Let's be slim!
One of the most knowledgeable watch insiders shares advice to defeat the current market turmoil.
Over the past ten years, we have witnessed an “explosion” of watch prices. Has the industry gone too far?
Slim, thin or extra-flat watches are the latest trend. A selection of the most interesting models.
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The price explosion
10 retail tips
A EUROPA STAR GROUP PUBLICATION
WATCH BUSINESS PAPER | USA VOL. 53 NO. 299 | CHAPTER 3/2017 | WWW.EUROPASTAR.COM/WATCH-AFICIONADO
More watches for the middle class!
High on the intoxicating returns from its ascent to the dizzying heights of luxury, the Swiss watch industry has now fallen back to earth. And it’s asking itself whether it went too far. All eyes are now redirected downwards, towards the mid-range hitherto regarded with barely concealed condescension. Without anything to hold it up, the top of the pyramid can’t sustain itself. If you’re going to build high, you need a solid foundation. And in order for the base of the pyramid to be sturdy, it must be as broad as possible. In other words: without volume, there can be no exclusivity.
The mid-range watches have a very strong card to play, by responding to the real aspirations of the middle classes. The role of providing volume – a volume of quality, that underpins the strength and permanence of the entire edifice – has fallen to what we have come to call, for want of a better term, the “mid-range”. No one likes this term. Some prefer to speak of “accessible luxury”, which is an oxymoron since, if it’s accessible, it’s not really luxury. Having said that, there is no single “mid-range” but several “mid-ranges”, because the accessibility of a given product is relative, depending on where you live, in a developed economy or an emerging one.
Similarly, there is no one middle class – there are several, and their destinies are very different. While the Chinese middle classes continue to expand – they already represent one-third of the world’s middle classes – the Western middle classes are in decline. A recent article by Bloomberg was entitled: “MiddleClass Angst Is Depressing Swiss Watch Sales”. But a careful reading reveals that the examples cited were all about high-end watches priced at $5,000 and over, not the mid-range, which is generally defined as sitting between $500 and $3,000. The economic pressures weighing on the middle classes, the fact that salaries are stagnating, concern about the future is rising, jobs are being replaced by robots, Europe is dealing with Brexit, the USA is dealing with an unpredictable Trump, China is dealing with anti-corruption and anti-extravagance campaigns – all this has changed the game, and it has altered the aspirations of the “middle class” which, as Bloomberg points out, “has decided that, after not getting a pay rise for many years, there are better things to spend money on than Swiss wrist jewelry.” But that is precisely where the “midrange” has a very strong card to play, by responding to the real aspirations of the middle classes. In their state of disillusionment, they no longer aspire to a higher social status (which is what that pricey watch was intended to advertise), but they still want something that is handsome, solid, reliable and timeless. It’s time for the mid-range to have its day. In this issue we devote a substantial Dossier to the subject: Don’t Forget the Middle Class.
Trumponomics & Swiss watches If past is prologue, Donald Trump will be good for Swiss watch sales in the United States. And then he won’t. by
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There were plenty of historical firsts when Donald J. Trump took the oath of office and became the 45th president of the United States on January 20. The most striking is that he is the first person in U.S. history to become president without having served either in the military or in any government post.
Then there’s this amazing double first: Trump is the first President to launch his own watch line. And Melania Trump is the first First Lady to do the same thing. His came in 2005 in a venture with Macy’s, the giant department store chain. Hers came in 2010 in a tieup with QVC, the giant TV homeshopping network. Swiss watch industry executives anxious to assess the impact of the Trump presidency on the Swiss watch business in the U.S. might see the First Couple’s watch launches as a good omen. It isn’t. The Donald J. Trump Signature Watch Collection, launched in 2005, consisted of Far-East-produced
quartz watches priced from $85 to $250 with styles imitating best-selling Swiss models, like the “Monacostyled” chronograph. The future president was not a particular fan of them. At an appearance at a Macy’s at a mall in Orange County, California in 2005 to promote his various products, he boasted to the crowd that the Piaget watch he was wearing cost $100,000 more than the watches that bore his name. Then, according to the Orange County Register, he declared, “Enough of this bullshit, let’s get on with the autographs!” Clearly a president in the making. His watch venture lasted one year. (Continued on page 2)
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Melania Trump’s “Melania Timepieces and Jewelry Collection” befitted the wife of a man who fancies himself “a blue-collar billionaire.” According to the New York Times, one of the watches was “a chunky silver watch styled like a bracelet (‘with holes so you can see the skin,’ Melania noted) for $64.” No, the best clue to how Swiss watches might fare in the U.S. during the Trump administration, I believe, lies in Swiss watch export data. I have covered the U.S. watch market for 39 years spanning 10 presidential elections. A review of Federation of the Swiss Watch Industry export data to the U.S. over that period shows conclusively that in American presidential elections, the candidate’s political party is destiny, particularly in terms of economic policies. When a Republican president takes over from a Democrat, as just happened, Swiss exports to the U.S. get a big boost followed by a big bust. Let’s look at the record:
Republicans Ronald Reagan and George H.W. Bush controlled the White House for three consecutive terms. Reagan’s economic policies, known as Reaganomics, emphasised tax cuts, decreased social spending, increased military spending and deregulation of domestic markets. Reaganomics stimulated the economy but created enormous deficits. From 1980 to 1990, Swiss watch exports to the U.S. increased by 113% to $ 903.9 million and the U.S. surpassed Hong Kong as the world’s top market for Swiss watches. But in 1991, the boom went bust. Between 1990 and 1992, exports fell 10.8% and the U.S. dropped to a humiliating #3 in the Swiss watch
ranking after Italy. In the election of 1992, Bill Clinton’s campaign manager James Carville gained immortality by making the slogan “It’s the economy, stupid!” the theme of the campaign. Clinton won.
When the Democrat replaced the Republican in the White House, there was no boom/bust cycle. Swiss watch exports to the U.S. increased every year of Clinton’s two terms, 1993–2000, an increase of 129% to $ 1.84 billion. The U.S. became Switzerland’s top watch market again in 1998.
In 2001, Republican George W. Bush succeeded Clinton and the boombust cycle resumed. Between 2002 and 2007, Swiss watch exports to the U.S. soared 54% to a record $ 2.44 billion. The bust came in 2007 with the sub-prime loan crisis, which triggered the Great Recession in 2008. Between 2007 and 2009, Swiss watch exports to the U.S. fell by an astounding $ 970 million to $ 1.47 billion, sending sales back to the level of 1998! Once again the U.S. fell behind Hong Kong in the export rankings.
During the two terms of Democrat Barak Obama, the U.S. economy slowly recovered. Between 2009 and 2015, Swiss watch exports increased 60.3% to $ 2.36 billion, growing each year except for a slight dip (-0.8%) in 2015. However, they never quite regained the record level of 2007.
Odds are good that Trump will bring a new Republican boom-bust cycle. Trumponomics will stimulate the economy with tax cuts directed at the wealthy and corporations, increased government spending on infrastructure and a new round of deregulation, all of which should be favourable for luxury watch sales. Then, as history and FH data suggest, look for a bust, as deficits soar.
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Consultant and instructor Gianfranco Ritschel is one of the most knowledgeable insiders in the watch business. A veteran of Rolex, Bucherer, Piaget and Sowind Group, this independent trainer in watchmaking knowledge and sales techniques shares ten pieces of advice to help retailers improve returns in the current market turmoil. interview by
Spotting new brands with strong potential: It is wise to be on the lookout for new opportunities beyond the basic brands in your portfolio. Engaging with a watchmaking start-up means taking a commercial risk, but if it sits just right in a properly diverse portfolio of brands, it can raise turnover and profits thanks to better margins. Let’s not overlook the fact that customers’ buying behaviour is changing all the time and so are their expectations.
Choose between range breadth or depth: By limiting your portfolio of brands to a strict minimum, you are sure of total mastery of each brand and their models and will be able to present them to your customers correctly. Your range will therefore have depth for each brand. With breadth of range – lots of brands, in other words – you will probably attract some additional customers, but it will make the
task of your sales staff much more difficult, as they have to assimilate all the special features of every model. Also, it is difficult to have a representative offering for each and every brand: you will be pressurised by the brands, who will not tolerate the fact that you restrict yourself to the best sellers, with the result that you’ll become less important for the brand in question.
Accept and make the most of your role of “filter” for the customers: When I go to a good restaurant, the chef makes sure he tells me that he went to the market himself to select the best ingredients. All too rare are the retailers who really regard themselves as what they are, “curators”, with choices that they stand by and defend: “I did not take this model because it did not correspond to my aesthetic criteria or to what I want to offer my customers.” These biases have genuine value and you have to know how to put them across to stand out from the crowd. They make every boutique interesting and unique.
Customer service as a source of profit: It costs less to make turnover with an existing customer than to find a new customer. And the way to do it is through the type and quality of the service, which should pay off in the form of a worthwhile customer relationship. We have to get away from the notion that “we’re there to put problems right”. Who, today, notifies their customer when it’s time for a service, supplies replacement watches or keeps a maintenance logbook – the tools of a long-term service strategy? Who helps customers to log and photograph their watch collection? Who offers insurance policies, warranty extensions or other services that go beyond the simple selling of watches? In my opinion, there is a multitude of ideas to be developed, along the lines of the automotive or IT sectors.
Social media – an opportunity to communicate for next to nothing: Many retailers are still at the stage of sending out an annual newsletter to their customers. But social media and digitisation have changed consumer expectations. Instead of communication, we have to think in terms of permanent interconnection. That’s an opportunity for creative retailers, because this new kind of communication is much cheaper, as well as being fast and dynamic! Customers are so interconnected today that they have turned into information hunters. We have to stimulate that curiosity.
Winning the battle of boutique design: There will always be a deep schism between the retailers’ desire to manage their own space and that of the brands, who want their universe to be recognised. There is no right or wrong, everybody has to find their own solution depending on the goodwill of the different parties involved. But pay attention to the evolution of experiential marketing, which introduces the notion of stage-managing sales to generate a feeling of wellbeing and stimulate customers to buy. Learn how to surprise your customers with a unique atmosphere.
Find out about your customers, not what they want to buy! In the past, the salesperson tried to find out as quickly as possible what the customer wanted to buy. The smartest among them achieved their end by posing a series of open questions to channel the customers’ choices. Today, we tend to say rather: “Find out about the customer and you will know what he or she likes.” That calls for a fair amount of emotional intelligence and tact on the part of the sales staff, but it is far more effective and interesting. It enables you to sell better, more, and more often.
What are the things that the internet cannot offer? Clearly, more and more watches are being sold over the internet, and the highend brands can no longer stand in
Replace price with value: Customers are negotiating prices more and more, and that is becoming virtually the only point at which the sales advisor plays an active role. That is a serious mistake! First of all, try to understand why the customer is asking for a discount: is it a cultural habit? Does she want an unbeatable bargain? Does he not understand the value of the product? Then, apply a very simple rule: the sales advisor should take pains to raise the “perceived value” of the product instead of lowering the price. With the right arguments, customers’ perceptions can change and sales be brought to a positive conclusion. Incidentally, that is why the sales advisor should never use the term “price”! By using the term “value”, you can mould it and raise it in the customer’s eyes. Whereas a price is written in figures and is immutable.
The way you treat customers can be more important than the choice of product! If you compare experiences in restaurants, planes or hotels, it is easy to see how crucial ceremony is. The little attentions paid by the staff, empathy, sensitivity and the ability to tell a story are essential factors. Has your mouth never watered at a waiter’s poetic description of the evening menu?
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10 added-value retail tips… to beat the market
its way. Even worse, they are themselves preparing for online sales. This competition with conventional retail is worrying and requires action. We either start selling online too (in a way that is compatible with distribution contracts), or else we take advantage of what the internet cannot offer – the “touch and feel” that is so important for wearable objects with an emotional impact, and for the immediacy of purchasing.
THE WATCH THAT POSSESSES YOU
FLYING DOUBLE TOURBILLON DUAL TIME www.lerhone.com
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The jewish roots of Swiss watchmaking
Hailing from Allschwil near Basel, the Diedesheim family emigrated to Hégenheim back in 1694. Over time, its patronym was transformed to Didisheim, Diedisheim, Ditisheim, Dietisheim and Didesheim. In 1850, the brothers Marc and Emmanuel Didisheim founded a watchmaking company at SaintImier, registering it under the name
Hégenheim, the cradle of illustrious names in Swiss watchmaking
ago s yn
In pre-1866 Switzerland, Jews were subjected to severe discrimination and made up only a tiny part of the population. The Federal Constitution of 1848 granted freedom of movement and freedom to settle anywhere on Swiss territory to the entire Christian population, but not to Jews. It was only in 1866 that they were granted freedom to settle where they pleased and full civic rights. The new Federal Constitution of 1874 finally granted them freedom of conscience and worship. It was these latter provisions which triggered the first wave of immigration. When Alsace was annexed by Germany in 1871, Alsatians of all confessions were obliged to choose German nationality or leave the country. Numerous Alsatian Jews and, later, Jews from eastern Europe, left for the Jura region around Neuchâtel and Bern, or Geneva and Avenches. In the French village of Hégenheim, located just outside Basel and home to a Jewish community, there lived a handful of Basel-based Jewish watchmakers who were refused the right to reside in Switzerland. The other inhabitants were cattle merchants, cloth merchants or watch dealers. Some of them gradually came to watchmaking through trade, often with the objective of mechanising watchmaking. Thanks to their international relations and commercial expertise, the arrival of Jewish families in Switzerland galvanised watch sales. Among the families from Hégenheim, we find the names of Bloch, Brunschweig, Dietisheim, Dreyfus, Franck, Gintzburger, Grumbach, Lévy, Nordmann, Picard, Schwob and Weil.
