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From Lehman Brothers to Fine Watchmaking

From Lehman Brothers to Fine Watchmaking

Friday, 27 November 2009
By Quentin Simonet
Quentin Simonet

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5 min read

Symbolically at least, this is how it began. When Lehman Brothers collapsed in September 2008, a wave of panic swept through the world’s financial markets and the global economy. How has this affected the watch segment, which this year risks a shortfall of between three and four billion Swiss francs?

Fact number one: prestige watches have felt the backwash almost as much as the rest of the branch. “The high-end of the sector has also suffered the effects of economic crisis, even if the impact did come later,” Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry (FH), observes. “This has been a sustained decline, although we are comparing with the excellent results of 2008 when the high-end outperformed every other segment, hence a significant base effect. The very high-end category of CHF 50,000 and above [ex-works price] seems to have been less affected, although at this level we are dealing in very small quantities.” Thus Fine Watches have been unable to cast off the mantle of recession, although the often substantial differences between brands invite a more nuanced assessment. This notwithstanding, the higher up the pyramid we climb, the less exposed brands are.

The end of "empty" products

According to Jean-Claude Biver, CEO of Hublot, it’s too soon to be talking about a paradigm shift. “I don’t see us in the throes of change because of recession. Perhaps because it hasn’t lasted long enough for us to feel the effects, or because companies had built up reserves before it set in? Or is it because ours is a solid industry that has no structural weaknesses but is simply experiencing a slowdown in consumption? In truth, it’s a bit of everything at once.” Countering the prophets of doom, he continues: “We cannot deny that recession has caused exports to fall back to 2006 levels, which was still the third-best year the segment has ever known.”

Over at Corum, CEO Antonio Calce observes how economic gloom has prompted a return to fundamental values. “Consumers are turning their backs on extravagance, exuberance and bling in search of authentic timepieces which clearly demonstrate the expertise and creativity of the branch. We’re dealing more with a market of connoisseurs who expect something in return for their money, which is why price positioning is more important than in the past.” Rolf Schnyder, CEO and owner of Ulysse Nardin, has this wish: “A high-end timepiece can no longer lack substance. At least I very much hope so.”

Antonio Calce, CEO of Corum © Corum
Antonio Calce, CEO of Corum © Corum

Emmanuel Vuille, CEO of Greubel Forsey, believes that while the Fine Watch market hasn’t escaped recession, it does have a sizeable advantage in that it knows who its customers are. “This means it can reach them directly through established networks. Fine Watchmaking isn’t at the mercy of recession and must take initiatives. Not to mention that volume has only limited consequences.” He concludes by adding that the notion of sales service plays an increasingly decisive role.

Emmanuel Vuille, CEO of Greubel Forsey © Greubel Forsey
Emmanuel Vuille, CEO of Greubel Forsey © Greubel Forsey
A fact of life

The truth nonetheless is that everyone has suffered to some degree. Witness the restructuring, job losses, short-time working and even redundancies in the segment. For some, this is nothing more than economic Darwinism. Jean-Claude Biver prefers to take a more impassioned approach. “In my view, changes to come will be less the consequence of economic crisis and more normal changes driven by how the industry is evolving. Note that very few businesses have shut up shop, despite predictions that many small brands would go under.”

This doesn’t change the fact that recession has hit retailers full on. Many have gone bankrupt (an estimated 5,000 have closed down in the United States). Says Antonio Calce: “Retailers are still facing problems of inventory and cashflow. It’s important that we work our way through this period together and offer mutual support.” Indeed, company heads all agree that brands have a real responsibility towards a fabric that feeds them and is ultimately the backbone of the profession.

Economic history is an eternal recommencement, so what can we learn from the current debacle? Jean-Claude Biver believes the biggest lesson is to know how to anticipate the next one. “Even though recessions are extraordinary occurrences, in the proper sense of the word, they are a part of any long-term growth and as such we must incorporate them into our development models.”

"We’ve turned a page"

The future of Fine Watches will thus embrace authentic values, together with a recognition and appreciation of expertise alongside innovation and creativity that stay true to a certain tradition. Equally evident, from as early as the 1990s in fact, is that for watchmaking to prosper, it must adapt to today’s economy. This means constantly optimising its production logistics and distribution strategy. “I think that in the future we will have to build and maintain closer links with the customer and retailers, while promoting a greater understanding of watchmaking as a whole,” Antonio Calce says.

Emmanuel Vuille takes a slightly less optimistic view. “We’ve turned a page. The product, its quality and coherency, the longevity and history of the brand, have become essential. We also need to remove barriers between the different players, meaning brands, distributors, retailers and ultimately end customers. They are the ones we must satisfy by working together. Fine Watchmaking has evolved into a more difficult, more complex but also more stimulating profession. The current situation will help us put our house in order. The strongest, which doesn’t necessarily mean the biggest, will remain,” he predicts. So each must find their place. “Many years later,” to borrow a phrase from the Colombian author Gabriel García Márquez, will we still remember this recession? Only the future will tell. If nothing else, it should make for a return to reason.

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