It’s shakeout time. Watchmakers head to the industry’s annual Baselworld watch and jewelry bonanza amid a shifting landscape, with disruption set to continue.
The first glaring, physical change from last year is the show’s size: the number of exhibiting brands has been chopped in half to 650, with exhibit hall space pared down accordingly.
Two days have been shaved off of the week, and the show will take place from March 22 to 27.
The dramatic shrinking of the event follows a period of prolonged declines in the sector. Lower spending in Asia — a country that is the main growth engine for Swiss watch exports — and mounting competition from connected timepieces, especially watches from Apple, are biting into business.
The tech giant shipped eight million Apple Watches in the last three months of 2017, topping records as the largest quarterly figure recorded, according to research firm Canalys. The news sent shudders through the Swiss watch industry.
“It is, I would say, a major alarm bell that should go off in every c-suite in Switzerland,” said Peter Stas, president of Frédérique Constant Group.
While there have been some spots of improvement for the industry — exports of Swiss watches began to climb this year after two years of declines — observers see uneven results for different players and warn that stronger brands will likely out-muscle weaker ones.
“We still see a long-term trend toward concentration and consolidation in the industry, both on the companies’ and the retailers’ side, and we also see the upswing does not affect all brands or the industry as a whole,” said Sylvie Ritter, managing director of Baselworld.
The reduction in exhibitor numbers is inevitable as the show gears itself to the stronger labels, fewer in number, in Ritter’s view. She is billing the reduced numbers as an opportunity to focus on improving the quality of the show for the bigger players.
“We believe that by reducing the number of exhibitors, we are in fact increasing the attractiveness of the show as we improve the conditions for a successful show for the most important players in the market,” she said.
In Ritter’s view, the aim is to help brands stage their products better.
Under pressure to demonstrate the relevance of the show at a time when watchmakers are increasingly embracing digital means for marketing purposes, Baselworld is touting its own digital efforts, which will include channeling all of its news to its web site, an app, and social media. It is also introducing a chatbot-based news channel in Facebook Messenger, Skype and Telegram called “Baselworld Live News.”
The dramatically lower number of showgoers has prompted much debate about the fair’s future and how Baselworld might evolve, with few resisting a comparison to its smaller, higher-end counterpart that takes place earlier in the year in Geneva, the Salon de la Haute Horlogerie, commonly called SIHH. In a high-profile defection, Hermès left Baselworld for SIHH this year.
“I don’t agree — it’s not less important. If you look at it from an international point of view, the importance has gained,” Nick Hayek, Swatch Group chief executive officer, said of Baselworld when questioned about the significance of the drop in numbers during an annual results presentation last week.
He noted that Basel continues to host big players in the industry, and said it’s the place to see where patents are coming from, estimating that around 80 percent of the brands attending the Geneva fair use movements or components made by Swatch.
“When you talk about industry and innovation, then Basel is a must,” said Hayek, who added that the companies not coming this year are smaller ones.
“A lot of small companies are really based on marketing and once the bubble bursts, as we saw three or four years ago and business drops and gets a bit tougher, people pull out, they don’t come, they save their marketing budget, they don’t come to Basel,” he added.
Peter Stas, Frédérique Constant Group president, said that he expects his brand’s most important customers to show up, “like they always do.” As for this year’s crowd of absentees, he noted that there had been “many small companies in the back of the fair that didn’t have much traction in the first place.”
Zenith ceo Julien Tornare calls Baselworld a melting pot of the watchmaking world.
“Basel is a historic fair, a fair that’s pretty authentic, I’d like to say, because there’s everything, suppliers of watch hands, of dials, there are also small brands and suppliers — it’s a melting pot, much more than SIHH, where you have a grouping of fairly exclusive brands with large spaces.”
Watch brands Hublot, Zenith and Tag Heuer, which belong to LVMH Moët Hennessy Louis Vuitton, will be at Baselworld, in accordance with long-standing custom. For the past two years, though, the trio has also found a way to get in on some of the action at SIHH, which is dominated by brands belonging to Compagnie Financière Richemont. From a boat docked on Lake Geneva, the LVMH brands welcomed around 400 guests to see their new timepieces during that fair at the start of the year.
“The idea was that we tactically positioned ourselves in Geneva to see our clients and take advantage of their presence there to see them, but our main show remains Baselworld,” said Tornare.
However, he doesn’t rule out the possibility of a future switch.
“I can’t tell you I won’t change shows someday; we have to see how Baselworld evolves. I keep my options open. Today, do we need a watchmaking fair? It’s a big question,” he said, citing strategies that others might pursue, like conducting individual roadshows.
While Baselworld organizers seek to put a positive spin on changes at the show, they are under pressure to maintain its relevance amid broader transformations taking place in the sector.
“The world is changing and we’ll see how Basel adapts in the next five years. Something will have to be done, undoubtedly — but I wouldn’t call into question the purpose or make this comparison between Basel and Geneva,” said Hayek.
The fair still represents the Swiss watchmaking industry, the executive insisted, citing Swatch brands Breguet, Blancpain, Omega and Longines, along with Rolex and Patek Philippe.
“You don’t really have to worry about Basel as long as those people are there,” Hayek said, adding he doesn’t agree with those who refer to the change at Baselworld this year as an exodus.
Swatch executive François Thiébaud, who heads the Tissot brand, noted that the event is an important reflection of Switzerland’s place in the watchmaking industry.
“We have clients from all over the world who come to see what’s being done in innovation — Swiss watchmaking is made up of Swiss brands…the big brands in France and Italy come to make Swiss watches because of Switzerland’s reputation for quality and precision, and I think Baselworld reflects that,” said Thiébaud.