la haute horlogerie, geneva
expert with the fondation de
The roots of “Watch Valley” are not only Protestant, as the popular image would have it. Jews – from Alsace in particular – contributed just as much to the emergence of the Swiss watchmaking industry as the Huguenots. A historical round-up. of M & E Didisheim in 1884. HenryAlbert, Edgar and Hyppolite, Marc’s sons, registered the trademark Marvin in 1893 and, after moving to La Chaux-de-Fonds, turned it into an international brand. From 1893 onwards, they exported wristwatches to the United States and developed their business with continuous efforts to increase mechanisation, a policy that was continued by the third genera-
Thanks to their international relations and commercial expertise, the arrival of Jewish ly with Charles Edouard Guillaume, and Repeating Watch Company “Urania”, was for a time managed by families in Switzerland studied the effects of atmospher- of Geneva founded by Prosper Charles Picard, the then president ic pressure and magnetic fields and Nordmann, whose chronoscopes of the Jewish community in Bienne. galvanised watch sales. tion. In 1905, the company began trading under the name of “HenriAlbert Didisheim, fabrique Marvin”. Marc and Emmanuel had a brother, Jacques Didisheim. In 1860, he opened a watchmaking workshop at Saint Imier called Fabrique Juvenia Didisheim-Goldschmidt et Cie, a business which was transferred to La Chaux-de-Fonds in 1882. Also, Marc Didisheim’s three sons married the three daughters of Maurice Ditisheim. The latter's uncle, Gaspard, was the co-founder of Ditisheim & Cie Fabrique Vulcain with his brother Maurice, and the father of Paul Bernard Ditisheim – the founder of Solvil in La Chaux-de-Fonds. Maurice Ditisheim left Hégenheim in 1858 and settled in La Chauxde-Fonds as a watch broker, trading under the name of Manufacture Maurice Ditisheim. At the Paris World Fair of 1889, the company was awarded a bronze medal for the “Vallée de l’Arve”, a watch with extremely sophisticated complications. In 1894, the watches were manufactured under the trademark “Vulcain”, which entered the annals of history in 1947 with the 120 Cricket calibre, development of which had begun in 1942. Paul Bernard Ditisheim worked first of all in the Vulcain family business. In 1892, he founded the watchmaking manufacture, Ditis, Solvil et Titus. Regarded as the founding father of modern chronometry, he made the most accurate chronometers ever produced and in 1912 achieved the world chronometric record at the Royal Observatory at Kew. He also collaborated close-
created synthetic lubricants with the chemical engineer, Paul Woog. He sold his company to Paul Bernard Vogel in 1930. Through his marriage to Suzanne, one of the heirs of the Eberhard family, the businessman was related to the great watchmaking families of the period, notably the Eberhards, Blums and Ditisheims. Théodore Schwob, born in Hégenheim, settled in La Chaux-de-Fonds as a horse merchant, then set himself up as a watchmaker by founding Schwob Frères et Cie in 1862. He married his daughter to Adrien Schwob, the son of Joseph Schwob, an Alsatian who had also settled in La Chaux-de-Fonds, firstly as a cloth merchant and then as a sales representative with Zenith. Adrien then set up his own company at Le Locle, sold it, and with Théodore invested a part of his capital in the Henri Sandoz manufacture in Tavannes. The capital of the Tavannes Watch Co, registered on 25 September 1895, thus came from Schwob Frères et Cie (Théodore Schwob) and Schwob et Cie (Joseph Schwob). It guaranteed Henri Sandoz, who was appointed as its director, the means of selling his output. To avoid any mutual competition, the shareholding companies divided up the markets between themselves and penetrated Russia, Japan and the Middle East. Shortly before the outbreak of the First World War, Tavannes Watch became the second-largest Swiss watchmaking company thanks to its rationalisation methods based on the American model. While Tavannes did not manufacture chronographs, Schwob Frères et Cie SA sold those of the Timing
and repeater watches were identical to those of the Waltham Watch Company in the US. In 1945, Schwob Frères et Cie SA became Cyma Watch Co SA. In 1966, Tavannes Watch Co was bought by Ebauches SA and Cyma Watch Co SA, the latter marketing Tavannes’ products under the Cyma brand. Born in Hégenheim, the brothers Achille, Léopold and Isidore Ditesheim founded the company LAI Ditesheim in La Chaux-de-Fonds in 1883; in 1903 it became Movado LAI Ditesheim. In 1947, Nathan Georg Horwitt, a disciple of the Bauhaus movement, dreamed up the design of the Museum Watch for Movado, the watch which was later to be selected by the New York Museum of Modern Art for display there. In 1911 Eugène Blum, the descendant of a watch dealer from Belfort, and his wife Alice Lévy founded the Ebel Blum & Cie manufacture in La Chaux-de-Fonds, Ebel being the acronym of Eugène Blum Et Lévy.
Bienne, home to watchmakers from Alsace and the Jura After the arrival of watchmakers from the French Jura, others left Alsace and settled in Bienne. So it was that companies such as Antima Watch (the Antmann and Appel families), Liebmann and Liema Watch (Sigmund Liebmann), and Goschler et Cie were created. The latter, founded in 1830 under the name of Goschler Frères, and which gained fame with the trademark
Léon Lévy, one of eight children born to Gaspard Lévy in Hégenheim, created his own company in Bienne in 1883: Léon Lévy et Frères. Three years later, the company employed 700 people and manufactured complete watches. In 1905, it opened a factory in Moutier. This was dedicated to developing the Pierce brand which, until its demise in 1980, specialised in automatic watches, which have a weight moving parallel to the mechanism, chronographs and complete calendar and moon phase watches. Fritz Meyer founded his first company in Solothurn in 1888 and then, in association with Johann Stüdeli, a second company called Meyer & Stüdeli AG in 1905. The first calibres were called Médana and Roamer. The latter gradually replaced the original name of the company, which became Roamer Watch Co SA.
And the others? A large number of companies founded by Jewish watchmakers have had to be left out of this brief retrospective. For example: Auréole Watch Cie, created by Philidor Wolf, Homis Watch by Schymanski, a family of Polish emigrants, and the Nathan Weil watchmaking manufacture, which in 1913 launched the very first “chronograph counter wristwatches” – or split-seconds chronographs. Whether still in business or consigned to oblivion, all contributed to the development of industrial Swiss watchmaking just as much as the artisanal watchmaking workshops founded before them by Protestants, and whose history is far better known.
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PRICES: THE GREAT UPHEAVAL A special report compiled by Pierre
• Tension on the price front is indicative of the current situation in the watch industry. • Over the past ten years, we have witnessed an “explosion” at several levels – prices, styles, a multiplication of innovations, an acceleration in the pace of launches. • This “explosion” has left brands, retailers and consumers bewildered and disorientated and has saturated the markets. • At the same time, traditional distribution has been turned upside down, both by the proliferation of brand boutiques and by new uses of digital technology. • Customer volatility and nomadic purchasing habits have increased. • The simultaneous arrival of smartwatches has added to the confusion. • Saturation has triggered a certain disenchantment with – or even a disavowal of – watches.
Reshuffling the price cards The very serious slowdown experienced by the Swiss watchmaking industry in 2016 had at least one positive effect – it provided a clearer view of things, revealed the strengths and weaknesses of all the players, prompted some self-examination and reshuffled the cards. At the first sign that the tide was turning, the industry pointed its finger at the policy of a strong franc, then railed at the Chinese government and its anti-corruption campaign. It bewailed the sanctions against Russia, suffered the consequences of terrorism and kept its head down until the interminable US election campaign was over, while at the same fearing the emergence of smartwatches without, even now, finding any real solution.
Retailers no longer know which “network”, real or virtual, to turn to and have launched themselves into a price-cutting war. In short, the designated guilty parties were all outside the watchmaking arena proper. But there is no getting away from the fact that the reasons and responsibilities for this mother of all slowdowns also lie within the vast industrial and artisanal watchmaking sector. Put in cruder terms, the industrial watchmakers, brands and retailers have all, each in their own way, shot themselves in the foot (and the media, it has to be said, held the revolver). The industrialists staked their bets on inexorable growth which, they opined, would inevitably rise year after year, to the extent that today, they are finding themselves in a situation of serious overcapacity at every stage of the supply chain (on this, read our detailed investigation into mechanical movement oversupply, Europa Star 4/16).
The brands, most of which went along with the economic, mechanical and stylistic one-upmanship, are now finding themselves with huge stocks they do not know what to do with – apart from picking out the diamonds and melting down the gold cases in a bid to salvage what they can. As for the retailers, they no longer know which “network”, real or virtual, to turn to and have launched themselves into a price-cutting war which has fuelled the grey market and caused a profit-margin meltdown. In short, the entire watchmaking sector, down to the very core of the system, is experiencing that “morning after” feeling and, even worse, the situation is not going to improve any time soon. Because to all the factors that have triggered this crisis, both external and internal to the watchmaking industry, we have to add the even more disturbing, nay taboo, question: are we seeing the emergence of a certain disenchantment with watchmaking? Is glorious horology, so historic yet so modern, losing its status as a social indicator? Is its prestige paling as it spreads to broader swathes of the population? Is horology running the risk of becoming a has-been? To try to gain a better understanding of what is happening in the watchmaking sector and identify some leads for the future, we felt that the most revealing approach was to look at prices. As a fellow journalist so neatly summed it up (Yvan Radja in Le Matin Dimanche): “Disconnected from its customers after years of overpricing, the watchmaking industry has to reinvent itself.” But how? It is impossible to go into every aspect of an issue with so many wheels within wheels, such numerous complications. But to try to get a clearer picture, Europa Star Time.Business probed, questioned and talked with a broad panel of industry players and observers: industrialists, watchmakers, distributors, retailers, clearance firms, analysts and others. What about the price situation?
WATCH.AFICIONADO | 9
An objective look But before we start analysing the current situation, let’s cast our eyes back. Because, although the watchmaking business is all about time, it often has a short memory. We only have to go back about fifteen years to find the source of the problems that the watchmaking industry is facing today. Attitudes towards purchasing a watch have changed considerably in 15 years. In the early 2000s, Richard Mille (2001) and Greubel Forsey (2004) watches began their steady climb to the top. Back then, Richard Mille offered watches in a totally different style from the norm; in particular, he introduced research into new materials and innovative architecture, while the more neo-classical Greubel Forsey sought to take chronometric research and decorative excellence to new levels. Rave reviews and successful sales, at often very high prices (which, in their case, were
justified by their rarity) gave rise to numerous emulators. Among them were authentic, original approaches to quality watchmaking, but also numerous opportunist launches based essentially on price, the product being of almost secondary importance as long as it conformed to the latest fashion, as if the watch was the packaging for the price. The large groups did not remain impassive as the fever rose, and they too began offering more and more extravagant products – talking pieces aimed first and foremost at generating buzz and showing how modern they were, like trees hiding the more financially rewarding wood. It was against this backdrop of technical, mechanical and stylistic inflation that prices quite naturally soared. Even the most banal watches muscled up in a testosterone-fuelled market ambience, baring their mechanical entrails more
and more, as if trying to physically justify their swelling prices. This inflation – and success – is corroborated by the Swiss export statistics for timepieces with an export price of $ 3,000 and over (see graph). The figures are unequivocal: the share in value of the highest-end watches rose from a modest 15.5% in 2000 to peak at 62% in 2014 and 2015. Whereas over the same period, the total number of timepieces
exported remained virtually stable, or even fell back slightly, from just over 29 million in 2000 to 28 million in 2015. In other words, watch prices underwent a virtually meteoric rise and the Swiss watch industry got high (and, consequently, dependent) on luxury. While this situation was manna from heaven for watchmakers, it also paved the way for the current
slump. The watch industry gradually retreated to the summits, producing fewer and fewer timepieces, but more and more costly ones – witness timepieces with an export price of under $ 200: they represented almost half of the total value of exports in 2000 against only one-tenth in 2015. The price issue is indeed at the heart of the current delicate situation.
Watches over $ 3,000 as % of total official Swiss watch export value
Export value (in $)
Export total (in $)
No. of timepieces 3,000 +
Source: Swiss Customs / FH. Export prices, add margins up to retailer prices.
Illustration: “Disintegrating Series” by Swiss artist Fabian Oefner is a suite of images of high performance cars that appear to have blown apart. The series explores essential questions about the relationship of time and reality, ultimately creating a visually rich rendition of a moment that never existed. His work can be seen at M.A.D. Gallery Geneva and on fabianoefner.com.
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The internet has changed the rules of distribution “On the So Goods site, customers can compare prices in real time. Logistically, you can send anything anywhere. You can find the best price anywhere in the world and have it sent anywhere. It’s the biggest change of our time, because it has reshuffled all the cards in the distribution game.”
To raise or lower prices? In the face of all this uncertainty, the ongoing paradigm shift, the burden of excess stock and industrial overproduction, what strategies are open to the brands? And the sixty-four-thousand-dollar question: should prices be raised or lowered? Every brand has or will have its own response, some better suited than others to the realities of a market in motion. And the responses vary depending on where the brands are situated on the social hierarchy scale.
