How times change.
This story first appeared in the January 14, 2011 issue of WWD. Subscribe Today.
Only last year, Swiss watchmakers were cautiously banking on a recovery in sales after the global economic crisis sent exports plummeting in 2009. As the industry prepares for the Salon International de la Haute Horlogerie (SIHH), running from Jan. 17 to 21 in Geneva, it is looking forward to hitting new peaks this year, thanks to an unexpectedly strong rebound in consumers’ appetite for luxury timepieces.
“We have been positively surprised by the strength of the recovery in exports,” said Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry (FHS). “We believe 2011 could be a record year.”
Swiss watch exports rose 21.8 percent between January and November last year to 14.6 billion Swiss francs, or $13.94 billion, according to the most recent available FHS data. That brings the market back to levels last seen in 2007 — historically, its second-best year after 2008, noted Pasche.
In a recent report, Zurich-based investment bank Vontobel said exports should rise 8 percent this year to 17.3 billion euros, or $18.12 billion at current exchange, beating the record of 17 billion euros set in 2008.
As a result, the watch sector, which shed a total of 4,200 employees in 2009, is hiring again.
Hublot is seeking 50 extra staff in departments ranging from watchmaking to electrotyping, a spokesman for the brand said. Tag Heuer is hiring 40 people, including watchmaking operators, engineers, technicians and administrative staff, while Audemars Piguet is recruiting 25 employees in various fields.
However, not all firms have benefited from the recovery. Suppliers have yet to feel the trickle-down effects of rising demand, with some still resorting to furloughs in order to avoid firing employees, according to Pasche.
And of the new jobs being created, many are temporary positions, noted François Matile, secretary general of the Convention Patronale de l’Industrie Horlogère Suisse, an organization representing employers in the Swiss watch industry.
Nonetheless, Matile was optimistic about the outlook. He believes the number of jobs in the industry remained stable last year at around 49,100, thanks largely to efforts by leading manufacturers to avoid layoffs, leaving the sector well equipped to tackle future growth.
“We went through a tough 18 months, but the reassuring thing about that period is that it was clear the sector was not dealing with structural issues. All that was missing was the customer,” said Matile. “Now the financial crisis is over, the watch industry is ready to pick up where it left off.”
There are some clouds on the horizon: The Swiss franc last month hit a record high against the U.S. dollar, euro and British pound, making Swiss exports less competitive, while the price of precious metals like gold has steadily climbed in the last year.
Those pressures should prompt brands to continue raising prices in 2011, industry observers said.
“It’s a process that has already begun,” noted Pasche at the FHS. “It is possible and, indeed, very probable that prices will rise. But it’s impossible to say by how much overall, because that will depend on each brand’s policy. After all, raising prices is also risky and can provoke a negative reaction.”
In its report, Vontobel said brands including Rolex, Cartier, IWC and Audemars Piguet marked up their goods in Europe in 2010, but Swatch Group has held back so far.