But many suggested the downturn partly reflected new buying patterns, with the Chinese instead buying more when visiting Europe and Japan.
In any event, the timing of the downturn has been unfortunate. Many brands have invested heavily to meet forecast higher demand and consumers’ wish for ever-more genuine manufacturing of products. Vacheron Constantin has just concluded a 10-year, 120 million Swiss franc, or $118.1 million, investment program to allow it for the first time to make all its 25,000 watches in-house. An early beneficiary is its new Overseas line of “sports casual” watches. The same applies to Panerai, whose new factory can now produce all the movements it requires. Just over a decade ago, the situation was the opposite, with all movements outsourced. “You cannot convince people to buy a watch without offering your own content,” said Panerai’s ceo Angelo Bonati.
Piaget’s expansion is still underway, with extra space for production and administration expected to be completed this summer, while A. Lange & Sohne’s extension, consolidating workshops onto a single bigger site, opened last August. IWC, which used SIHH to launch its revised Pilot line, should begin building its larger new facility in April.
Unsurprisingly in such circumstances, Richemont brand ceos stuck to the corporate script of long-term demand rising thanks to accelerating global affluence, demographics and increasing consumer sophistication. “In my long experience in the industry, I’ve seen very many stormy days and survived. Whatever comes our way, we’ll handle it,” said Wilhelm Schmid, the ceo of Lange who was formerly at BMW.
All agreed the climb would be choppy and 2016 a year to buckle up. After all the uncertainties of 2015, including terrorism and its impact on tourism, “the next 18 months will be tough,” predicted Juan-Carlos Torres, ceo of Vacheron Constantin, who added that “2015 was a more challenging year than in the past, though we managed to raise unit sales and revenues in single-digit percentage points.”
Daniel Riedo, head of Jaeger-LeCoultre, agreed, saying, “2016 looks similar.”
“We definitely have headwinds. We all must get used to the fact that the crises we see — of whatever sort — are becoming the new normal. Just to think everything is going to be lovely in 2016? I don’t think so,” said Georges Kern, ceo of IWC Schaffhausen.
There were various telltale signs of the altered mood. Executives acknowledged clients had become more price conscious. “Customers are more sensitive than before. Pricing has become very important,” said Philippe Léopold-Metzger, head of Piaget. The greater sensitivity mirrored tougher economic conditions and lower consumer confidence, as well as China’s crackdown on gifts.
“Price sensitivity has increased as the market for gifts has declined. It’s different when people buy for themselves,” Léopold-Metzger added.
Even the very top end may be feeling the pinch. Greubel-Forsey, the exclusive brand part owned by Richemont, introduced its Signature 1 — named for carrying the moniker of the watchmaker behind it. “It’s our most accessible watch yet,” said Stephen Forsey, cofounder. The watch costs 170,000 Swiss francs, or $167,000, for a gold version.
Consumers are also less willing to experiment. “The market is more difficult. Customers are looking for authenticity,” said Léopold-Metzger. “People are looking for secure values,” agreed Kern.
That means a focus on established brands and preference for identifiable values, like evident craftsmanship. Some executives ascribed the trend to consumers’ wariness about standardization and automation, and their wish to buy something with palpable craft skills. Said Bennahmias with characteristic bluntness: “There’s no more bulls–t. Customers want authenticity. You cannot play games.”
Such concern for “authenticity” was evident at Cartier, Richemont’s powerhouse brand, with new top-end timepieces showcasing its craft expertise. But alongside limited-edition, big-ticket items echoing the group’s classic Panther theme came an important new female collection. The Hypnose line, featuring distinctively Cartier double-oval dials, comes in two sizes and assorted variations priced from 23,000 Swiss francs, or $22,640, for the steel entry level model to 145,000 Swiss francs, or $142,750, for a fully pavéd diamond version.
Piaget followed suit in trying to differentiate itself by highlighting engraving, marquetry and even more exotic skills such as eggshell and feather artistry. But it also introduced a moderately priced newcomer in the Limelight Stella ladies’ watch, which features an automatic movement and is priced at 20,000 Swiss francs, or $19,700, before tax.