Cyrille Vigneron, CEO, Cartier
Here is one possible response, which Jean-Christophe Babin, CEO of Bulgari, recently gave to questions by Europa Star. “In watchmaking, volume and value form two opposing pyramids. The majority of the volume is situated below the 2,000-dollar mark. And most of the value is situated above the 5,000-dollar mark. VALUE
AN rd B SW ES ER T
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AN OP SW ER
This volatility in purchasing, which has become global and migratory depending on international prices, is posing serious problems for the brands, distributors and retailers as regards stocks, price adaptation, logistics, distribution channels and communications, to cite just some examples. And these are exacerbated by the growth of internet price comparison sites and mobile apps for mobile customers. Wilhelm Schmid, CEO of A. Lange & Söhne, neatly sums up the challenges that these new habits are posing for brands: “What can you do to harmonise prices all over the world? It’s impossible, in concrete terms. You have to accept that. We will never reduce our prices, unless there’s hyperinflation, in Russia or India. We have to maintain a clear price strategy worldwide. That presents a huge challenge. Another major challenge is finding a balance between local customers and shopping tourism. And the third challenge for us is: how to keep abreast of trends and stay exclusive? It’s a contradiction in terms. If you want to keep abreast of trends, you have to grow. We’re growing. Otherwise, we’ll fall off the radar. Many brands are growing, but are losing intensity. I have to manage this paradox.” This danger of “losing intensity”, as Wilhelm Schmid puts it, is all the greater since “for the first time since 2012, online resellers are viewed as the most important sales channel,” according to the 2016 Deloitte study on the Swiss watchmaking industry. Purely mechanically, this is likely to bring prices down and render supply commonplace as products, on offer here, there and everywhere, lose their exclusivity. But rarity is at the root of the price question. “Half of the watch executives surveyed indicated that they will be Where will you most likely purchase a watch? putting the most emphasis on online resellers in the next twelve months, compared to only 19% in 2015,” the Deloitte study continues. By way of illustration, Deloitte cites Online Multibrand Department shop boutique store the exclusive e-commerce partnership signed by TAG Heuer with the Online Department Mono-brand shop store store Jingdong Group, a powerful player on the online sales scene in China. Online Multibrand Department shop boutique store But there are plenty more examples of initiatives already under way or Multibrand Online Mono-brand boutique shop store germinating on this digital “new frontier” that online sales represent Mono-brand Online Multibrand store shop boutique for the luxury sector. And the repercussions for distribMultibrand Department Online boutique shop store utors and retailers, not to mention prices, will be numerous. Source: Deloitte, 2016
Another price strategy and another response is that currently being implemented by Jérôme Lambert with Montblanc. He made a splash – and raised a storm of criticism accusing him of wanting to kill off the market – when he was CEO of Jaeger-LeCoultre, for having produced a tourbillon for around $ 40,000. He did it again at Montblanc, producing a perpetual calendar selling at 10,000 dollars. Davide Cerrato, director of Montblanc’s watchmaking division, responds to competitors’ criticism of the company’s price strategy.
The response to the crisis is not necessarily lower prices. In a crisis like today’s, scrambling below the 5,000-dollar mark is a human reflex, because we associate crisis with a lack of money, but it’s not necessarily the right reflex, or the right solution. We’re forgetting that 90% of the value is in the segment above 5,000 dollars and that, in the 10% below, there are already highly competent players with iconic models and very confident retailers in those brands. And what you also have to take into account is that below and above 5,000 dollars, there is a general decline in sales across the industry as a whole. It isn’t as if all of a sudden people who bought watches at 25,000 dollars are now going to buy watches at 2,000 dollars: that’s totally wrong. So, are we going to sell 15% more by positioning ourselves 10% lower? Personally, I’m rather sceptical. I think that more than ever, the products we offer should have substance that is not only perceived, but real. Why lower prices when you can be more attractive by setting the right price for new products? Thanks to our retail network, we can exactly measure the behaviour of our customers, and no one came to buy a 3,000-dollar watch when they’d bought a watch for 30,000 dollars before. But from 30,000 dollars to 20,000, yes. A Tesla in relation to a Mercedes – that’s a good response and an avenue to explore for the watch industry.”
“Offering competitive prices in rela tion to perceived value has been the constant strategy of Jérôme Lambert at Montblanc for the past three years. We achieve our greatest sales volumes in the 1,000 to 5,000 dollar segment, in particular with sport chronographs. Thanks to this consistent position, we are not being forced to go downmarket today. Three years ago, when market conditions were excellent, you really needed vision to impose this constraint of accessible prices. We want to be viable in the long term. If we started lowering our prices now, neither our brand nor our partners would be able to do business. Montblanc’s objective was to set the right price, not to cut prices, as we’re sometimes accused of doing.” Lower prices? Cut-throat prices, even? That is the strategy chosen by Ebel CEO Flavio Pellegrini to put back on track a brand that used to be in the spotlight before more or less disappearing off the radar. “The industry has been too greedy these past few years in terms of profit margins, going for in-house production and vertical distribution with their own sales outlets. Certain brands have two years’ worth of inventory and components upstream, and two years’ worth of watches in their own boutiques downstream. It will take at least two years to be reabsorbed. But you have to remember that the quartz crisis was an existential crisis far more dramatic than today’s. We’re going to have to give it time.
Our battle-horse and our anti-crisis remedy? To maintain brand quality, but with aggressive pricing. For example, our gold and steel Wave model with a diamond-set bezel and a mother-of-pearl and diamond dial used to be priced at $ 5,900. Our engineers have found smarter ways of lowering prices, and we’ve also revised the architecture of the timepiece, and today it sells at $ 3,600.” The message from the independent watchmakers is quite different. With a track record of nearly 30 years in the watchmaking business, François-Paul Journe has no intention of changing policy and puts the ball back in the court of the large groups. “While today it’s easy to find prestige watches sold with a 40-50% price reduction, you will never find one of my watches at a discount price. It took me more than 20 years to build my image, and I’m not going to destroy it at the first gust of wind. In my view, the current crisis is largely due to the blindness and greed of a large number of major watchmaking companies. Today, they’re paying for their recent excesses. But when you are a young brand and have not yet finished building your image, the “price war” that has sprung up on several fronts forces you to find a response. And to engage in pitched combat on prices, while communicating about quality.” For Julien Haenny, CEO of Anonimo, price is the key. “Today, price is the key. The brand used to be the gateway to the watch. Today, increasingly, price is the primary criterion. For several years now, watch-pricing policies have become completely disproportionate in relation to the customers. We are a spin-off of Panerai, but our prices range from 1,900 to 4,900 dollars. We’re going for a more aggressive price policy by launching a new line at Baselworld, with a target price of $ 1,500. It’s the only solution for a little-known brand like us – to showcase an attractive price for a genuine, Swiss-made product. My aim is to thumb my nose at the brands offering similar products to ours at excessive prices. But the toughest thing for a relatively new brand is to stay the course. Tradition is reassuring. Many watchmaking start-ups are in danger of vanishing in the period we’re currently going through.” The virtue of stability… No previous price hikes means no hard decisions about lowering (or further raising) prices now, and there is market share to be won, points
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12 | WATCH.AFICIONADO
Wildly fluctuating exchange rates, the price slump, volatile customers, accumulating stocks, discount, competition from smartwatches, the grey market, the internet, brands’ own boutiques… Stop! For retailers the world over, the cup is full. Distribution is at a crossroads, with crucial choices ahead: which direction should they choose? “The reduction in profit margins for distributors was initiated four or five years ago,” Gérard Gouten,
Source: Companies, Vontobel Equity Research
A chart that perfectly illustrates the boom in stocks in Asia from late 2013
-10%, the minimum discount -10% for the tour operator who brings in the customers -2.5% for credit card charges -5% for contractual communication This adds up to 27.5%, excluding rent, salaries, running costs, maintenance, taxes and various charges. Moreover, retailers have to eliminate static inventory, improve product turnover – because without sell-out,
René Weber, Vontobel, Europa Star Arcade, Nov. 2016
ASIAN WATCH RETAILERS: INVENTORY AS % OF SALES 2007-1ST HALF 2016
“In 2016, we sold more watches in the 3,000–5,000 dollar segment than in the 6,000–8,000 bracket. The average sales price has dropped. Because of our broad price range, which goes from 3,000 to 400,000 dollars, we have flexibility, and that has helped us to gain market share. Every client who comes into the shop is a potential customer for us, and in five years we have gone from producing 6,500 watches per year to more than 25,000. Over the same period, we have also launched a tourbillon, a perpetual calendar and a power reserve. Thanks to this investment across our entire price range, which is very broad, we have succeeded in growing.”
“Inventories have attained levels never seen before. Richemont has announced that they are buying back 240 million dollars’ worth of watches to clean out the market, including a large number of Cartier watches, but that still is not enough; stocks are still too high.”
a Swiss market veteran, explains to us. “Today, since they’ve moved upmarket, distributors are located on the best avenues in town. Rents are huge, the salaries of qualified sales staff are high, and they work longer hours with the increase in night-time opening. And then there’s the issue of discounting, a practice which has become generalised and which customers are now demanding from the outset. And that’s not to mention the direct competition war that the brands are waging with their own boutiques.” But the current crisis has also had the effect of raising margins slightly, and brands are adapting their policies once again. For example, Cartier, which had reduced its margins to 35%, is cautiously raising them to an average of 38% – while not forgetting to mop up stocks and take back more unsold items than before. Whatever the case, the independent watchmakers are still offering more appreciable margins to retailers, up to 50%, resulting in an average margin of around 40%. But what is left of these margins after all the expenses are taken into account?
For Sascha Moeri, CEO of Carl F. Bucherer, a judicious strategy of price diversification has helped his company to increase its market share in a tense climate.
A paradigm shift for distribution
“One characteristic of our brand is that, contrary to the inflation we have seen in luxury watchmaking, we haven’t raised our prices since 2009. We gained market share in 2016, particularly in the United States, our main market, where we have continued to grow despite a shrinking context. We go into this crisis in a better position than we were in 2008, with more tightly controlled distribution.”
out Xavier Gauderlot, Movado Group’s President for Europe.
there’s no sell-in – and, if necessary, activate the guarantee and sell the watches at cut prices. And that is not even to mention the new, cut-throat competition from e-commerce. Some of the people we spoke to are “convinced we’re heading towards an uberisation of the watch distribution sector” as a result of the “takeover by e-commerce”. During our discussions, one model cropped up again and again: that of turning retailers into “gallery owners”.
“Retailers need to turn into gallery owners” François-Xavier Mousin and Caroline Buechler (who worked for swiss retailer les ambassadeurs and now head up opus magnum consultants) set out this “revolutionary” concept.
“The e-commerce takeover is final proof that the old retail model needs to be rethought. It is high time to reinvent it by separating the experiential and commercial functions, and the margins that go with them.
The traditional role of retailers was to offer a complete “package” combining the sensorial experience and the sale. Their remuneration was thus based on these two missions and took into account both the costs of representation and the sales costs. A boutique was both a showcase and a sales venue. The arrival of e-commerce has severed these two functions irrevocably. It is now possible to sell without offering the sensorial experience, and to offer the whole product ex-
perience without selling, because customers can take advantage of the physical infrastructure of a traditional retailer and then finalise their purchase on the internet. This behaviour is going to escalate and become generalised. It is perfectly normal and legitimate for a customer to seek the best price for the best service. As high as it may appear to the uninitiated, a profit margin of 50% for a retailer on the sale price of a product – which is an exception in the watch-
making world, it must be said – has to cover far more than just the cost of the sale: an exorbitant boutique on one of the best streets in town, impressive display windows, sofas in the best leather, top-level sales staff, champagne and bouquets of flowers. You can’t show a luxury watch in a papier mâché shop in the middle of an industrial estate. The luxury experience has to be complete, otherwise it isn’t luxury. What is abnormal is that the same margin should be granted indiscriminately, as it is today, to retailers who invest millions every year in their boutiques and to obscure players whose principal source of income is a virtual shopfront on Amazon, Yahoo or Chrono24.
Dividing the trade into two functions The model we’re putting forward is extremely simple: it consists of dividing a trade into two functions: sales on the one hand and experiential promotion on the other. Dematerialised sales require no major physical structure while offering the same service as far as delivery times, guarantees, after-sales service and
convenience are concerned, whether physical or virtual. Consequently, they should be remunerated on the basis of lowest cost for greatest efficiency, that is, a margin of 10-25% of the sale price, whatever the channel used. As for the “representational” function, it has to be dissociated from the sales margin and attributed only to players who actually practise it, according to new parameters which have nothing to do with realised turnover, such as visitor volume, surface area and display quality, showcase area, training of sales staff, type of associated services and so on. Redistributing roles in this way is the only way to keep the dependent businesses alive so they can sell physical sensorial experiences. It is also the only way of getting out of the damaging logic of the grey market and discounts, since the trade margin offered will no longer allow prices to vary so wildly depending on operating costs. Lastly, it will give rise to genuine “experience professionals” instead of sales, since remuneration will only be very partially indexed to pure sales performance. It will also be more effective than all those product training campaigns that all businesses insist on holding at great cost and with no success.”
14 | WATCH.AFICIONADO
DON’T FORGET THE MIDDLE CLASS! Dossier compiled by Pierre
Serge Maillard with Fabrice Eschmann
• What is a “mid-range” watch, exactly? Just as there isn’t just one middle class but several, so there are several interpretations of “mid-range” where watches are concerned. • Has the Swiss watch industry neglected the mid-range? Over the last ten years, the Swiss watch industry has gone upmarket, and media coverage has been monopolised by top-end watches. • Can exclusivity coexist with quantity? That’s the paradox of the mid-range: it has to be produced in volume while giving the impression of exclusivity. • Does the current crisis offer new opportunities? Watches costing between $ 500 and $ 3,000 (retail price) have weathered the storm better than anything else. • What do mid-range customers expect? As well as price, they are looking for reliability, highquality finishing, durability, and they want a watch that will stand the test of time. • Are we entering a period of stylistic conservatism? A more reassuring and less ostentatious style of watch seems to be appropriate for the mid-range. • Have smartwatches affected the mid-range? Yes, more than people think. The impact of ecommerce is also making itself felt. • Are retailers still interested in the mid-range? They look at it as a way of increasing lacklustre sales. • Is the current crisis an opportunity to reshuffle the distribution deck? The mid-range is also a testing ground for the changing face of watch sales. Illustration: Founded by architect Li Han and designer Hu Yan in Beijing, Drawing Architecture Studio (DAS) is a creative platform incorporating architecture, art, design, urban study and pop culture, and aiming to explore new models for the creation of contemporary urban culture. Working in the belief that architectural drawing has great potential beyond its traditional role in architectural design, DAS’s current practice focuses on exploring new approaches to architectural drawing and examining its value in contemporary culture and social contexts. DRAWING ARCHITECTURE STUDIO | www.d-a-s.cn
WATCH.AFICIONADO | 15
Have the middle classes been neglected? In recent decades, Swiss watchmakers have been preoccupied with scaling the summits in terms of pricing, mechanical sophistication and artistic refinement, while overlooking, ignoring even, an essential sector of their clientele – the middle classes. (A notable exception to this is the Swatch Group and some strong independents.) In our previous Dossier – The Price Issue, Europa Star Time.Business 1/17 – we highlighted the considerable increase in market share of watches priced over $ 3,000 (export price), which grew from 15.5% in 2000 and peaked at 60.2% in 2015, falling back only slightly in 2016 to 60%. Logically, what this also points to is that the market share of Swiss midrange watches has fallen significantly in 15 years, especially given that the total number of watches exported has remained virtually the same, declining marginally from 29 million units in 2000 to 28 million in 2015. This contraction of the mid-range watch sector has certainly benefited Switzerland’s competitors. In 2015, for instance, while the number of pieces exported by Switzerland fell 1.6%, settling at 28.1 million units, Germany increased exports by 4.4%, reaching a total of 21.9 million units,
while French exports rose by 6.1% to 7.3 million. At the same time, Japan exported around 60 million watches with a total value of 160 billion yen (1.4 billion dollars). Given that the majority of these German, French and Japanese exports can be classed as mid-range (between $ 500 and $ 3,000 retail), the relative “void” left by Switzerland has been filled by its rivals.
