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Is it all change for the Swiss watch industry in 2020?

Is it all change for the Swiss watch industry in 2020?

Monday, 06 January 2020
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Christophe Roulet
Editor-in-chief, HH Journal

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4 min read

An ongoing drop in volume exports, an inexplicable intervention by the competition watchdog, problems in Hong Kong, individual exhibition strategies… the face of the Swiss watch industry is changing in 2020.

The watch industry enters a new year in which, to use an astrological metaphor, the planets have yet to align. While no amount of crystal ball-gazing can say what the coming months have in store, we can expect a bumpy, not to say rocky road ahead. The hard numbers are of little comfort. After an upbeat 2018 during which Swiss watch exports gained 6.3%, shipments were unable to maintain the pace, resulting in a twelve-month moving average at end November 2019 that hovered around the +2% mark. Despite being traditionally a month of gift-giving, sales in December are unlikely to move the needle.

The industry has hit a downward trend that will be more heavily impacted by social and political upheaval than in the first six months of 2019. Brexit still looms, but with some of the doubt now removed following the general election in December, brands will likely put a brake on their exports to the UK. The biggest thorn in watchmakers’ side remains Hong Kong. Exports to the region have plummeted since the beginning of pro-democracy protests, dropping almost 30% in October 2019 and by the same amount again in November. At this rate, the special administrative region of China could soon be overtaken by the United States as the main destination for Swiss timepieces.

Outside interference

The continued fall in export volumes, down 13.4% or 3 million units at end November 2019, is another cause for concern, not least as the decline actually gained pace in 2019, leaving no doubt as to the impact smartwatches are having on sales at lower price points. However much makers might dismiss the Apple Watch and cohorts as watches in name only, they present a serious and direct challenge to quartz, and for as long as Swiss manufacturers fail to come up with a realistic response, the situation is unlikely to improve.

This was one of the reasons cited by Switzerland’s anti-trust regulator, Comco, when it announced a decision many observers find hard to fathom. In the next step of a procedure begun in 2013 – by which Swatch Group, the world’s biggest watch group, was under obligation to carry on supplying third parties with mechanical movements until end 2019 -, two weeks before the deadline Comco issued a contradictory ruling that bans Swatch Group from supplying large rivals with movements as from January 1st 2020. The measure allows the group to continue deliveries to smaller companies and constitutes a transitional phase while the regulator reviews the situation prior to issuing its final decision – something it evidently has not had time to do in the last seven years.

Wanted: new formulas

Switzerland’s federal administration moves in ways the average observer would be hard-pressed to understand. In defence of its ruling, Comco reasons that the drop in volume sales means brands will have no difficulty sourcing movements. Swatch Group was quick to respond, issuing a statement in which it describes these provisional measures as “incomprehensible and inacceptable.” Leaving aside the technical details, suffice to say Comco is creating uncertainty the industry could well have done without. All in the name of competition which, in reality, the new ruling distorts given that Swatch Group is no longer the market’s dominant player.

The regulatory body has promised it will publish the findings of its review this summer, by which time the main industry gatherings will have taken place. Here, too, questions subsist. What will happen to Baselworld, with Japan’s Seiko the latest brand to pull out? What schedule can we expect from LVMH whose watch brands are hosting their own exhibition in January in Dubai before travelling to Basel three months later? What model will we see from brands that choose to go it alone, such as Audemars Piguet, Richard Mille or Greubel Forsey, in the wake of Breitling? In the midst of these multiple initiatives, Watches & Wonders Geneva (ex-SIHH) will roll out a bold new format that includes events across Geneva city centre to bring watchmaking and its professions to a wider audience, including next generations. In the face of omnipresent social media, evolutions to distribution models and the emergence of a new clientele, the watch industry is seeking tomorrow’s winning formulas. Starting in 2020.

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