The reversion to “icons” evident through the show was interpreted widely as watchmakers’ response to uncertain times. Jaeger-LeCoultre exemplified the trend, surprising visitors by sprucing up and rationalizing its signature Reverso range in recognition of the latter’s 85th anniversary.
“This isn’t a period for taking very big risks. Clients are refocusing on brands that have a genuine history, content and legitimacy,” said Jaeger’s Riedo. The Reverso collections, covering men’s and women’s watches, have been pared down to three sizes, single or double faces, and three subdesign families dubbed Classic, Reverso One (specifically for women) and Tribute (more complex timepieces for men). The cheapest quartz-powered steel Reverso One starts at 3,450 euros, or $3,725.
Richemont’s trading statement noted jewelry had outperformed watches, and its trio of brands spanning both lines were accordingly more upbeat than their solely horological peers. Van Cleef & Arpels president and ceo Nicolas Bos stressed jewelry, unlike watches, remained predominantly unbranded, leaving significant room for market-share gains. The fact that jewelry sales in recent years had not experienced quite the same feast (and consequent indigestion) of watches also underlined this scope.
Branded jewelry also benefited from its relatively slow start in mainland China, where sales of precious metals and gems had once been restricted, he argued. And jewelry appeared to be more resistant to the crackdown on corruption, as ostentatious gift-giving between officials and businessmen was a largely masculine affair. “Finally, don’t forget, jewelry distribution is much more retail-oriented than watches, so it damps the peaks and troughs typical of selling through wholesalers,” he added.
Although predominantly a jewelry brand, Van Cleef nevertheless used SIHH to feature its watchmaking credentials, with an expansion of the Poetic Complications collection introduced more than a decade ago. The new Lady Arpels Ronde de Papillions, selling for 105,000 euros, or $113,400, marked a major addition, featuring complex mechanical innovations to move butterflies around its dial.
“Jewelry has helped for sure,” agreed Piaget’s Léopold-Metzger. “We’re going to push it even harder.” Jewelry was “more personal” than watches, making it less vulnerable to the corruption crackdown in China and was often seen as “more lasting” and less fashion-driven than watches. Unlike Richemont stablemates Cartier and Van Cleef, Piaget jewelry — which can be as pricey as its sister brands — has a much lower entry point, with pieces beginning at around 1,000 Swiss francs, or $985, and the bulk of the range selling between 7,000 to 12,000 Swiss francs, or $6,890 to $11,800. “That creates a lot of traffic in our retails stores,” he said.
Diversification into women’s watches was certainly evident at a number of predominantly male brands. Jean-Marc Pontroué, head of upmarket Roger Dubuis, denied its new push into female watches was a reaction to a tougher market for its trademark ultra-complicated men’s skeleton timepieces. But the extension of the brand’s Velvet range to new limited edition “high design” women’s pieces was striking.
“The idea is to highlight similarities between high watchmaking and haute couture,” said Pontroué. Underlining the point, Roger Dubuis has struck a partnership with Massaro, the exclusive Parisian shoemaker owned by Chanel, that will in future supply straps. Pontroué also revealed Richemont had recently spent an undisclosed sum to buy the remaining 40 percent of Roger Dubuis it did not acquire when it bought its initial stake in 2008.
Among others pushing further into women’s watches was Baume & Mercier, Richemont’s entry-level brand, now seeing the benefits of a five-year repositioning and restructuring spearheaded by ceo Alain Zimmermann after his arrival in 2009. Focused very much on the U.S., its biggest market, the brand unveiled extensions to its Shelby Cobra men’s range and an expansion of women’s watches with the new, smaller Petite Promesse alongside the larger Promesse collection launched in 2014. With a distinctive double-wrap strap, bright colors, and a $2,450 opening price, the range “is part of our push to expand our U.S. female offering,” Zimmermann said.
A similar, if not quite so prolonged, repositioning has been under way at Montblanc, where former Jaeger-LeCoultre ceo Jérôme Lambert arrived in July 2013 to rationalize and reposition the watch, leather goods and writing instruments brand. The campaign has moved apace, with no less than five new watch collections since his arrival. This year saw the complete reworking of the 4810 range, dating from 2006, “and now timed to coincide with our 110th anniversary,” he said.