Is the wind about to change? The crisis that Swiss watchmakers have endured over the last two years – from the top, this time – is a gamechanger. Suddenly, their rather condescending attitude to the mid-range has shifted: after all, the mid-range not only has the volume, it also seems better able to absorb the bumps in the road that are an inevitable consequence of our globalised trade. It was obvious at the recent SIHH that brands that previously would not deign to discuss prices were now broadcasting them, although the subject was cloaked coyly in terms of “value”. One brand in particular, somewhat
unexpectedly in this exalted company, was thrust into the spotlight. Baume & Mercier abruptly found itself the focus of universal admiration because of its moderate pricing. The mid-range is back. Suddenly, everyone wants a piece. Brands sense a possible growth vector. Retailers sniff an opportunity to increase footfall and stock turnover. Interestingly, the same phenomenon can also be observed in Western politics. All at once the middle classes, who are becoming increasingly disaffected, are exerting a powerful fascination. And this is no coincidence: as we have often said, watchmaking is a reflection of its time.
The mid-range is also a laboratory The most profound upheavals in the watchmaking sector won’t come from the top – they are already happening in the mid-range trenches. Joe Thompson, an astute observer, describes in his article (see further) the forces at work in this vital sector of the American market. Whatever Swiss watchmakers may
America’s ever evolving mid-market To see the impact of cutting-edge change in the watch world, check out America’s big, bruising middle market. by
In the 2016 U.S. presidential election, an ocean of ink was spent on chronicling the uncertainties and anxieties of America’s middle class. Despite all that, there is one area that just-plain-folks really can’t complain about. That’s watches. When it comes to buying a watch, Joe and Jane Six-Pack have never had it so good. Middle-class Americans today can buy more watch brands, boasting more technologies and styles, at more watch retail outlets than ever before. That’s not to say that the U.S. watch market is booming. It isn’t. (Swiss
watch exports to the U.S. dropped 9.1% in value last year.) What it means is that the American midmarket, like the global watch market, is undergoing some dramatic changes resulting from new economic, technological, and demographic forces. For consumers, that’s good. For watch companies, maybe not so much. The middle segment of the U.S. watch market, which runs roughly from $200 to $1,200, may be the best place to see those forces at work. Somewhere in that range is what the American middle-class – defined as a three-person household with an annual income ranging from $42,000 to $125,000 – tends to spend on a new watch. It’s home to the traditional Big Three midpriced brands, Citizen, Seiko, and Bulova. It also includes a strong fashion-watch segment as well as quartz analogue watches from a significant contingent of Swiss brands like Movado and Raymond Weil. Here’s a look at three forces that are shaping that important market segment today.
1 | Smartwatches The arrival of the Apple Watch in 2015 was a mid-priced bombshell that showed the potential power of the connected watch. After just nine months in the watch market, Apple became the world’s first or second largest watch company (it depends on your estimate of Rolex’s sales) with sales of an estimated 13 million watches worth $6 billion. Last year, though, in its first full year and despite the launch of Apple Watch Series 2, priced from $369 to $1,339, Apple’s watch sales dropped 15%, according to estimates by Strategy Analytics, a Boston research firm. (Apple does not release sales data for the watch.) Smartwatch sales for Samsung, the world’s #2 smartwatch producer, fell 11%. Overall, global smartwatch sales rose a measly 1% to 21.1 million units. U.S. watch executives offer good news/bad news assessments of the impact of smartwatches. The good news is that they are expanding the market, putting watches on the
choose to believe, the advent of the smartwatch shook the mid-range to its foundations, and as e-commerce continues to cut a swathe through traditional consumption patterns, a flourishing grey market is upsetting the old hierarchies. And we all know that what’s happening in the USA eventually happens everywhere, a few years later. Whether it likes it or not, the midrange has also become the laboratory where the future of the watch industry is being shaped. Having said all that, however, this so-called “mid-range” category is difficult, if not impossible, to define. Not only is the concept of mid-range itself relative (a watch that would be considered ordinary here might be deemed a luxury somewhere else) but it covers a very broad spectrum of products. And this doesn’t even take into account the contradictory tastes that must be catered to. What’s more, middle-class consumers are no longer prepared to take anything that gets foisted on them. While price may still be crucial, the concepts of high reliability, quality of finish, durability and timeless appeal – concepts they have absorbed from the shop windows and the marketing campaigns of prestigious brands – have all, with the help of the internet, become decisive factors. So it’s no surprise that brands are now talking up the correlation between price and substance. In other words, to satisfy a mid-range client, you really have to provide value for money. Whatever the price.
wrists of people who would not otherwise wear them. The bad news is that they have taken sales away from traditional mid-market brands. Just where the smartwatch market is headed is anybody’s guess. Apple and Fitbit remain gung-ho about it. But the loss of momentum at Apple and Samsung and the failure of smartwatch-pioneer Pebble (the watch was discontinued and the company sold to Fitbit in December) and Motorola (it halted production of its Moto360 smartwatch) has soured analysts on the category. They have slashed 2017 smartwatch forecasts, as smart technology moves on to new applications such as home appliances (smart speakers, smart bathroom showers, etc.). In an ironic twist, one smartwatch expert last summer looked to traditional watch brands to boost the stalled smartwatch market. “One of the biggest omissions in the smartwatch market is the absence of traditional watchmaker brands among the leading vendors,” wrote Ramon T. Llamas, research manager for International Data Corp. in Massachusetts, an authority on consumer technology markets. “Only a small handful of traditional watchmaker brands have entered the smartwatch market…. Participation from traditional watchmaker brands is imperative to deliver some of the most important qualities sought >>
16 | WATCH.AFICIONADO
2 | E-commerce
Movado, Frédérique Constant, Alpina, Bulgari, Tissot, Mondaine and more. Whether they will help the smartwatch market, or it will help them, remains to be seen. The game is still afoot. Silicon Valley analysts may consider sales of 21 million watches small peas, but in the watch world, that’s a big deal: it’s nearly as many watches as the entire Swiss industry exported last year (25.4 million).
Tuan Jie Hu ©Drawing Architecture Studio | www.d-a-s.cn
after by end-users, namely design, fit and functionality. Combine these with the brand recognition and distribution these brands already have, and it’s reasonable to expect the smartwatch market to grow from here.” Indeed, the number of traditional watch brands offering smartwatches is growing. They include Fossil, Timex, Swatch, Casio, TAG Heuer,
Last November, in a meeting with financial analysts, Richemont Group Chairman Johann Rupert sounded the alarm about how e-commerce was changing the luxury industry. “I am talking about a massive change in the way business is being done by going digital, a massive change in ecommerce.” Addressing the worsening slump in luxury goods sales, he said, “The sales will come back, but how will they come back? Will they come back in the same way, where people walk into retail stores? I doubt it.” Richemont had just hired an executive from Google, he said: “We’re appointing new people from e-commerce to be ahead of that curve.” Compared to other Swiss luxury-watch firms, Richemont may be ahead of the e-commerce curve. But compared to watch companies competing below $1,200 in the American mid-market, including Swiss ones like TAG Heuer and Movado, most Swiss luxury brands are far behind. The U.S. market is ground zero for e-commerce. The rise of e-tailing giants like amazon.com is drastically disrupting America’s complex brickand-mortar distribution system. The watch industry relied on an array of retailers: independent jewellers, regional and national jewellery chains, brand boutiques, department stores, mass merchandisers, outlet stores, etc. Now, though, brick-and-mortar casualties are mounting. Malls are dying; once mighty Macy’s will close 100 stores this year; and 1,269 jewellery stores closed last year, accord-
ing to the Jewelers Board of Trade. Consequently, mid-range watch firms had little choice but to embrace e-commerce years ago. Virtually all of them sell their watches on their own websites and apps. Many have a network of authorised e-commerce dealers. Citizen, for example, lists 88 “authorised internet retailers” on its U.S. website. Moreover, e-commerce may be the solution to what many U.S. watch executives consider a serious emerging threat to watch sales: Millennials and the generation behind them, Gen-Z. These youngsters are famously immune to the lure of the wristwatch. They don’t value traditional brands or traditional modes of shopping. So how to reach them? Electronically, via social media. There they discover products and brands that appeal to them. Including watch brands, like California-based MVMT, founded by two American millennials. Priced between $95 and $160, MVMT is a mass-market, not a mid-range brand. But let’s see where they are in five years when the founders turn 30.
3 | Grey market The rise of e-commerce has exacerbated another distinctive feature of the U.S. watch market: the thriving grey-market sector. Swollen inventories in Asia due to the slowdown in China and the collapse of the Hong Kong market has led to an avalanche of grey-market merchandise in the U.S. Maurice Goldberger, owner of Chiron Inc., in Montreal, is one of the watch industry’s biggest and best-known watch closeout
Swatch Group, champions of the medium range Of the three major Swiss watchmaker groups, only the Swatch Group has fundamentally industrial origins. While Richemont and LVMH have, with a forced march, gradually caught up some of the ground between them and industrialisation, their tropism is still the luxury segment (with the exception of TAG Heuer at LVMH, which is making major inroads into the medium range, and Baume & Mercier at Richemont). The historical and geographical heart of the Swatch Group lies in the town of Biel/Bienne, which developed into a watchmaking centre relatively late, around the middle of the nineteenth century. While Geneva and the Joux Valley specialised for centuries in top-range, “artisanal” watches, the Bienne watchmaking sector was from the outset a highly industrialised affair and thus geared to mass production. In other words, to medium-range watches. This historical industrial heritage
can be observed at the heart of the Swatch Group, the different brands of which “are highly disciplined”, as Rado CEO Matthias Breschan explains. Each of the Group’s brands covers a precisely delimited territory: “To the Swatch Group’s way of thinking, there’s the entry-level range, the medium range, the high-end range and the prestige range. That way, the positioning of the Group brands is clear at all times. That said, the different segments are defined by price: the entry-level range is priced at under $ 1,000 and the medium and high end between $ 1,000 and 5,000, while the prestige range is anything above that,” he explains. So, the group’s spread consists of a rock-solid portfolio of brands which are carefully “terraced” to cover the entire, broad, mediumrange spectrum: Certina, Tissot, Mido, Longines, Rado and, right at the top, Omega, which has one foot in the upper medium range and the other in the high-end range.
Tissot, the flagship of the medium range Tissot is without any doubt the Swatch Group’s most iconic midrange brand. Its CEO François Thiébaud recently responded to questions from Europa Star. VERBATIM
By going for quantity, you can create an industrial tool at the service of people! “With an output of four million watches a year, Tissot is an industrial brand, but our objective is and has always been to produce quality watches at affordable prices. Our products are situated in the 400-1,200 dollar range and our annual output is around two million quartz watches and two million mechanical watches. We have 350 boutiques and are represented in some 13,500 outlets worldwide.”
Gold watches for the price of silver “We make affordable luxury. Like the slogan says, it’s a gold watch for the price of silver! One example of this philosophy is that in 1998, not long after coming to Tissot, I wanted to introduce a sapphire crystal for the watches, but a crystal cost 22 dollars per piece. To keep the price of a model down to 295 dollars, I needed a crystal at 17 dollars. Well, Nicolas Hayek Sr. came down on our side! Today, a sapphire crystal costs 5 dollars. By going for quantity, you can create an industrial tool which is at the service of people! And the quality is no lower. Thanks to automation, the welds of a Fiat have a better finish than those of a Ferrari!” The strength of the Swatch Group is that it covers all segments “Everything is relative when you talk about price or social class. Sometimes, you don’t make the right compari-
specialists. “2016 got off to a flying start and the market is expected to grow over the next few years,” he told Switzerland’s swissinfo.com last year. “Our growth is particularly strong in North America.” No surprise there. The size of the American market (Switzerland’s second largest market) and its deeply engrained discount culture have long made it a destination for closeout watches. Last year, though, the influx of grey goods rose to alarming levels. “It’s the worst I have ever seen,” one veteran jeweller told me. Boom times for transhippers are a bane for authorised retailers. With unauthorised e-tailers like amazon.com, eBay, jomashop.com, and others offering tons of new watches at deep discounts, it makes it harder for authorised retailers to move their own bloated stock. Or to move new goods. At SIHH in January, Baume & Mercier unveiled a new men’s quartz analogue Classima priced at $ 890 on a leather strap and $ 1,090 on bracelet. The watches are “priced to sell”, particularly in the United States, B&M’s top market. On amazon.com, however, you can buy a men’s quartz analogue Classima 8485 from the existing collection for $640. Indeed, a search of amazon.com shows quartz and mechanical watches from a surprising number of Swiss brands selling at bargain basement prices aimed directly at the mid-market buyer. Can America’s mid-market absorb all the new models flowing into it? Over time, yes. But not this year. With watch pipelines still full, for American watch consumers, it’s still a buyers’ market.
