One of many luxurious items sector’s showpiece occasions returns this week with its mixture of innovation, artwork and wealth – topped off with a sprinkle of celeb stardust from “model ambassadors” from Hollywood or sport.
It is Geneva’s annual watch truthful, Switzerland’s international promotion of an industry that’s nonetheless the nation’s third largest exporter, after chemical substances and equipment.
The Salon Worldwide de la Haute Horlogerie (SIHH) is the place producers (the occasion is dominated by Richemont and its many manufacturers) and small artisan workshops show their newest merchandise to sellers, collectors and most of the people.
You will not discover a lot on present on the four-day occasion that is out there in your native division retailer. However you will see that watches of astonishing complexity costing tons of of 1000’s of kilos.
The “Made in Switzerland” label continues to be thought to be the hallmark of high quality in mechanical watchmaking. It is the place analogue nonetheless guidelines in an more and more digital age.
The industry gathers this week after typically wholesome gross sales in 2018, though clouds dangle over the sector.
Worries about international commerce, the rise of the smartwatch, and an industry-wide restructuring proceed to place a brake on progress and funding.
Even watch exhibits themselves are altering. SIHH and archrival Baselworld have agreed to synchronise future dates in a bid to ease their competitors for the eyes of the world.
The industry wanted to vary after a very dismal 2016 and 2017 attributable to a downturn in key markets, oversupply of watches, a crackdown on “gifting” (bribery) in China, and subdued tourism in some European cities as a result of terrorism.
Fabienne Lupo, chairwoman and managing director of the Fondation de la Haute Horlogerie (which organises SIHH), says the industry went by way of “a disaster interval”. However after a painful restructuring and job losses, she says the “developments are trying fairly good”.
Newest knowledge from the Federation of the Swiss Watch Trade (FH) exhibits that within the 11 months to the top of November the worth of exports was up 7.1% on the earlier interval at 19.54bn Swiss francs (£15.5bn; $19.9bn).
The largest market, Hong Kong, was up 21% and the following two largest, the US and mainland China, rose eight% and 14% respectively. The rise in exports to the US comes after three years of consecutive declines.
What’s extra, international shipments in the important thing luxurious watch market – thought of to be something with a manufacturing unit gate worth above three,000 Swiss francs (CHF) – are up 11%, whereas these within the sub-500 francs bracket are down about 15%.
On Friday, Cartier-owner Richemont, the world’s second largest luxurious items group, posted a 5% rise in quarterly gross sales, bolstered by double-digit progress in China.
However, in response to analysts at funding financial institution Morgan Stanley, such constructive headline numbers belie main challenges for large gamers like Swatch Group (which does not take part in SIHH) and Richemont.
In a report final month, Morgan Stanley warned of a “disruptive and game-changing” few years as extra retail gross sales transfer on-line.
The analysts estimate that there’s about €16bn (£14.5bn) price of inventory with third-party retailers worldwide. Wholesalers have been aghast on the quantity of discounting on-line, which not solely hurts profitability but additionally model worth.
Corporations can purchase again the stock, however it’s costly. In 2017 Richemont purchased again €200m of unsold watches – and destroyed them so they’d not be offered at knockdown costs.
Richemont, which additionally owns the Vacheron Constantin and Jaeger-LeCoultre watch manufacturers, described its buyback technique as an “distinctive measure” for “distinctive instances”.
That radical transfer, together with administration modifications, funding in on-line, and a repositioning of manufacturers, is a minimum of making Richemont’s watch division match for the long run, analysts say.
“The industry has been by way of a protracted interval of consolidation,” says Ariel Adams, founding father of the influential web site ablogtowatch.com. “Corporations have bought manufacturers as investments. However loads of manufacturers haven’t been allowed to develop.”
Some manufacturers have misplaced their approach, he says, partly due to frequent administration modifications and partly as a result of they want funding. He believes some manufacturers will not be round in a few years, such is the crowded market.
The watches being produced at the moment are lots much less thrilling than 10 years in the past, he says. “Client demand is nice. The issue lies with the individuals who promote watches.”
Morgan Stanley says smartwatches will proceed to take market share from mechanical and quartz merchandise as Apple, Samsung, Fossil and others develop their know-how.
That is unlikely to harm Swatch Group’s many high-end manufacturers similar to Longlines, Breguet, Blancpain or Jacquet Droz. However, with the Apple Watch priced at about 450 Swiss francs, it is a risk to low-end merchandise.
“From a structural standpoint, now we have change into incrementally extra bearish all year long on the impression smartwatches could have on the Swiss watch industry,” Morgan Stanley says.
Ms Lupo says the risk from the smartwatch revolution is overplayed. “Smartwatches are complementary to mechanical watches,” she argues. “In our metropolis you see individuals with one every of their wrists.”
It is tough to envisage many millennials going to these lengths. However Ariel Adams says smartwatches are taking part in an essential function in getting younger individuals “to assume and put on watches”.
20 years in the past, sporting a watch was going out of style. He sees smartwatches as “a gateway to luxurious watches”.
“Younger individuals are listening to watches, and that provides the industry a possible new era of customers,” he says.
What’s extra, producers are dabbling with incorporating good tech in watches which have the outward look of being all-mechanical. Some have experimented with screens on watch straps.
This yr’s SIHH has a show space known as The Lab to showcase watch know-how and the usage of robotics, 3D printers and synthetic intelligence.
Though the Swiss watch industry trades off heritage and custom, Ms Lupo insists: “We’re a really fashionable technological industry, regardless of being a really haute [fine watchmaking] industry.”
And if you’d like examples: Vacheron Constantin created a watch with 2,826 components, whereas Patek Philippe has one with 1,728 components. And these should rank as technological achievements in any age.