In the space of a few days, the watch sector in general, and Fine Watches in particular, has been inundated with good and even great news, as though events had conspired to prove that the slowdown forecast for the second half of the year is, for the moment, all in the mind. Export figures for the month of May set the ball rolling. With sales of watches and parts outside Switzerland climbing 14.6% to CHF 1.5 billion versus the same month 2007, the industry looks comfortably settled into the same favourable trend of the past three years. Over the first five months of the year, the level of exports exceeded that of January-May 2007 by 15.3%.
And because good things come in packages, a closer analysis of these figures shows that high-end watches turned in the best performance over the period in question. The Federation of the Swiss Watch Industry observed that “growth in watch exports in May was supported exclusively by wristwatches costing more than CHF 3,000 (editor’s note, ex-works price) which posted rates of variation in the region of 40% or more. Timepieces costing less than CHF 200 recorded slight growth, while products costing between CHF 200 and CHF 3,000 showed a downward trend.” As for the markets, sales rocketed in certain regions such as Singapore (+72.1%), the United Arab Emirates (+54.7%), China (+38.1%) and Hong Kong (+23.1%). Even France recorded an increase of 28.4%. Japan, unsurprisingly, is still in the red at -5.9% while the slowdown in the United States was confirmed as sales inched forward just 1.1%.
Needless to say, with growth at this level, the vast majority of watch firms are looking to develop their labour force and production capacity, a trend that is clearly illustrated in the latest census carried out by the Convention Patronale de l’Industrie Horlogère Suisse (CPIH) which represents employers in the Swiss watch industry. More good news for a sector that continues to go from strength to strength. “The Swiss watch industry set a new record for recruitment in 2007,” writes the CPIH. “The total workforce reached 48,835 people. This is almost 4,400 more in one year, an increase of 9.9%. Meanwhile, the number of companies grew by 32 (5.4%).” Hardly surprisingly, the largest increase in staff was in the production branch, which took on an additional 3,350 workers to reach a total of 36,515.
It’s worth noting that the 2007 spike corresponds to the highest increase of recent years. “Since falling to its lowest level in 1987, at 29,800 workers, employment in the sector grew steadily to reach close to 40,000 people in 2004,” continues the CPIH. “This upturn has significantly accelerated since: in three years, close to 9,000 workers have joined the sector, an increase of 22%. The watch industry now boasts the same number of workers as in 1980.” Furthermore, these are increasingly qualified positions. Currently, 10.8% of production staff have been through higher education and 39% hold a vocational diploma. Semi-skilled or unskilled staff now represent just 40% of the branch’s total workforce.
An expanding target audience
The latest news to warm watch professionals’ heart, or at least the ones at the top of the pyramid, came with the publication of the World Wealth Report, an annual survey by Merrill Lynch and Capgemini of the number of affluent persons worldwide and changes to their wealth. These are the very people that Fine Watch companies are targeting. The latest report, released at end June 2008, reveals that the number of High Net Worth Individuals (HNWI) – that is people with financial assets excluding their primary residence of at least US$1 million – grew 6% in 2007 to 10.1 million worldwide. Global HNWI wealth gained 9.4% at US$40.7 trillion. At +8.8%, growth was even stronger in the ultra-HNWI band of individuals, who have assets of at least US$30 million. As the report points out, for the first time since the survey began, average HNWI wealth surpassed US$4 million.
With their expanding economies and, in certain regions, exploding market capitalisation, the biggest increase in HNWI populations was recorded in the so-called emerging markets, gaining 15.6% in the Middle East, 14.3% in Eastern Europe and 12.2% in Latin America. At national level, India (+22.7%), China (+20.3%) and Brazil (+19.1%) clearly led the field although Russia (+14.4%) is also among the ten nations where this wealthy population has expanded the most. Hardly surprising, in these conditions, that the BRIC nations of Brazil, Russia, India and China stand out as the new eldorado for the watch branch. The question now being asked is whether the US subprime crisis will put a spoke in the wheel? Not so sure. While mature markets are clearly slowing down, emerging markets continue to forge ahead, their main concern being inflation. Merrill Lynch and Capgemini have made no change to their forecasts, projecting that HNWI wealth will advance at an annual rate of 7.7% until 2012, by which time it will equal US$59.1 trillion. Which should give even the most pessimistic observers something to smile about…