sons. We’re still number one in terms of volume in China. But those who used to earn 200 dollars yesterday might earn 1,000 dollars today and can go on to another brand of the Swatch Group. Our strength is that we cover all segments. The intermediary classes are in the process of increasing their purchasing power. And when that happens, things that used to be rare become banal. The advantage of our watches is that they’re mobile: our playing field is global and we can move from one market to another. And people are a bit fed up with extravagance at any price: 60 percent of the watches we sell are classic in style. There’s a return to greater simplicity. A blue dial is all very well, but does it go with all the clothes you wear on an everyday basis?” The active class “I prefer to talk about the 'active' class, rather than the middle class. It’s the active class that makes society work, all those people who really keep the world ticking over every day. They shouldn’t be forgotten – a society made up of only rich and poor can’t function. We have to come back to this active class, which creates businesses, innovates.” >>
MIDDLE CLASS The return to minimalism is good news for Rado Rado, ceramic watch pioneer and specialist and a historically strong brand in China, is something of a special case in the medium range: few other mid-range brands place their stakes primarily on design and materials. An interview with Matthias Breschan, Rado’s CEO. VERBATIM
The important thing is the relationship between price and substance “The pertinent thing in my view is to know what you’re offering: it’s the relationship between price and substance. In the past 15 years, we’ve seen a lot of repositioning. But it was often just a repositioning of prices, with no adjustment to the substance. That's dangerous, because it’s a kind of deceit, it’s cheating! The brands that indulged in that kind of manoeuvring were the first to suffer.” The average selling price has fallen “Rado is situated between Tissot at the bottom and Omega at the top. Our prices range from $ 1,000 to $ 3,000, with a few models at $ 4,000. That was true of the past ten years, and it will be of the next ten to come. Our price range hasn’t changed: it is situated between $ 1,000 and 3,000. But what has changed these past two or three years is that sales have been better at the lower end of the range than
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at the upper end. The market is more price-sensitive and the average selling price has fallen. But this average price differs from region to region. In China for example, which is a market of automatic watches, it’s different from Europe, the United States or Japan, markets where people are more inclined to buy quartz chronographs. The Basel trade fair attracts numerous top-range watchmakers. In the midst of all of them, Rado almost looks like an entry-level brand. But let’s not overlook the fact that $ 1,000 is a lot of money for lots of people! We address the middle class – which has grown hugely in emerging economies like China and elsewhere.»
nologically too, such as the Esenza Ceramic Touch, which instead of a crown has sensors in the ceramic case. This kind of innovation is a good example of the group’s industrial strength: the movement is made by ETA, the electronic components were developed at EM MicroelectronicMarin, the ceramics at Comadur, and so on. It’s crucial for the Swatch Group to conserve this kind of industrial fleet in Switzerland. As for any potential projects in the field of connectivity, the Swatch Group has just announced a partnership with CSEM of Neuchâtel to develop an ‘operating system’ for connected objects. That’s of interest to Swatch, Tissot and Hamilton first and foremost, but to Rado too, of course.”
Investing efforts in the look
Mido – “huge” growth
“It is true that current trends are more for a pared-down, minimalist style than for watches with character. And that’s a good thing for Rado. Others try to set themselves apart through the movement or complications. We don’t: we invest our efforts in the look – the materials and design. But as luck would have it, today we’re seeing ceramic used by lots of brands, even in the top range! So over the past few years, ceramic has grown into a noble material, and that’s helped us a lot.” The group’s industrial strength “Innovation is and has always been one of our top priorities. If you stop innovating, you’re dead… And incidentally, Rado has launched highly innovative products, not only as far as the materials are concerned but tech-
Less well-known in Europe than Tissot, Mido is highly reputed and occupies a historically strong position in Latin America – a position that the brand, situated in the $ 700 to $ 3,000 price range, is seeking to extend to other regions of the world, notably Asia. Franz Linder, CEO of Mido, answered our questions. VERBATIM
The Swiss middle class is not the same thing as the Indonesian middle class “Mido targets the middle classes. But you have to remember, for example, that between a teacher in Switzerland and in Indonesia, although they’re both middle class,
the difference in purchasing power is huge. A teacher in Switzerland can buy a Swiss watch without any problem, while in Indonesia they have to make far more sacrifices, as it represents more than a month’s salary.” Customers want more – and more – for their money “Recently, customers have begun looking more and more closely at what they get for their money. This preoccupation with the right ratio between price and quality is nothing but an advantage for us. And recently we’ve felt a reversal in our favour. At one time, when we looked around for retailers many of them wanted to sell only very expensive watches. But things have changed these past few years. There are numerous high-end retailers today who are looking to round out their offer with affordable watches because they also bring in custom. The winds of distribution have turned in our favour.” We sell timeless timepieces “We specialise in mechanical watches. We sell timeless timepieces that can survive through several generations. That’s one of the reasons for our success. We’re in the long-term business. Smart watches are short-lived. Up to 200 dollars, that’s impulse buying, there’s a market for that. But spending 1,000 dollars on something you use for two years – I don’t think that’s really a viable business model. If you look at the 25 million watches Switzerland exports compared with the world population, there’s still plenty of room for growth, volumes, besides smart watches. Looking at our sales, Mido is still gaining market share. We’ve experienced huge growth these past few years because we’ve remained true to our principles: offering the best watches at the best price. Our automatic watches offer extraordinary quality for price. And customers are looking first and foremost for quality watches with sound aftersales service.”
Certina: spotlight on sport Completing the Swatch Group’s would-be exhaustive mosaic of midrange brands, Certina fills the space marked “sports watch”. A large majority of chronographs suited to all disciplines, extremely reasonable prices and – fashion oblige – a vintage line called Heritage. An interview with Adrian Bosshard, CEO of Certina. San Li Tun ©Drawing Architecture Studio | www.d-a-s.cn
We sell a lot of watches in countries where the average income is a tiny percentage of the average Swiss income “The terms ‘entry level’ and ‘medium range’ reflect the way of thinking of watchmaking professionals. Since Certina works principally in the $
300-$ 2,000 price segment, our ambition and strategy is to offer premium products in that price range: a highquality, Swiss-watchmaking product at a reasonable price. For many Swiss customers, a price situated between $ 300 and $ 2,000 still represents a lot of money, so we have to remember that we sell lots of watches in countries where the average income is a tiny percentage of the average Swiss income.” It’s crucial to generate volumes “In the Swatch Group, we never neglect entry-level and mid-range products, because we’re aware that a great majority of the global population buys watches in the price segment below $ 1,000. A brand like Certina proves that it is possible to offer major innovations and Swiss watchmaking skills in that segment too. These skills allow us to generate the volumes that are crucial both from the industrial production perspective and from that of footfall in our retail outlets.” We don’t change strategy at each glitch in the economy “A product’s finish, quality control, communications, distribution and customer service have to be flawless, and the brands that succeed in maintaining all these competencies to nearperfection succeed in winning customers’ hearts. And our strategy doesn’t change at each glitch in the economy: both the group and our brand always work with a view to the long term.” Focus on opportunities “Whatever the economic changes, there are always opportunities and risks. We focus on the opportunities, in other words, even if a local market is shrinking in comparison with the economy as a whole, there will always be customers in search of a product with the kind of exclusive, specific DNA that we offer – that is, a broad collection of watches that are both sporty and sleek. But it’s only fitting that a brand with a history going back to 1888 should also have a Heritage watch collection. Sales trends for both these collections are currently excellent.” The watchmaking industry is cyclical “Smart watches are not impacting us, because you can’t compare Certina with the electronic giants. We aim to sell emotion, as well as the horological values of product longevity and durability, not just functions. Watchmaking is, and has always been, a cyclical industry. Since I started twenty years ago, watch exports have more than doubled. That’s why I feel it’s an exaggeration to talk about crisis. Distribution is production’s other half: you have to keep a cool head when the economy goes into overdrive, and when the going gets tough be brave in the knowledge that the economy will soon bounce back. That’s why Certina is able to perform well both when the economy is buoyant and when indicators are down.”
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“The watch industry went too far”
Interview with Thierry Stern, President of Patek Philippe Patek Philippe is a reference, a virtually inviolable icon of Swiss watchmaking. How did this family firm, one of the last, get through the annus horribilis that was 2016? What are the secrets – if there are any – of its resilience? by
What do you think of the current downturn in the watch industry? The situation is unsettled, to say the least. Thierry Stern: The overall situation isn’t catastrophic – far from it. One reason for the current slowdown is overproduction. Many companies insisted on production at any price. The markets became saturated, and then indigestion kicked in. But in our case foresight came to our rescue; we have been extremely vigilant for some years now. Back in 2015 we started the year with a cautious outlook. We specifically looked at the number of pieces we wanted to deliver, and were careful not to force the hands of our retailers, not push things too far. We never really had to reduce delivery levels, because it was never our intention to increase them at all costs, but we did apply the brakes a little. We also took the risk of keeping stock here, within our own walls (in fact, we’ve been pushing for that for a long time, and, as things turned out, our stocks were basically exhausted within the year). In the marketplace, this restraint enabled us to work in greater depth, with fewer pieces, placing the emphasis on rarity and an enduring focus on the long term. At the same time, watch customers have become more volatile, more restless, less loyal. We have always given priority to our local clients, wherever we are in the world. That, in our view, is vital. In a way, you get the clients you deserve: loyalty and continuity before the volatility of passing trade. We have enormous confidence in our 400 or so retailers. In addition to the fact that they are often built on historical partnerships, they give us an insider’s understanding of the markets, their differences and how they evolve. For a long time now, unlike many other companies, we have stuck with our strategic decision to prioritise our retailers. We have only three Patek Philippe boutiques, in Geneva, Paris and London. And, let me just say, I find it utterly unfair to retailers, when watchmakers open their own bou-
tiques right next door. Today, our strategy of trust in our retailers has proven decisive. It means that we don’t just think about ourselves; we take into account the needs and expectations of our distributors, our retailers, and our end clients. You should never be too greedy, or too pushy. Rely on trust. The trick is to maintain visibility without increasing stocks. And I don’t want
“I find it utterly unfair to retailers, when watchmakers open their own boutiques right next door. Today, our strategy of trust in our retailers has proven decisive.”
to increase production. So we proceed by taking small but consistent steps, as we have always done. And if you need to stop and take a rest, then you do it. It’s a matter of internal regulation. It’s not always the easiest path to take, but in the end our model has proved effective – as well as being agreeable to everyone. We are also fortunate that, as a family firm, we have no pressure from shareholders. We are sheltered from power games, strategic changes of direction, repurchasing, numbercrunching and deep discounting – all the things that have brought us to where we are today. 2016 might not have been a record year, but we are fortunate that we don’t have to keep chasing records. We have time on our side. And yet you’ve made a number of announcements this year. What can I say! We’re watchmakers, we love to create. It’s our profession, and our passion. We’re often tempted to do too much. For 2017, I had 50 new items ready to go into production. We deliberately limited ourselves to 20 or 25, including updates to our current collections. However, we are presenting a coherent selection of new products, across all our ranges and series. Having said that,
easing off a little does allow us to focus on our processes, the future and, something that for me is essential – reliability. We do pretty well in that respect, but we’ll never achieve zero returns. Nevertheless, we must continue to improve our after-sales service – its quality, efficiency and speed. Today, our clients demand product reliability above all else. From a technical standpoint, we regularly bring out two new developments each year. But before they are ready to be launched they must offer maximum reliability. They are bench-tested, road-tested and checked from A to Z. And they must be available for prompt delivery. That’s how you win the war. Do you think the current slowdown has also triggered a stylistic and aesthetic “recalibration”? Watchmakers went too far into gadgetry and ostentation. There’s no doubt about that. Today, our customers are somewhat apprehensive about the future, and they’re looking for a more conservative stylistic approach. Design is central: how can you make a simple, attractive watch with three hands that delights and enchants? That’s the hardest thing. Designers, get your sketch books out! But stylistically speaking, I don’t mind admitting that I’m proud of our collections, which I believe are extremely strong in this regard. The Patek Philippe brand is perceived as being traditional in spirit. And yet, you invest a great deal in research. If there is a Patek Philippe tradition, it’s also very much a tradition of innovation. But innovation, in a technical and visual sense, that comes second to usefulness, reliability and precision. Our research and development labs are here, at the heart of the manufacturing facility, and they are equipped with the most cutting-edge resources available, all the necessary tooling and the finest engineers. Testing is front and centre of our strategy, and we spend a considerable amount of time on this. Sometimes the direction we take is very promising; other times we’re disappointed. But our efforts never cease. We work with organisations such as the EPFL in Lausanne and the CSEM in Neuchâtel, and sometimes in consortium with other selected companies. We pioneered the use of silicon, and today around 85% of our watches have silicon components. Historically, Patek Philippe has always helped watchmaking to evolve, but we want to avoid technology for
“The trick is to maintain visibility without increasing stocks. And I don’t want to increase production. So we proceed by taking small but consistent steps, as we have always done.” its own sake. When we develop a new technology it has to work, and we have to be able to integrate it into our production. In fact, we consider it our duty to continually innovate and evolve. But when we innovate, we remain “traditional” in our own way, and this also applies to the watch casings and external parts. It’s important also to bear in mind one cardinal rule: all our innovations must be capable of being repaired in 50 or 100 years’ time. A Patek Philippe is, and remains, an investment. You seem quite confident about your future. How can we not be confident, when we have invested 500 million dollars out of our own pocket in a new building, as we are in the process of doing? And all to produce barely 60,000 watches a year. It’s a hefty investment! This unit, next door to our current manufacturing facility, is our investment in the future. One of its purposes is to strengthen our after-sales service, and train up the watchmakers of tomorrow. But we will also bring in our watch casing department, which is not far away, as well as installing our component manufacturing and research divisions here. I would also have liked to keep some empty space for future projects, but the 50,000 m2 we have planned are already filling up too quickly. Are you afraid that we are coming to the end of a cycle, that people are falling out of love with watchmaking, that everything could change? As I said, the watch industry took things too far. There was too much of everything and a lot of nonsense, and it led to saturation and then indigestion, which is what you get when you eat too many sweets. But there’s a sense that things are turning around, that the desire is back again. Our history gives us the luxury of a certain amount of detachment, which helps us to keep the ups and downs in perspective. For example, our enamelled
Dome table clocks suffered through a period of distinct apathy. But not only did we continue to stock them, we continued to make them, in order to preserve the savoir-faire. And it proved to be the right decision because, although we don’t fully understand why, one day the tide turned and we sold out of our entire stock. What can you tell us about your market distribution, in these uncertain times? We remain very strong in Europe, which accounts for 40% to 43% of our sales. This is the result of comprehensive, long-term efforts with our local clientele. Ten years ago, the USA was also very strong, at around 30%. Today, although it is down to 15%, there is still great potential there for us. The USA is home to some of the finest Patek Philippe collections – there are some breathtaking pieces in the hands of collectors who have kept a very low profile. Asia, as everyone knows, has
“How can we not be confident, when we have invested 500 million dollars out of our own pocket in a new building, as we are in the process of doing?” calmed down considerably – Hong Kong first and foremost – but it still makes up 30% of our market. Things are going very well in Singapore, for example. Japan less so. But the market that has suffered the most is Russia, without question. There, it’s all or nothing. Patek Philippe regularly makes the headlines with extraordinary results at auction. Is this the result of a deliberate policy? Absolutely not, it’s the result of a policy focused on quality, reliability and the long term. Remember, we have made a commitment to be able to repair or restore anything, forever. We are set up to do this, and we do it every day [see ‘The manufacture within the manufacture’, Europa Star March 2016, www.europastar.com]. But of course we’re absolutely delighted with these extraordinary results. We welcome them heartily, but we don’t use them. They serve to confirm that we have made the right choices, and they attest to the exceptional trust in which our clients and collectors continue to hold us.
