Wa t c h e s Jewellery

FT SPECIAL REPORT

T

he turbulence resulting

from the pro-democracy

protests in Hong Kong

might have beenshrugged

off by Swiss horologists had

it not come atsuch atransformational

timeforthewatchindustry.

Many manufacturers had been bank-

ing on 2019 as a year ofcalm,a time to

recoverafterachallenging2018.

Instead they face a situation where

analyst estimates point to a fall from 4

per cent global growth to near zero, and

a longer-term contraction intheir larg-

estmarketofupto40percent.

The traditionally conservativeSwiss

industry is struggling with twolinked

structuraltrends. The first is a shift to

directretailoperationstotrytoimprove

margin and inventory management,

andcontrolbranding.

The second is the need to accommo-

date the growingresale market in Swiss

watches in the age of ecommerce. In

recent years, Richemont brands Cartier,

IWC and Jaeger-LeCoultre have allhad

to buy back tock from retailers to sup-s

portpricing,forinstance.

Yet themove to direct selling, away

from traditionalmulti-brand retailers

such as Watches of Switzerland and

Bucherer,hasbeenfarfromsmooth.

The Swiss makers’ attempt to reduce

the number of points of sale through

which their products are available has

beenaslowprocess.

IWC now has about 100 shops ut fewb

are particularly profitable,say analysts.

Limiting production isanotherway to

control availability but that is seenas a

drasticoption.

“We cannot say that the problem has

been solved but at least the brands have

startedtoworkonthatandtheimpactis

being seen,” says René Weber, an ana-

lystatSwitzerland’sVontobelbank.

The pre-owned and grey market,

in which genuine watches are sold by

unofficial vendors,are alsoirritations

that watchmakers can no longerignore.

The grey market, for example, often

commands higher prices forcoveted

timepieces: aPatek Philippe Nautilus

can be acquiredimmediately for

SFr55,000 ($55,400) via an online ven-

dor, compared with SFr26,000 and a

five-yearwaitthroughaPatekstore.

Thetravails of Baselworld, the annual

Swiss flagship fair for watchmakers,

serve to illustrate the industry’sreposi-

tioning efforts. The show has suffered a

heavy fall in exhibitor numbers in the

past two years,with Swatch Group’s exit

the most notable, and this has forced

organiserstooverhaultheiroffering.

Yet while they insist thisis a transi-

tional period for the show and the wider

industry, for many it remains unclear

what this means for next year and

beyond.

One area ofconsensus, at least, is the

growing importance of the Asian mar-

ket, which has been buffetedby thepro-

tests in Hong Kong,previously luxury

watches’biggestmarket.

Theterritory’shigh-endInternational

Finance Centre (IFC) mall has enough

luxury Swiss watches on display torival

Continued on page 2

Red flags signal pressure

on brands’ global growth

Structural changes

and Asia protests

weigh on Swiss

watchmakers,

writesSam Jones

Rap music has long acted as a bridge that links

luxury goods with popular culture. From

Grandmaster Flash and Public Enemy’s Flavor

Flav in the 1980s, through to Eminem, Pusha T

and Jay Z (pictured) in recent years, the lyrical

lauding of timepieces in songs mirrors the careful

craftsmanship, aspiration and wealth associated

with the genre’s stars.Page 6

Rappers’ delightHip-hop’s affinity for watches

More than

50 per cent

of our

exports are

destined for

Asia. Events

in Hong

Kong duly

affect our

business

Women at the top

Brands’ chiefs begin to

reflect female client base

LEADERSHIPPage 8

Doubling down

Pandora’s brand revamp

homes in on best sellers

STRATEGYPage 4

Health watches

The wearables that can

monitor ever more ills

TECHNOLOGYPage 3

NOVEMBER 9 2019 Section:Reports Time: 11/20196/ - 17:51 User:maxine.kelly Page Name:WJW1, Part,Page,Edition:WJW, 1, 1