What are your favorite brands for budget watches

Focus

| Focus

Swiss watches are the problem children of the industry.

For the first time since the financial crisis, the Confederates recorded some dramatic slumps in their export business. Business with Asia in particular is suffering. Is noble manufacturing suddenly no longer in keeping with the times?


Sometimes less is more. At least on the wrist. If you look at the mighty world’s wristwatch, you will recognize a trend: understatement. Barack Obama's often photographed Jorg Gray is available for the equivalent of less than 200 euros, French Prime Minister François Hollande wears the “Swatch Quarterman” for around 135 euros, Angela Merkel reads the time from her “Boccia Titanium”. It costs just 89 euros.

The big Swiss watch manufacturers would probably like to turn back time by three to four years. At the time, Nicolas Sarkozy was driving France and presenting his Patek Philippe to photographers. Silvio Berlusconi was still in office at the time, and his Vacheron Constantin costs around half a million euros. But the era of Berlusconi and Sarkozy is over - and obviously the rich years of the Swiss watch industry are also numbered. For the first time since the economic and financial crisis, the Federation of the Swiss Watch Industry FH (Fédération de l’industrie horlogère suisse) reported a decline in exports for the past year. The numbers were particularly alarming in the first four months of this year: a decrease of 28.2 percent for Hong Kong, 20.8 percent less export income from Taiwan, 15.2 percent less for China, similar to the decline for Singapore.

At the end of 2015

the Swiss had exported 460,000 fewer watches, which corresponds to a decrease of 7.3 percent.

Five years ago, sales of Swiss watches grew by a double-digit percentage. The largest and most important customers were Hong Kong and China. Almost every other clock went there. The downward slide then began in 2015. At that time, the Swiss National Bank (SNB) abandoned the minimum exchange rate between the franc and the euro. At the end of 2015, according to the FH, the Swiss had already exported 7.3 percent fewer watches - a total of 460,000 timepieces. That doesn't sound like a dramatic thing at first, after all, the Confederates delivered 28.1 million watches all over the world in 2015. In fact, the number of items has not shrunk as much as the sales value - it lost 3.6 percent compared to the previous year. The Swiss could not earn any money with watches in the price segment of 200 to 500 francs in particular - exports of medium-priced watches fell by 8.7 percent in value. The upscale and luxury segments also fell far short of the industry's expectations. Inexpensive models with an export price of up to 200 euros were the only ones to increase marginally.

However, a paradigm shift from expensive to cheap alone cannot explain the downward trend in exports, especially for Asia. One should also look at the hands of Chinese rulers. Lo and behold: The joint of China's President Xi Jinping looks naked in all the photos on the Internet without a watch. His ostentatious renunciation of luxury is only logical: in 2012, Xi Jinping's anti-corruption campaign, which continues to this day, called out the hunt for anyone who accepted expensive watches as bribes. And since the Chinese used to like to go on watch shopping tours in Hong Kong, but have since suffered both their consumption and their shopping goals, the demand for Swiss watches is weakening, especially in Hong Kong.

The influence of the Swiss franc cannot be denied

This is also felt by the German dealers, such as the jeweler Georg Leicht, who, in addition to Pforzheim, operates eight other exclusive locations in major German cities. According to his own statement, he has 20 percent fewer Asian customers. This can easily be attributed to a change in shopping behavior among the Chinese and their travel guides. “The first three months of this year were particularly weak,” he says. For colleagues who have geared their product range mainly to customers from the Far East - for example with their favorite brands Omega and Longines - “the situation is more than just a slight problem”.

Fewer tourists and fear of terrorism could explain the drop of almost 12 percent in France, while low oil prices and signs of economic downturn could explain those in Asia and Russia, where shipments were made a whopping 35 percent in 2016, suspects Jean-Daniel Pasche, President of the Swiss Watch Industry Association FH (Fédération de l'industrie horlogère suisse, see interview). In addition, there is the still strong Swiss franc: “The influence of the Swiss franc is great and the brands have to react in order to remain competitive,” he says. Some watch brands cut costs and narrowed margins, while others increased prices, he reports.

Not all Swiss watch manufacturers allow themselves to be looked at as to which strategies they are choosing to make their products attractive again around the world. François-Henry Bennahmias (FHB), CEO of Audemars Piguet, however, reveals his goals: “Our annual production is 40,000 units and we have capped it at this mark for the next five years. We are focused on only expanding one watch and one customer at a time, whether in Asia or elsewhere. ”The Richemont Group claims to be shedding jobs at Cartier and other watch brands. Richemont shows 23 percent less net profit than in the previous year, according to the group report mainly due to weak business in the Asia-Pacific region. The Swatch Group also reported only a fifth less profit than in 2014. Its business lost 5.7 percent in the entire Asian region.