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20 | WATCH.AFICIONADO
Getting back onto young people’s wrists For the past fifty years, the only so-called ‘watches’ worn by young people have been garish, interchangeable, gimmicky things; accessories rather than real watches. That’s because young people’s relationship with time has changed hugely. Sociologists have now started taking an interest in the subject, revealing how young people have developed this particular approach to time since becoming hyperconnected. The watchmaking industry, meanwhile, mostly has a lot of catching up to do. by
The issue has been haunting us for several years, more pressingly so ever since Peter Stas made the frank admission that his regrets included being “unable to find a way onto young people’s wrists” – and that was back in 2011. Indeed, this individual confession has been true of the entire industry, ever since the renaissance of mechanical watches in the early 1990s. But nobody bothered to look into why that should be, since there were no problems in the adult market. Or at least, not until now. Today, though, it’s high time the subject was researched – more than high time, perhaps. An investigative piece
on young people and time might sound a bit pretentious. After all, there’s no such thing as time, or indeed “young people”. Time is perceived differently by different people; “young people” is a fluctuating sociological category. A century ago, someone aged 14 was held to be young simply because people tended to die at 50. But today, in the West at least, youth tends to be defined in socio-professional terms: “young people” means anyone who is not yet fully independent, because they are not yet on the job market. The term has become something of a catch-all for everyone who has lost the privileges of childhood but not yet inherited those of adulthood.
The end of “dad’s watch” Is youth the “ungrateful age”? Very probably, but through no fault of its own. In peak physical condition and at the height of their intellectual abilities, young people are like future beings trapped between two very different worlds – the freedom of childhood and the obligations of adulthood. So it’s hardly surprising that getting a handle on their relationship with time is such a challenge.
Gaining control of time is one of the first ways young people break out of the age of childhood – whilst also setting themselves firmly apart from the age of adulthood. There are some clues that can help us make sense of it, though. As the watchmaking industry struggles to get its timepieces back on young people’s wrists, it would do well to note them. It’s blindingly obvious that the industry is failing to connect with young people because it
no longer understands their relationship with time. Watchmakers are still trying to impose the “dad’s watch” recipe on the younger generation – and as has been seen, this is doomed to failure, because the latter are living in a hyperconnected world.
I take my time, therefore I am Research by Schehr (1999), Lachance (2011) and others has identified time as a means by which young people achieve autonomy. Children’s time is organised around them: parents plan their day around their offspring’s nap times and mealtimes. Adults’ lives, meanwhile, are structured by social norms, with time governed by professional obligations and social engagements. Young people’s lives are caught between these two tensions, as they strive to find the right balance. Gaining control of time is one of the first ways young people break out of the age of childhood – whilst also setting themselves firmly apart from the age of adulthood, perceived as a period of slavery. This is clearly seen in the teenager who says “I’ll be down in a minute,” when his parents tell him that dinner is ready; or the teenage girl who’s supposed to be back from her evening out at 10pm, and who
invariably fails to return before ten or quarter past. Contrary to popular belief, this is not so much a sign of teenage rebellion, but first and foremost a way of signalling independence, as teens take full and conscious control of their time. “I manage my time, therefore I am capable of managing myself, therefore I am autonomous,” goes the reasoning. Or in a nutshell, “desynchronisation is emancipation”. Adults consider time to be all about getting old, whereas young people see it as a means of escape. Adults put up with it; young people seek to control it. It may be wryly observed that some adults, fed up with enduring the rigours of time, decide to defy it or even taunt it. One by-product of this is the fad for skull watches – the ultimate combination, on the same dial, of the death they are fleeing and the time they are defying. It also explains why these watches are a total flop amongst young people, who do not as yet see time as an enemy, but rather as an ally that can help them achieve independence.
Today, tomorrow... but no further It virtually goes without saying that the further on in life one is, the more one can look ahead. A sensible adult can project into the future
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MUST-HAVE APPEAL OR CLEAR-HEADED CONVICTION? Over the past few years, certain brands can be justifiably proud of their relationship with young people: Fossil and its various licensing agreements, including with the very effective Michael Kors, along with Festina, Ice-Watch, Daniel Wellington, Calvin Klein, and others. Their success is undeniable – though often short-lived. Young people’s tastes change quickly, and none of these brands has managed to stay with them through their transition to adulthood. Such brands offer must-have appeal to young people, rather than the sense of conviction relied on by traditional watchmaking, based on an objective, reasoned value proposition and a sense of heritage – and this gap between appeal and conviction appears to be pretty much unbridgeable. However, attempts are currently being made to close this gap in two different ways. One involves having a single brand with two separate horological offerings: for instance, TAG Heuer’s “full basket” strategy, ranging from its Connected watch through to its traditional mechanical watches. The other is more clear-cut: one brand with a number of sub-brands, each with its own particular target; witness Armani’s “controlled dispersion” with Armani, Emporio Armani, EA7, Giorgio Armani, Armani Jeans, and so on. The first strategy involves a broader line of fire; the second, more guns. Both approaches are correct in how they view young people: as fast-moving targets.
over several years on the basis of their socio-economic environment and the usual life events: expected promotions, marriage, children, and so on. Children rarely think beyond the week they are in, their homework, or at the very most the next school holidays. Young people are in between these two attitudes. They are often seen as being in a transitional phase between the short-term vision of the child and the long-term vision of the grown-up. This is, however, a mistake. There is no gradual lengthening from short to long-term vision, no “averaging out” between childhood and adult time that might offer us insights into teenager time. Young people usually react in terms of compression and decompression. Compression is primarily a phenomenon associated with their studies. The higher the level of study, the greater the pressure – and the more time is compressed. As has already
been seen, time is a way of young people gaining autonomy, and they find it very difficult when time is compressed by academic pressure. The extreme alienation of young people’s time can lead to depression, anxiety, stress, or even suicide – because time is their road to freedom. Taking away young people’s time blocks their path to independence. “Time has become a stress factor,” admits Loane, a first-year medical student. “Time scares me, because it’s passing too quickly.” In short, while young people need to be prepared for the long-term projection adulthood entails, doing so compresses their time – depriving them of freedom and holding them prisoner in the short-term time of childhood, where they can see little further than one day ahead, precisely when they have incredibly intensive tasks to complete! Such an environment inevitably leads to breakdowns, because the natural
relationship of young people with time is destroyed.
Farewell to past, present, and future From this it follows that young people need to be able to use time to mature; but in contrast to adults, they see time as elastic. Young people today experience time in a nonlinear fashion. The reason for this elasticity can be summed up in one word – internet. The web has allowed young people to develop a form of “atemporality”. The most striking example of this is social media. Facebook, for instance, is a communication channel based on an absolutely unique concept in history: the timeline. In other words, it’s an open-ended option of sharing a present moment, envisaging the future, and remembering the past – by continuing to
write about it, share it, and comment on it. This creates a virtual time-space that is wholly disconnected from reality, allowing young people to juggle with the linear nature of time as they wish, build shared memories, edit them, alter them – and even delete them. Facebook is not just a social medium: it is also a place where collective memories, disconnected from real time, are being forged. And understanding young people’s relationship to time also entails getting to grips with their ability to travel at will in non-linear time.
Me, myself, I Young people’s elastic relationship with time usually surfaces in images, and understanding it also entails understanding their relationship with the latter. In today’s adult world, or that of our parents, still
Young people can no longer identify with the values embodied by “Daddy’s watch”, family heirlooms, and the vision of time these represent. photos dominate: a framed photo of the kids in the living room, a photo of the grandparents on a wall, a family holiday snapshot on the bedside table; single, isolated, immutable pictures; the iconic “photo on the mantelpiece” we all saw at our grandparents’, conveying a memory shared only by those who were there, visible only to guests in our home. Young people live in a “pictoraltemporal” dimension that is the exact opposite of all this. Images are no longer personal, unique, capturing a moment. They have become ubiquitous, are perfectly controlled, and are made available to all and sundry. When a young person shares an image, they are simply placing a temporal marker in the life and community of their peers. Whether it’s on Instagram, Snapchat or some other platform, the same principle is at work. The message is: “I’ve had some me time, I’m in control of it, I’ve immortalised it, and now I’m sharing it so my peers can comment on it.” And, invariably, so that it becomes part of a never-ending present, one that can never be deleted.
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But what has all this got to do with watchmaking? Different people therefore experience time differently. Emile Durkheim was already saying as much back in 1912. But the hyperconnectedness of twenty-first century youth has drastically changed their relationship with time. As we
have seen, it is not an approximate average of child time and grown-up time. It is a means of emancipation. Above all, it is non-linear, embodied chiefly in community-based relationships and the massive use of images – and therefore of the ego. In this perspective, young people are bound to find instruments for telling the time utterly pointless. Where’s the sense in them having a chronograph to measure linear time when they want nothing to do with it? Young people’s time consists of compression (imposed on them) and decompression (when allowed). And it’s no accident that this decompression always defies time in some way: the night owl lifestyle of teenagers, rave parties that last an entire weekend, and suchlike. Nothing that marks out regular intervals in time, be it religion, timetables, or any kind of calendar, has any appeal at all for young people: they prefer time they can control – elastic time. This means that the traditional mechanical watch will continue to struggle to appeal to young people. It enshrines a bygone, linear, disconnected, personal world, whereas young people’s time is all about community, connection, and elasticity. For our forefathers, time was bound up with Kundera’s “fields of the possible”, the promise of a new dawn, and of continuous, sure, and certain progress. Today, young people’s time revolves around questions rather than answers: will I find a job? What will the planet be like in 50 years’ time? Who will I look to when my parents aren’t around any more? Young people can no longer identify with the values embodied by “Daddy’s watch”, family heirlooms, and the vision of time these represent. This explains why the vintage style has won over an entire adult generation that knew something of that age of promise – and left many young people absolutely unmoved, since they perceived this style as nothing more than a relic of an era they will never see. Vintage style reassures those who experienced it directly, or saw it from fairly close at hand – but it’s a source of anxiety for young people, for whom it is nothing more than the vestiges of a lost world. All that said, some watchmaking ventures do appear promising. The smartwatch undeniably offers a promise of digital community that mechanical watchmaking cannot hope to fulfil. Timepieces with a link to achievements and clubs draw people together, thereby contributing to the community dimension that young people find so important. Those who play with time find the idea of owning a watch such as Yohan Blake’s or Usain Bolt’s very meaningful; both these men have used time to set themselves free. A timepiece where you can pause time would also be completely in keeping with the temporal elasticity so dear to young people – even though the current prices of such timepieces unfortunately make them unaffordable, simply because they are mechanical...
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Transparency Has transparency become a sine qua non of our time? The fact remains that sapphire is now a favoured material in luxury watchmaking. It is hard, durable, and scratch-resistant. But it is expensive and terribly difficult to machine. And yet it offers crystalclear transparency, a delicate touch, and a subtle sparkle. In a sapphire casing, the complex interweaving of wheels, levers, bridges and the mechanical heart of the watch takes on a whole new dimension.
H. Moser & Cie Venturer Tourbillon Dual Time Sapphire Blue Skeleton Presented at Baselworld for the first time in 2015, the Venturer Tourbillon Dual Time Sapphire Skeleton, a unique piece, was instantly purchased by famous Parisian retailer Laurent Picciotto, for the princely sum of 1 million US dollars. He then went on to order a second, as transparent as the first but this time featuring a nickel silver skeletonised movement with an all-over blued finish (created through CVD, a process where a chemical vapour applies a thin film). The result is a quite extraordinary piece that marries a classic movement with a totally sapphire case, in convex shapes that recall the 1960s. The clear sapphire contrasts with the blue movement, the rose gold of the tourbillon and delicate hands, and the red GMT hand. A precious mechanical palette of colours.
Bell & Ross BR-X1 Chronograph Tourbillon Sapphire The BR watch was presented for the first time at the Basel show in 2005. Its very military-style square design, inspired by on-board aviation instruments (as though a dial had been take from an instrument panel and added to your wrist) immediately drew attention. Going against all expectations, its bold and unusual design â€“ that seemed to be targeted at a very specific category of buyer â€“ was a hit, and inspired thousands of imitations. Twelve years later, the original BR has been through many iterations, all the while retaining its tough structural design and imposing dimensions (45 or 46 mm). Little by little, it has gained a good reputation in the watch industry, becoming a chronograph, receiving the additions of a tourbillon and a skull pattern, at each turn demonstrating its military origins or moving into the realm of jewellery watches. Today, it appears in the totally transparent form of the BR-X1 Chronograph Tourbillon Sapphire. Combining a flying tourbillon and a single push-piece, its totally transparent construction gives an unobstructed view of the mechanical workings of the watch.
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Physical Resonance Armin Strom Mirrored Force Resonance
The fascinating physical phenomenon of resonance! While it is common knowledge among civil engineers that the resonance of the synchronised marching of an army can cause a bridge to collapse, the phenomenon was first observed in watchmaking by Christiaan Huygens, who noticed that two of his pendulum clocks suspended from the same beam synchronised their frequency. Two centuries later, Antide Janvier with his resonance regulator, and then Abraham-Louis Breguet with his double pendulum resonance clock, further explored the phenomenon. But it was not until the arrival of François-Paul Journe and his Résonance that the phenomenon was finally applied to a wristwatch. Since then, Rudis Sylva has been the only one to approach the subject, this time by linking together two toothed balance wheels. Now, Armin Strom, a modest yet excellent manufacture located in Biel, is offering his own interpretation of the phenomenon. Armin Strom has created a highly elegant solution that is magnificently presented in the Mirrored Force Resonance. To give a very brief summary, it houses a single movement equipped with two regulators whose balance wheels mirror each other, and which are linked together by a stunning steel resonance clutch spring in a new and unique shape (see diagram). The two regulators stabilise and synchronise with each other, and coordinate within ten minutes to beat at the same frequency. The result is improved working accuracy and a magnificent and intriguing spectacle. SHOCK PROTECTION FOR RESONANCE CLUTCH SPRING
BALANCE WHEEL BRIDGE
SHOCK PROTECTION INCABLOCK
RESONANCE CLUTCH SPRING
Pitch Black Anish Kapoor MCT Sequential One S110 Evo Vantablack The polar opposite of sapphire! Vantablack is a black material composed of carbon nanotubes that trap light by absorbing 99.96% of the visible spectrum. Artist Anish Kapoor has acquired the exclusive rights to use it – creating debate among other artists who feel they have been deprived of this ‘colour’. “When we discovered Vantablack a year ago, we were fascinated by its surreal beauty, the depth and dizzying power of its finish,” explains Pierre Jacques, CEO of MCT Watches. In collaboration with Anish Kapoor, for the first time MCT is offering this incredible shade of black to the watch industry. The result is a fascinating piece, a ‘black hole’ whose mysteries can only be grasped when seen with your own eyes. Seen here against crumpled aluminium, Vantablack removes any appearance of depth. It was first used for military purposes in aircraft and other stealth vehicles.
Let’s be slim
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If you needed a demonstration that time is cyclical, the ebb and flow of trends could serve as useful pointers. After a decade in which watches have continued to grow in size, they are now shrinking again, in both diameter and thickness. Slim, thin, extra-flat watches are the latest trend, as they have been on occasion in the past.
Bulgari Octo Finissimo Tourbillon Squelette At a record-setting 1.95 mm, the Bulgari calibre BVL 268 Finissimo Tourbillon remains the world’s thinnest tourbillon movement. Now fully skeletonised and visible from both sides of the watch, it gives up some of the “secrets” that enabled Bulgari to achieve this astonishing feat of miniaturisation. The cage of the flying tourbillon is driven by a peripheral mechanism mounted on ball-bearings, which considerably reduces the total height of the movement. Its 62-hour power reserve, an amazing feat for an ultra-thin movement, is also the result of innovative use of ball-bearings: the barrel spring is in fact a slip-spring, and the barrel itself is supported on three ball-bearings, which doubles the height of the spring and thus achieves an 80% increase in the power reserve. The Octo Finissimo Tourbillon Squelette is the latest addition to the Octo Finissimo collection, following in the footsteps of the extraordinary Minute Repeater presented last year, which was equipped with the calibre BVL 362, itself no slouch in the thinness department, at 3.12 mm.
Jean Lassale, Europa Star 1976
In 1976, for example, the cover of Europa Star was dedicated to Jean Lassale, who had just unveiled “the world’s thinnest watch”, with a handwound movement measuring just 1.2 mm thick (2.00 mm for the automatic version). At the time, Gilles Baillod, editorin-chief of L’Impartial and a great watch connoisseur, wrote: “In the field of mechanical watchmaking, we didn’t really expect any more mechanical inventions that could be considered great discoveries. And yet! At the Basel Fair in April 1976, a man who was unknown, or virtually unknown, to the watchmaking establishment, unveiled an innovation that captured the attention of technicians and stylists alike with a movement so thin that it defied the logical underpinnings of watch mechanics, measuring just 1.2 millimetres thick. This calibre is as bold as it is brilliant. It incorporates a number of ingenious solutions that could be of interest to all watch manufacturers, although not at a thickness of 1.2 millimetres...” Designed by watchmaker Pierre Mathys, this movement was revolutionary in a number of ways, but particularly in one of its more unique aspects: for the first time, every element of the gear train rotated on a single bearing driven into a bearing block, which itself was part of the baseplate, incorporating the thickness of the movement itself. However, the Jean Lassale company got into difficulties, and Seiko took over in 1979 (beating Omega to it). The patents for calibre 1200 and calibre 2000, however, ended up in the hands of Nouvelle Lemania. Lemania supplied them exclusively to Piaget and, later, after Piaget was taken over by Cartier, Lemania also supplied them to Vacheron Constantin. Today, slim watches are making a comeback.
Vacheron Constantin Patrimony Quantième Perpétuel Among the great watchmaking houses, Vacheron Constantin has some very serious references in the ultra-thin segment, including the calibre 1003, which came out in 1955. At its debut, this manually wound Geneva-hallmarked movement was the thinnest in the world, measuring just 1.64 mm, a mere 0.44 mm more than Jean Lassale’s calibre 1200, which would not appear until 21 years later. Vacheron Constantin’s expertise in ultra-thin technology goes back even further, in fact: in 1931 Vacheron Constantin unveiled the world’s thinnest pocket watch, built on a movement 0.90 mm deep. But at such minute tolerances, the exercise becomes something of a tightrope walk. The last product of Vacheron Constantin’s longstanding relationship with millimetres and their tenths and hundredths is the automatic 1120 QP calibre, which is 4.05 mm deep. This stunning achievement of miniaturisation and reliability was the result of a classic, traditional construction. Displaying hours, minutes, perpetual calendar (day of the week, date, 48-month counter with leap year) and moon phases, the Vacheron Constantin Patrimony Quantième Perpétuel comes in a case just 8.90 mm deep.
Piaget Altiplano Piaget didn’t wait around for Jean Lassale to develop his 1200 calibre to venture into the domain of the ultra-thin watch. As early as the 1957 Basel Fair, Piaget presented its manually wound calibre 9P, which measured 2.00 mm (0.8 mm more than Lassale’s future 1200). Three years later, in 1960, the 12P made its appearance: an automatic 2.3 mm calibre, made possible by the use of an off-centre micro-rotor. This achievement was justly applauded at the time. This mastery of ultra-thin movements, combined with a generous dial size, enabled Piaget to develop a particularly elegant, understated style which became an international success. This year, to mark the 60th anniversary of Piaget’s commitment to the ultra-thin watch, the company is unveiling a whole series of new slim versions. They include the Altiplano Tourbillon Haute Joaillerie, a rare example of a tourbillon in an extra-thin watch. The movement that drives it, the manually-wound 670P, measures a remarkable 4.6 mm deep. The tourbillon cage weighs just 0.2 g.
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Audemars Piguet Royal Oak Extra-Thin The calibre 2121 that drives the new AP Royal Oak ExtraThin is the secret behind the legendary Royal Oak, which made its debut in 1972. Contrary to appearances, the apparent solidity of Gérald Genta’s design of the first Royal Oak required an ultra-thin movement. But the calibre didn’t come out of nowhere. It was preceded by a long history of rivalry and collaboration between Audemars Piguet, Jaeger-LeCoultre and Vacheron Constantin. Its heritage can be traced back to 1921, when Audemars Piguet introduced a pocket watch movement measuring 1.32 mm thick, in response to the 1.38 mm movement unveiled by Jaeger-LeCoultre in 1907. This was followed in 1953 by the calibre 2003, developed by all three watchmakers in collaboration, then in 1967 the first automatic calibre, the 2020 measuring 2.45 mm, designed by a fourth partner, Patek Philippe. Its descendant, the 2121, with a thickness of 3.05 mm, launched by Audemars Piguet in 1972, is where the Royal Oak saga begins. The latest chapter of that saga features the new extra-thin Royal Oak in yellow gold, driven by the 2121.
Citizen Eco-Drive One Record: broken. Encased, the Eco-Drive One measures an incredibly slender 2.98 mm, which makes it unquestionably the slimmest solar-powered quartz watch in the world. In order to achieve this spectacular and extremely elegant result, Citizen’s engineers designed a movement 1.0 mm deep. They had to redesign all the components, and pioneered the use of new materials for the case, including cermet, a composite of ceramic and metal. The bezel is made of “binderless cemented carbide”, which is extremely hard and impervious to oxidisation. “Technology exists to enhance beauty. That’s how we define it,” states Toshio Tokura, President and CEO of the Japanese watchmaker.
Cartier Drive Extra-Plate With a total thickness of 6.6 mm, which is 40% slimmer than the previous automatic version, the Cartier Drive Extra-Plate is undeniably elegant. Its slim profile is down to the manuallywound 430 MC movement. The same movement, with its 131 parts, was used to drive the very slender (5.1 mm total depth) Tank XL ultra-thin, which came out in 2012.
Jean Marcel Nano 3900µ Breaking the 4 mm barrier was the challenge Jean Marcel set itself after the success of its previous collection, the Ultraslim, which successfully met the mark of 4.5 mm. After a number of feats of engineering wizardry, the brand overcame the challenge with a case measuring 3.9 mm (hence the name – Nano 3900µ). With a water resistance of 3 atm, sapphire crystal and a simple, elegant face, the Nano collection features some of the slimmest watches in the world.
Movado Ultra Slim Created in 1947 by the famous Nathan George Horwitt, the Museum doesn’t look a day older as it prepares to celebrate its 70th birthday. It remains the undisputed symbol of stylistic rigour and simplicity. Brilliantly reinterpreted in 2016 by designer Yves Béhar, who fulfilled his sensitive brief with a daring concave shape, this year the Museum displays a more slender profile. With a depth of 6.3 mm, it is more minimalist than ever.
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“The danger is not the humanisation of robots but the robotisation of humans” by
The German futurologist Gerd Leonhard was invited to the 8th Haute Horlogerie Forum last autumn. He had one piece of advice to give to young people looking for a future career path: choose whatever you like, provided you can’t be replaced by a robot! On closer inspection, the choice isn’t actually all that wide. Hairdresser (probably). Plumber, given that a robot will never be as good at disentangling tubes and pipes as a human being. (An image of Robert de Niro as the heating engineer in Terry
Gilliam’s brilliant dystopian sciencefiction film Brazil comes to mind...) Lawyer – probably not. Since May 2016, a robot by the name of Ross has been working in the Cleveland offices of BakerHostetler. Ross has already fathered children. His father is IBM. Ross’s area of expertise is corporate bankruptcy (I’m not making this up). He doesn’t speak in court (although that day may come); what he does is analyse, extremely efficiently, thousands and thousands of documents relating to corporate bankruptcy. Some of which is probably caused by robots.
Banker – that’s definitely a no. Trading is already dictated by algorithms. Journalist? The industry is already on its knees – and robots are rubbing salt into the wounds. “Researchers from the Intelligent Systems Informatics Lab (ISI) at the University of Tokyo have developed a new prototype capable of travelling around, interviewing people, collecting information, taking photos with an onboard camera, performing web searches and posting articles online, completely independently. Eventually, they could replace reporters in areas consid-
Manpower recently released the results of an interesting survey it conducted among 19,000 young people born between 1982 and 1996 in 25 countries. It paints a picture of a generation whose aspirations differ dramatically from those of the previous generation, who were marked paradoxically by both the idealistic revolutionary spirit of 1968, and by the “loadsamoney” decades that came later. They had been freed from societal conventions, and all sorts of financial, economic and physical barriers had
As consumers, Generation Y are all over the place, which goes some way to explaining why the watch industry seems to have lost its direction. been lifted. The result: that tired old stereotype of the former revolutionary who now drives a sports car, and soothes those occasional pangs of guilt with a bit of retail therapy and a nice new watch. Generation Y, on the other hand, has a far more straightforward relationship with career and money. Paradoxically, the absence of a guilty conscience gives these Millennials more freedom to pursue the ideals their elders abandoned: prioritising professional
harmony over an obsessive pursuit of financial and professional success; treating their peers the same, whatever their social status; achieving a work-life balance; returning to more conservative values; yearning for boundaries, limits, and at the same time a more friendly environment, when it seems everything has gone out of the window, and nothing is as it was. This generation has moulded itself into a paradox where individualism and resistance to authority have never been stronger (the result of the “social explosion”), but at the same time, the “digital explosion” has fostered an urge to rebuild bonds and (re)connect with their roots.
