Economy Friday, July 6th 2012
As the historic cradle of watchmaking, where Swiss timepieces need no introduction, Switzerland is a strategically important market for many Fine Watch brands.
"There are no official figures, but we can reasonably assume that Switzerland accounts for something like 5% of total watch sales. It's a significant market. Our country offers watchmaking a unique showcase, for tourists in particular who we estimate buy two-thirds of the watches sold in Switzerland. In regions such as Lucerne, Geneva and Interlaken, the figure is probably closer to 90% whereas in somewhere such as Lausanne, it would be substantially lower," Philippe Pegoraro, who heads the Economy and Statistics Department at the Federation of the Swiss Watch Industry, told HH Magazine.
Switzerland on a par with Singapore
A number of conclusions follow on from this remark. Firstly, including Switzerland in industry statistics takes the branch well clear of the CHF 20 billion (USD 20.5 billion / EUR 16.6 billion) mark. Last year, Swiss watch exports totalled CHF 19.3 billion (USD 19.8 billion / EUR 16 billion): add Switzerland to the equation and the branch is generating in the region of CHF 20.2 billion (USD 21 billion / EUR 17 billion). Arithmetically, this puts a value of CHF 1 billion (USD 1.02 billion / EUR 0.83 billion) on the Swiss market, more or less equivalent to Singapore. However, the influx of tourists into Switzerland, led by visitors from Asia and in particular China, gives every reason to believe the actual figure is slightly higher. For the first time last year, the number of overnight stays by Chinese tourists (600,000) exceeded the number for Japanese visitors (500,000). In ten years, the figure has been multiplied by six.
Similarly, Indian tourists have increased their overnight stays fivefold since 1992. Equally substantial rises have been noted over the same period for travellers arriving from Central America and the Caribbean (+106.8%) and Brazil (+55.5%), leaving no doubt as to the boost emerging countries are giving Swiss watch sales. As two retailers in Geneva and Lausanne explain, tourism has given fresh air to the market: "Brands now supply us with models which previously went straight to export." These same brands are also keeping their own stores stocked with exclusive models, limited editions and other new launches, generally the more expensive pieces in their ranges and therefore apt to increase Switzerland's share of the market overall.
Bought in Switzerland
This is something watchmakers have, of course, integrated into their strategy with a surge in new openings. TAG Heuer, for example, has three new own-name stores lined up. The La-Chaux-de-Fonds brand has already cut the ribbon in Lucerne at end May, and again at Zurich airport early June. A third point of sale will open in Geneva towards the end of the year. Previously, the brand had 90 stores in Switzerland. It takes no great stretch of the imagination to see that Switzerland has the same symbolic value as the major European tourist zones. As Thierry Stern, President of Patek Philippe, recently observed, "Europe plays a vital role in showcasing our products. American and Asian customers travelling in Europe will look to see which brand has the strongest presence. Europe, and de facto Switzerland, are a means of selling elsewhere as this dynamic carries over into other countries."
In the historic cradle of watchmaking, Swiss timepieces need no introduction. "We have always considered Switzerland to be a strategic market where we make 30% of our sales, though with a downward trend as we expand internationally," says Alain Spinedi, CEO of Louis Erard. Buying a Swiss watch in Switzerland is now on many tourists' "to-do" list, if only to circumvent prohibitively high taxes back home. "In addition to the growing ranks of local connoisseurs, we benefit from the fact that overseas customers make it a point of honour to purchase a timepiece in watchmaking's country of origin, and more importantly from our historic Quai de l'Ile boutique in Geneva," notes Vacheron Constantin. It makes between 8% and 10% of its global sales in Switzerland, depending on the year.
Emmanuel Vuille, Chief Executive at Greubel Forsey, quotes standard of service as ranking high among the advantages Switzerland offers watch-buyers. "We have a constant presence in Switzerland. That our Manufacture is here means we can arrange a visit to the workshops and a presentation of our watches at a moment's notice." This connoisseur's brand, established in La Chaux-de-Fonds, makes 5% to 7% of its sales in Switzerland.
A further point to consider is the impact of exchange rates which add to the purchase price for visitors who pay for their watch in Swiss francs. "Last year was complicated because the franc was strong against the euro," Luc Perramond, CEO of La Montre Hermès, observes. "Even so, we maintained an upward trend. Switzerland remains an important market that drains a large share of educated and wealthy tourists." Ricardo Guadalupe, Chief Executive at Hublot, emphasises heritage and identity as key factors. "We make close to 7% of our sales in Switzerland. It's an important market for Hublot and always has been, because it's our home market." As a strategic market, Switzerland hasn't said its last word. ■