Swiss Watchmakers Turn Pessimistic as Smartwatch Risk Looms

An Alpina smartwatch, with diamonds and a steel bracelet.

An Alpina smartwatch, with diamonds and a steel bracelet.

Source: MMT via Bloomberg
  • Watchmaker executives most negative since 2012 in study
  • Strong franc highlighted as biggest risk by Deloitte report

Swiss watchmaker executives are the most pessimistic in four years as an increasing minority see a threat from smartwatches and the strong franc buffets the industry, a Deloitte LLP report showed.

Deloitte found 41 percent of executives were negative about 12-month prospects while 14 percent were positive, according to the study, released Tuesday. That’s the first time gloominess beat optimism since the market researcher began the annual study in 2012.

“The Swiss watch industry is at a turning point,” Deloitte said.

Percentage of respondents with positive or negative views for Swiss watch industry over next 12 months.
Percentage of respondents with positive or negative views for Swiss watch industry over next 12 months.

Swiss watchmakers have struggled with a shrinking Chinese market since the country’s government started discouraging exuberant spending among officials in late 2012. The surge in the franc this year has also spoiled the mood, with 69 percent of executives citing it as the biggest risk for the industry.

Brands have scrambled to add electronic functions to their products as the Apple Watch arrived in Swiss stores in June. Cie. Financiere Richemont SA’s Montblanc brand introduced an "e-Strap," while Swatch Group AG and Mondaine have also announced smart devices. Apple is also looking to add a touch of luxury to its smartwatch, evidenced by its collaboration with Hermes to make bands for the Apple Watch.

Richemont and Swatch shares were little changed at 1:30 p.m. in Zurich. They have declined 20 percent and 18 percent this year, respectively.

A separate survey by Research Now showed that more than 60 percent of Chinese consumers plan to purchase a smartwatch in the next year.

The percentage of watch executives considering smartwatches to be a growing competitive threat rose to 25 percent in 2015 from 11 percent last year.

Deloitte’s survey was conducted with more than 50 watch executives earlier this year. The Research Now survey encompassed 3,000 participants in China, France, Italy, Japan, Switzerland and the U.S.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE