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Forecasts for 2014
Point of View

Forecasts for 2014

Wednesday, 04 December 2013
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Franco Cologni
President of the FHH Cultural Council

“Talent demands effort, dedication and hours spent perfecting a gesture which, day by day, becomes a gift.”

An entrepreneur at heart, though a man of letters, Franco Cologni was quick to embark on a business career that would lead him to key roles within the Richemont Group.

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Experts, analysts and journalists have already delivered their end-of-year forecasts based on Swiss watch exports at September 30th, and predict a fall of 5% in volume terms but an increase in value terms of 2% on 2012. With little reason to believe these estimates will vary greatly between now and the end of the year, results for 2013 are likely to be in sharp contrast with last year’s strong performance. The segment closest to our heart, namely watches with an export price above CHF 1,500, confirms a rise in exports of 1% in quantity and 2% in value, which indicates a stable market.

By breaking down high-end watch exports into three segments – CHF 1,500-3,000 for luxury watches, CHF 3,000-6,000 for prestige watches, and above CHF 6,000 for fine watches – we can note with interest and satisfaction that the latter segment has recorded an increase of 4% in both volume and value terms, ahead of the luxury and prestige segments where results range between -1% and +1% in both volume and value. There should be no change to these figures for the year as a whole.

I’d like to look beyond the numbers. After all, every watch sold is sold to an end customer, from ordinary enthusiasts to collectors. In other words, the customer writes the rules, and in 2013 the trend is clearly towards stability, however much sales in one region might compensate another, however many new recruits join the community of admirers of finely-crafted timepieces. When discussing exports, we are of course referring to the retailer rather than the end customer. To have a true picture of the market, we would need to know how much stock is held in the various distribution networks because, in my opinion, supply is currently greater than demand, particularly in China. However, we have no means of knowing how much unsold inventory remains.

But let’s look ahead to next year. Leaving aside the gloomy predictions of a Cassandra or a Nostradamus, we’ll instead consult Pythia, the Oracle of Delphi, for a more meaningful prophecy. What does she have to say? That the fine watch segment should progress by more than 5% in volume while the luxury and prestige segments are unlikely to exceed 2% to 3%. The market euphoria observed between 2010 and 2012 is clearly reaching an end as we prepare to enter a calmer period, marked by prudence.

Swiss wrist watches exports (Source: Federation of the Swiss Watch Industry FH)

As for the markets, in our segment of watches with an export price above CHF 1,500, there will be no great changes, particularly in terms of volume sales. Asia is no longer the promised land and should continue to account for some 35% of total Swiss watch exports. North America and Japan are expected to remain steady at 12% and 8% respectively. The Middle East should go from 9% to 10%, and Latin America to 4%. Stability is also expected in Europe at around 30%, excluding a drop in tourist numbers. Where the remaining 2% will originate remains to be seen. The surprise could come from Africa which is beginning to shine.

One final precision: in fine watchmaking, mechanical reigns supreme although there is an offering of quartz watches, principally jewelled timepieces for women. While prestige watches continue to seduce women more with their precious stones and design than their movement, the situation is changing fast. In conclusion, we expect the sector to consolidate in 2014, gaining a couple of percentage points. Period. 2014 is the Year of the Horse in the Chinese horoscope and, with a little poetic licence, we can safely say that Swiss watchmaking will trot more than it will gallop!

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