German traders could benefit

For German retailers, however, it doesn't have to be a disadvantage that some Swiss brands have to rethink their approach. “The manufacturers have become more cooperative with us and are also offering more events again,” says Juwelier Leicht. Many would focus more on the German core market and the sustainable development of their own brand again. And apparently some manufacturers are now also taking the new understatement into account: After all, according to media reports, fewer and fewer customers in this country were willing to support the pricing policy of the big names. FH President Pasche confirms that in difficult economic times a shift to products in the lower price segments can be observed - as in the crisis year 2009. Some brands have already reacted and “developed new products with a lower entry price,” he reports. Nevertheless, after the first four months of 2016, it can be seen that the upper price range is doing best again.

German traders could benefit

The big players in the watch industry should even survive an FDH diet after the fat export years without substantial damage. Bennahmias also assumes this: "As far as Audemars Piguet is concerned, the figures are still good and correspond to the growth from 2015." Nevertheless, the crisis is being taken seriously - he expects a consolidation on both the retailer and the manufacturer side. "In the end, the watch industry will have fewer players," he predicts, "but better ones."

The smaller manufacturers and suppliers, meanwhile, fear whether they will be among those who will drop out. The Swiss State Secretariat for Economic Affairs (SECO) confirms that many jobs are being cut. According to the latest unemployment statistics for the watch industry, almost 30 percent more workers in this industry were unemployed at the beginning of this year than in the previous year. The number of short-time working companies doubled in this period.

Smartwatches are after

Expert opinion innocent of the negative development.

"You can feel in the industry that the really big time of growth is over", reports Marcel Giger, managing director of the traditional Grenchner pointer manufacturer Estima: "We are also still on short-time work, but want to phase out soon." Giger hopes a strengthening of the suppliers also through the new "Swissness" legislation, which comes into force at the beginning of 2017. Then at least 60 percent of the manufacturing costs for a “Swiss made” watch as a whole must be incurred in Switzerland - no longer just for the movement, as was previously the case. Hansjörg Vollmer, President of Watchparts from Germany, the association of 15 Pforzheim-based manufacturers and suppliers to the watchmaking industry, believes that “Swissness” could prove to be job security in bad times: “The Swiss supplier industry can benefit from the prescribed high proportion of components from Switzerland ", he says. Nevertheless, there will probably be some who would have to throttle production or even close the doors.

 

Scenario like 2009 is excluded

This is how Aldo Magada, CEO of the Zenith brand, sees the development in a relaxed manner: “There will always be luxury watches. It is an exclusive niche in relation to the world market. It is only essential for any brand to be credible and recognized. The emotions that a mechanical watch arouses are irreplaceable. ”He also doesn't believe that smartwatches will become a real competitor to expensive mechanical watches. On the contrary: "Zenith sees the emergence of smartwatches as an incentive to maintain customer interest in mechanical watches." Perhaps, he speculates, smartwatches for non-watch wearers are even a step on the way to mechanical watches. Pasche also considers the smartwatch to be innocent of the waning interest in more expensive models. “Last year, the entry-level segment was the best in our exports. This is a sign that the smartwatches have not had any negative effects, ”he says.

While the Swiss wait and hope for better times, many German manufacturers are looking forward to it. Your watches are apparently in demand at the moment. The Saxon watch manufacturer Nomos Glashütte has doubled sales and the number of employees again in recent years. “And this growth trend seems to continue in 2016. We are in the fortunate position that the current crisis does not affect us. Our main markets are Central Europe and the USA ”, says brand manager Judith Borowski. The American market is currently growing the fastest. Borowski estimates that the number of employees will increase to around 300 by the end of the year. The Junghans watch factory is also satisfied. In 2015, the Schramberg company achieved growth of 9.9 percent. "In line with the economic situation, we are noticing increased demand in the medium-price segment, especially in our core price range of 500 to 2000 euros," says Managing Director Matthias Stotz.

A watch in this price range would probably also appeal to some statesmen. Only Vladimir Putin hardly. According to the magazine “Focus”, Russia's head of state adorns himself with a watch made in Germany, an A. Lange & Söhne Tourbillon worth an impressive 380,000 euros.

Text: Natalie Kotowski, illustration: Nadine Pfeifer