Watchmakers Won't Always Have Paris as Luxury Sales Stall Out

  • High-end brands lower prices and tap new markets like Houston
  • H. Moser responds to Apple Watch with tongue-in-cheek replica

One year after a shock currency move roiled Swiss watchmakers, the industry now faces a fresh litany of problems that’s forced the craftsmen of luxury timepieces into an unfamiliar role: traveling salesmen.

Threats of terrorism from Paris to Jakarta, vanishing stock market wealth and the decline of Hong Kong as a luxury hub will make 2016 an even tougher year for watchmakers, executives said at Geneva’s watch fair this week. The arrival of the Apple Watch has also put them on the defensive, prompting responses ranging from innovative to cheeky to defiance. The waning demand means salesmen for brands such as Greubel Forsey have had to hit the road more to find clients.

Swiss Alp Watch

Source: H. Moser & Cie

“We expect 2016 to be very, very difficult,” Vincent Perriard, chief executive officer of watchmaker HYT, said on the grounds of the show. “One of our points of sale in Paris sold no watches at all, from any brand, from the day of the terrorist attack until now. Zero sales.”

A dearth of Chinese tourists after the Nov. 13 killings in Paris has added to a laundry list of woes. The industry, heavily dependent on demand from Asia, is considering scaling back a high-end Hong Kong watch fair. Ulysse Nardin has cut jobs in response to a slowdown in Russia, Richemont plans to decrease investments in manufacturing capacity, and other watchmakers have slashed prices on entry-level models. H. Moser & Cie. is looking to new markets like Chicago and Houston.

“It’s not anymore that you can wait and then you’re going to sell,” said David Bernard, chief operating officer at Greubel Forsey. The brand, one of Switzerland’s most expensive, has introduced a more accessible, simple timepiece starting at 150,000 Swiss francs ($149,000) for clients that can’t afford its average price of about 480,000 francs. “Now you need to go, explain, show that you’re there and communicate.”

The 24 brands exhibiting their latest models in Geneva this week include Cartier and Piaget, whose higher price tags make them more dependent on free-spending Asian buyers. Slumping Chinese equities are eroding middle-class buying power in the region, said Marc Gaudreault, CEO of Parmigiani Fleurier, whose watches sell for about 30,000 francs on average. China’s benchmark CSI 300 Index entered a bear market Thursday.

“If their money is gone, all of a sudden they can’t buy us anymore,” Gaudreault said. “The rich, instead of buying two, they will buy one.”

Just the week before last year’s watch salon, the industry was jolted by a surprise decision by the Swiss National Bank to unleash the country’s currency. The franc surged, boosting production costs for watchmakers and setting off what Swatch Group AG Chief Executive Officer Nick Hayek deemed a “tsunami.”

Less Concern

While currency concerns still exist, high-end brands displayed less worry about smartwatches, as the gadgets from Apple and others mainly threaten lower-priced timepieces. The Geneva show had one wearable device on display, an intelligent watchstrap by Montblanc called the “e-Strap.”

“The Apple Watch, smartwatches, the Google watches -- 99 percent are under $500,” Montblanc Chief Executive Officer Jerome Lambert said in an interview. “In that price zone, the relevance for fine watchmaking is zero.”

Swiss watches with wholesale prices of 3,000 francs and more held up better last year, with exports declining 3.1 percent in the first 11 months of 2015. Shipments of watches costing 200 francs to 500 francs dropped 8.2 percent, according to industry data.

“It might be the death of certain brands if they don’t react,” H. Moser CEO Edouard Meylan said.

H. Moser unveiled a spoof of the Apple Watch with its 24,900-franc “Swiss Alp Watch.” It’s a mechanical replica of Apple’s device, but has none of the functionality. Because it can’t make phone calls or send messages, it reconnects people as they have to meet face-to-face, according to a YouTube ad.

“Get a life and upgrade to a mechanical watch,” the ad says.