Still, some had suggestions for how the fair might evolve.
“SIHH is working to rejuvenate the event. I believe Basel as well is thinking about its future, about reinventing itself,” said Tornare, who hoped to meet show organizers to discuss its future.
“I would like something that’s dynamic and innovative. That’s what we want for Zenith these days, so I can not allow myself to stick with a show that doesn’t evolve,” he said.
The executive was recently recruited to rejuvenate Zenith by bolstering its stature on the international stage.
He wants to see Baselworld provide a better welcome to watch consumers and plans to make his booth inviting to the public.
“My stand is going to be open, there will be experiences and some fun stuff for the public at the entrance — if people come, they want to see things,” and not just the same watches that are displayed in stores, he explained, describing the brand’s upcoming stand as playful and amusing.
At the entrance, a darkened room will offer a presentation of Zenith’s Defy system and a photo booth so people can take pictures of themselves trying on the watches.
“We are trying to attract people by doing something a bit different than just simply walking in front of a window,” he said.
There will be films to view and Champagne, too, with a cocktail hour every evening — the public is welcome, he added.
The label is showing watches with the Defy technology after its splashy launch of Defy lab last year. It has 15 models of the watch this year, up from three last year.
Since Tornare’s arrival, Zenith has changed the names of its product lines, which include two contemporary, modern lines and two more classic ones.
Classic watches are the Elite, with two or three hands, and the Chronomaster, with three counters, while the contemporary Defy and Pilot lines will be the focus of the brand’s communication efforts.
While inspired by the past, the Pilot is a contemporary take on a vintage look, he explained: “It’s cool now, vintage — people want to buy vintage.”
Zenith once sold as many as 800 references but is reining the number back to 100. It is also sharpening its retail focus, aiming for 500 points of sale in the next two years, after already whittling down the amount from 841 to 720 this year. The brand is vetting agencies that have pitched ideas for a new corporate image and a new advertising campaign.
The executive said he is also pushing to shake up the brand’s day-to-day operating style by introducing a bit of a “start-up spirit.”
“Lots of people in Swiss watchmaking have a tendency to work in silos. I want to knock this down and open things up, so people will work together, in open spaces. I really want to create an environment that is fairly different,” he said.
After a period of getting to know the teams, he has started making some changes, recently recruiting a new marketing and communications director from Bell and Ross, Clarisse Desgeorge.
Tornare was recruited from Richemont, where he had managed Vacheron Constantin’s operations in New York and Hong Kong. The move to Switzerland was a homecoming of sorts for the Swiss-born executive, who notes that the population of the village he moved to could be contained in two or three Hong Kong high rises.
Other Swiss watchmakers bringing a new boss to Baselworld this year include Swatch Group-owned Breguet, with ceo Thierry Esslinger, and Frédérique Constant, which named a new managing director, Niels Eggerding. The executive had been working at the company for four years.
Peter Stas, Frédérique Constant Group president, and his wife Aletta Stas-Bax continue to oversee the group’s other two brands — Alpina Watches, a Swiss company founded in 1883, and Ateliers DeMonaco, a high-end watch manufacturer based in Monaco. The couple, who built the group over nearly three decades, sold it to Japanese company Citizen Watch Co. in 2016.
The challenge facing Swiss watchmakers, according to Stas, is that the Apple Watch over its three editions has evolved into something that moves beyond the functional.
“There is a clear shift in what you see. First, they were focusing on notifications and a little bit on fitness, then they started to focus more on fitness,” said Stas. But it’s the third generation’s focus on health that poses a real threat to the Swiss watch industry.
“It’s when those watches really start to live up to their expectation — and I know already from various anecdotes that they are starting to, that they really give people meaningful information about their health — then those watches are slowly starting to become indispensable,” said Stas.
The executive is coming to Basel with a new mechanical watch that has smart watch features, called the Hybrid Manufacture.
“It will enable us to reach the pure watch enthusiasts who want to have a mechanical caliber,” said Stas.
Frédérique Constant is in the process of producing 3,000 pieces of the new watch. The company integrated its mechanisms with an electronic layer of smart watch functions by inserting components into spaces around the mechanical movement. The brand will be able to ramp up production to 4,000 pieces this year, and 2,000 have already been pre-ordered, following a launch with actor Mark Ruffalo in New York last month, according to Stas.
Some mechanical parts were moved to different places and on top of the mechanics, the watchmakers added a new plate that holds down the various parts, including a shield to protect against the magnetism created by the electronic parts.
Frédérique Constant issued a purely electronic smart watch in 2015, and has sold 50,000 of the model, representing around 12 percent of annual revenue, according to Stas.
High-end watch maker Chanel, meanwhile, continues to pursue the exploration of masculine and feminine territory, bringing the new Boyfriend Skeleton Calibre Three, an octagon-shaped watch that contains the house’s skeleton movement.
“It’s a watch with a boyish style, because the idea of the Boyfriend from the beginning is to steal the codes from masculine watchmaking while making something that remains feminine in its dimensions,” said Nicolas Beau, Chanel’s international watch director.
To Beau, the smartwatch is a practical, modern tool, but it doesn’t keep women from slipping on fancy watches to complement their dresses on an elegant evening out.
“If we made watches in the $400 range, we’d be scared — the luxury watch is a bit different in that its associated with special moments in life,” he said, citing birthdays and weddings. “With a smart watch, we don’t celebrate anything, we take pleasure in having an object that helps with daily life. A watch — it doesn’t give the time any more, it’s there to bring pleasure,” said Beau.