As of June, according to the FHS, all the principal watch markets are in decline. In January through June, the exports of Swiss watches dropped 11.9 percent in terms of units and 10.7 percent in terms of value compared to the same period last year.
Precious metal watches performed the worst with a 31.4 percent decline in the first half of 2016. Watches priced between 500 – 3,000 francs (export price) represent the only segment to have avoided a double-digit decline during the same period (which is consistent with the previous 12-months).
If you want to see more comprehensive Swiss watch industry half-year statistics, I recommend this well-written Bloomberg article.
I will instead highlight just two key segments: precious metal watches and 500 – 3,000 Swiss franc watches. These two areas are the respective high/low outliers within the general results reported as of June. The numbers don’t lie.
Accessibly priced watches are in, and precious metals are out. Companies that have been proactive and made corrections based on declining demand for gold watches, for example, will likely see the least negative impact on sales and profit in comparison to companies who merely react, or that deny there is a problem altogether.
Swatch Group, for example, just announced that first half 2016 profit has been more than halved compared to last year. Swatch Group CEO, Nicolas Hayek Jr., did correctly point out that the group did still make a profit despite the massive drop. Nevertheless, that statement seems to deflect the fact that there is a major problem.
In my opinion, the overall problem with the Swiss watch industry – apart from the ever-growing list of external factors, such as terror attacks, the impending US Presidential election, the anti-corruption campaign in China, the strong Swiss Franc, smartwatches – lies in their outdated marketing methods, and the production of too many products that consumers don’t want or cannot afford. After years of above average gains, the Swatch Group (and many Swiss watch companies) have finally been met with the reality that such increases cannot go on forever.
Ever-increasing prices, hideous designs, huge watch cases, and precious metal are not in vogue. In fact, the opposite is true. Not to mention, glossy magazines are not an effective means to market products anymore considering that the consumers, at all price points, have computers and smartphones, and get most of their news digitally. (As a digital publication that statement may appear self-serving but if you read on it will make more sense.)
As one example of what consumers do want, look at the Oris 65 Divers collection. The second I laid my eyes on the watch I knew it was a hero. And not surprisingly, the conservatively sized and priced steel watch is selling like crazy. Even collectors with six-figure collections, that usually buy much more expensive timepieces, are buying them. Oris is doing it with a minimal marketing budget, too, thanks in part to the advent of social media.
The most popular and iconic watches evoke a sense of emotion, style, mechanics, heritage. Not bling. Not ostentation. Not gimmicks. Not ridiculous markup.
Have we teleported back to 2009? Have watch companies forgotten the lessons learned during the last watch crisis?
Just like back in 2009 when I shot the (image above), at Baselworld, during the peak of the crisis, which saw the value and quantity of Swiss exports plummet – there is no pill to solve the current watch crisis. However, if Swiss watch companies really listen to consumers and build products they actually want – and then price, promote, and place those products in a realistic way – they will sell more watches. This is, after all, the basic premise of consumer marketing.