The tangible results of the attempt to reconcile these contradictory forces are clear from the Manpower study, which shows that acquiring personal skills (73%) is more important to Millennials than building managerial skills (27%). Just 16% are interested in leadership positions, while “working with great people” is far more important for 33%. Most favour the idea of “being their own boss, not being told what to do”. Manpower urges employers to remain open to “alternative ways of working”. What are the consequences of these attitudes for the watch industry? Let’s look at two of them (there are many more).
ered too dangerous for humans,” explains Romain Serre of the prestigious European Communication School in Paris. Watchmaker, then? They do make quite a fuss about their manual skills: the painstaking hours they spend polishing chatons, angling bridges and mounting tourbillons in their handcrafted cages. But let’s not be coy: robotisation and automation are already key factors in many aspects of watchmaking. In many cases, and increasingly, human beings are only there to set up the robots. A new division of labour is emerging, as we saw when we vis-
As members of the workforce, Millennials, who have at their fingertips a palette of digital tools and countless inspiring figures to emulate, are keen to test the entrepreneurial waters, or to create their own space within a company, while maintaining a connection with their peers. It is no accident, then, that the charismatic CEOs Jean-Claude Biver (TAG Heuer) and Max Büsser (MB&F) are probably the most visible figures in our industry, given that both in their way have attitudes that will resonate with Generation Y. Mr Biver is known to be a “great guy” – dynamic and rich but not arrogant, and Mr Büsser promises his employees no more and no less than that they will “work with good people in a creative environment”. I rest my case. As consumers, Generation Y are all over the place, which goes some way to explaining why, as we try to process the vast “explosion” of everything that is safe and familiar, the watch industry seems to have lost its direction. Torn between the authenticity of the local shop and the convenience of online shopping, they are riddled with contradictions that torture and tempt in equal measure. There are few signposts in this vast chaos, where sometimes it looks like those who shout loudest always win, before they are suddenly eclipsed by a newcomer that prides itself on moderation and reason. And so we turn from blingbling to vintage. XXL machismo is replaced by the understated cool of Mad Men. That’s what happens, when you have a period of unprecedented and rapid technological, social and economic upheaval. In all of this, the Millennials are both executioners and victims, trapped between the previous generation, which lit the fuse, and the future digital natives who will reap the fallout. There’s a French film called “Life is a Long Quiet River”. I’m not so sure about the “quiet” part.
ited the Omega factory in 2014: “Each time a bridge is added to an assembly, a single screw is inserted manually purely to secure the movement during its transport. The remaining screws are then selected and screwed in automatically by a special robot,” we wrote. A very well-known watchmaker said to us a few weeks back: “There is an urgent need to put humans back at the centre.” Yes, but which humans? As our German futurologist warned, “Contrary to what everyone is saying, the danger lies not with the humanisation of robots, but with the robotisation of humans.”
EUROPA STAR WATCH.AFICIONADO
CHAIRMAN Philippe Maillard Publisher, CEO Serge Maillard EDITOR-IN-CHIEF Pierre Maillard EDITORS & CONTRIBUTORS IN THIS ISSUE Pierre Maillard, Serge Maillard, Jill Metcalfe, Pierre-Yves Schmid, Olivier Müller, Joe Thompson, Dominique Fléchon, Fabrice Eschmann, François Xavier Mousin, Caroline Buechler CONCEPTION & DESIGN Serge Maillard, Pierre Maillard, Alexis Sgouridis PUBLISHING / MARKETING / SALES Nathalie Glattfelder, Marianne Bechtel, Jocelyne Bailly, Véronique Zorzi BUSINESS MANAGER / ACCOUNTING Catherine Giloux MAGAZINES & BUSINESS PAPERS Europa Star Global | USA | China | Jewels | Switzerland | Bulletin d’informations | Eurotec WEBSITES europastar.com, watch-aficionado.com, watches-for-china.com, watches-for-china.cn, horalatina.com, europastarwatch.ru, worldwatchweb.com, europastar.com/premiere, europastarjewellery.com, CIJintl.com, eurotec-online.com EUROPA STAR HBM SA Route des Acacias 25, CH-1227 Geneva - Switzerland Tel +41 22 307 78 37, Fax +41 22 300 37 48, email@example.com MAGAZINE SUBSCRIPTION www.europastar.com/subscribe E-NEWSLETTERS www.europastar.com/newsletter Copyright 2017 EUROPA STAR All rights reserved. No part of this publication may be reproduced in any form without the writtenpermission of Europa Star HBM SA Geneva.
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Automation: towards human obsolescence? by
Pierre-Yves Schmid, eurotec
The Encyclopaedia Universalis defines automation as the act of rendering automatic operations which previously required human intervention. So we can see a certain nobility in this primary objective: the principle was aimed first and foremost at reducing the repetitiveness, physical effort and danger of the tasks entrusted to workers. Over time, these values gradually gave way to more mercantile considerations, as industry rapidly realised what advantages it could gain from large-scale automation: shorter production times, lower labour needs, higher productivity and profits.
Great advances – and huge social impact And this is where the whole paradox of automation lies: on the one hand, it has unquestionably improved the lives of millions of workers, while at the same time contributing to a massive loss of jobs. This contradictory effect grew steadily during the various technological revolutions of the past fifty years. The advent of robots, made possible thanks to information technology and sensors, has further exacerbated the phenomenon. This new, often unequal division of labour between man and machine presents huge issues for society; to such an extent that certain governments of industrialised countries are now considering taxing robots to fund training and conversion programmes for the employees they have shunted to the exit.
For watchmaking, the climax of an industrial odyssey The automation of certain operations is closely linked to the strong competition that Swiss watchmakers faced from American manufacturers in the late nineteenth century. Thanks to public contracts (the railways, army, etc.), the volumes produced in the United States left little room in the marketplace for Swiss watches. The sudden slump in exports to America brought home to the Swiss watchmaking industry the extent to which it lacked production capacity. In subsequent developments, the two World Wars forced the United States to concentrate their manufacturing industry on arms: watchmaking, in particular, was set aside. Switzerland took advantage of this period to do some catching up where automated production was concerned and abandoned – sometimes reluctantly – the rather widespread cottage-industry system in favour of factory work.
Subcontractors to the watchmaking sector – the major players in automation Today, automation in the watchmaking industry has found a choice partner for ensuring even greater precision for their operations: information technology. Take the example of Lécureux of Bienne: a wellknown name in the watchmaking world for the past 55 years thanks to its electric screwdrivers, it has developed control units which automatically recognise the screwdriver and apply the corresponding settings. This innovation has substantially optimised precision and cycle times. All screwing and measuring parameters can be set to suit a given application and stored via the control unit or the built-in PC interface. Thanks to the fact that all the workstations are networked and all the screwdrivers virtually integrated on the server, remote programming is possible. Statistics, saved settings
and results can be output to an SD card in response to the growing demand for traceability throughout all operations. Another example is the Smart Assembly Machine (SAM): thanks to its 6-axle robot, this new machine proves especially fast and flexible when it comes to operations such as assembling small watch parts, placing batteries in quartz movements,
racking, palletising, handling, quality control and connecting and disconnecting measuring systems. Fantastic progress! But progress which, as ever, poses the milliondollar question: in the digitised, automated assembly lines of tomorrow, what role will remain for humans? It is this interaction which is shaping, and will increasingly shape, economic – and political – agendas.
AUTOMATION FROM ANTIQUITY ON A number of important milestones marked the history of automation well before the industrial age. In the first century AD, the mathematician Heron of Alexandria built numerous automated systems using hydraulic energy. In the seventeenth century, Wilhelm Schickard, a German scientist, developed the first calculator, followed some twenty years later by Blaise Pascal. The first industrial application of automation came in 1793 when the French mechanical engineer, JosephMarie Jacquard, automated a weaving loom by using perforated cards to sequence the operations. From there, industrial automation spread. Sustained in the early twentieth century by the introduction of new work methods, such as Taylorism, it culminated in a revolution in the approach to production – one emblematic example being the assembly lines of the Ford factories.
Because make no mistake about it, automation is everywhere today. We’re talking here about industry, of course, but also increasingly about home automation (a mixture of automation, information technology, electronics and telecommunications to remotely control home systems), the rising automation of vehicles and more recently, even the automation of administrative, book-keeping and management occupations. In fact, scientists at Oxford University have identified some 700 professions which could, in the long term, be exercised by machines equipped with artificial intelligence. In the short term therefore, one of mankind’s major responsibilities will lie in setting itself limits to prevent one of the greatest contributions to workers’ well-being turning into a grave-digger for human activity.
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700 professions set to be fully automated soon?
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Reborn from Rock by
In 1974, Tissot sold precisely 919,200 watches with mechanical calibres of its own manufacturing. Ten years later, in 1984, the total number of watches sold had plummeted to 14,140, 10,226 of which were equipped with mechanical calibres. That, in a nutshell, was the magnitude of the fall. Moreover, Tissot had stopped manufacturing its own movement blanks in 1976, contenting itself with assembling its watches. Integrated into the SMH brand network developed by Nicolas Hayek, and by then no more than a pure marketing and sales entity, Tissot’s “awakening” came in an unexpected fashion. On a roll after the success of the plastic Swatch watch, which had just been launched in 1983, Ernst Thomke made Tissot a
bizarre offer. “To relaunch the brand, Tissot had to have a new product,” he explained in 1987. “During an alcohol-fuelled evening we said to ourselves: we’re going to make a watch out of rock! When I suggested selling a watch made of rock to them, they said ‘That’s a good joke. Ok, if you insist, we’ll sell 3,000’… I said: ‘10,000 at least, otherwise I’ll give it to another brand’… I think they thought I was completely crazy.” In 1985, the Rock Watch was launched on the US market, which Tissot had neglected for the past decade or so. It was no mean investment: 5 to 7 million US dollars for the development costs and the purchase of special equipment capable of machining granite, and 20 million for marketing and advertising. The success of this watch, carved in
granite for the most part from the Swiss Alps, was stupendous. “The workers at Tissot are now working overtime to supply the test markets of Chicago, Boston and Atlanta,” wrote L’Illustré in December 1985. On the strength of this test, which it passed with flying colours, the official launch on the Swiss market took place in March 1986 – witness the cover of the 2/1986 issue of Europa Star. With its red and yellow hands in imitation of the signposts on the Swiss Alpine trails, the one-of-a-kind, never-before-seen Rock Watch lifted Tissot back into the black. By 1994, when production came to an end, more than 800,000 Rock Watches had been sold. Rock gave rise to other ideas: in 1988, Tissot launched the Pearl Watch, all in mother-of-pearl, then in 1989 the Wood Watch. These experiments with unusual materials gave way to the Two Timer, a watch both analogue and digital that was to propel Tissot to new heights. But the Rock Watch had left an indelible mark. In the brand’s bid to reconquer the US in 2006 it was François Thiébaud, Tissot’s CEO, who said, “Americans remember the Rock Watch, not Tissot.”
The cover of the 2/1986 issue of Europa Star
The forgotten proletarian watch by
Some fifty years ago, in 1967, Europa Star (issue 3/1967) published an article in collaboration with the Roskopf Association celebrating the hundredth anniversary of an invention by Georg Friedrich Roskopf. Born in the Black Forest in Germany in 1813, where there was a thriving clockmaking industry, G.F. Roskopf became a watchmaker himself and moved to La Chaux-de-Fonds before settling in Geneva. It was here that he had the idea of creating ‘a watch for the working classes, a watch that anyone could afford’. This noble idea took more than ten years to bring to life, but in 1867 he finally launched what he called ‘the proletarian watch’, which was sold for 20 $. To achieve his goal, he tried to simplify the movement as far as possible, by reducing the number of necessary components from 160 to 57. He created a pin-pallet escapement, removed the centre-wheel and, initially, the hand-setting mechanism (which could be done with the finger), opted for a keyless winding mechanism, used non-precious metals and designed the watch to be easy to manufacture in the factory.
Europa Star n°3/1967
It was an immediate success, but Swiss watchmaking competitors took it badly. They all refused to work with him, and accused him of ‘destroying’ their artisanal craft. Roskopf was forced to call on workers from the French Jura and from the canton of Bern. Presented at the Universal Exhibition in Paris, the “Prolétaire” caught the attention of Louis Breguet, who praised it highly. The international markets then began to open up. While Switzerland totally rejected the watch, France, Belgium, the Indies, Brazil and Egypt, among others, were all quick to embrace it. From 1868 onwards, Roskopf had to expand and invest to meet the demand. As he hadn’t registered any patents, his work was also quickly copied, with varying degrees of success. Poorly-made ‘fake’ Roskopfs damaged his reputation. Eventually, he registered a patent in the United States and handed over the company to his friend Charles Léon Schmidt and the Will brothers. His successors launched a largescale industrialisation process and built two large ‘Roskopf Patent’ factories in La Chaux-de-Fonds. In the twentieth century, the Roskopf
brand flourished, inundating the British Empire and then the United States, becoming the most-exported Swiss watch with up to 35 million pieces exported per year at the start of the 70s, before the arrival of quartz dealt a fatal blow.
Killed by quartz In 1967, quartz had not yet hit the scene. The Roskopf Association included 67 brands and watchmakers, none of which are still in operation today, and seven ébauche manufactures, of which only Ronda survives, having made the switch to quartz before resuming production of mechanical watches last year. In 1967, the Roskopf Association reiterated its message in Europa Star: ‘Those who benefit from Roskopf watches include young people who still cannot afford to buy a more prestigious watch, those living in developing countries who are realising the importance of knowing the exact time, and the poorer classes in Western society’. Just a few years later, this dream was definitively cast aside as the Swatch became the new ‘Prolétaire’.
A NEW WATCH MAGAZINE FOR THE USA
Europa Star launches a new watch business paper for the American market. Watch.Aficionado targets 10,000 points of sale in the USA with in-depth analyses and watch expertise.
XXL newspaper tabloid size: 290 x 380 mm
Watch.Aficionado will be launched at the Couture and JCK shows in Las Vegas, starting on June 2.
Watch.Aficionado is published five times a year and circulated to 10,000 points of sale (jewellers) and aficionados on the American watch market.
The new 32-page publication in English, featuring articles by leading watch writers including Joe Thompson and Pierre Maillard, has the same format as the successful business paper Europa Star Première of Switzerland.
Europa Star has been present in the American marketplace for more than 50 years with several titles dedicated to the watch and jewellery industries.
The new publication, a compact local edition to complement the global 160-page Europa Star edition circulated worldwide, broadens Europa Star's reach in the USA. WORLD
ABOUT EUROPA STAR
Global edition – Magazine
Europa Star has been a leading watch magazine since 1927. Primarily aimed at watch professionals, it reaches 50,000 points of sale around the world, as well as a number of genuine watch aficionados. The 160-page Europa Star Global Edition in English, comprising two folios – Time.Business and Time.Keeper – is circulated five times a year in 170 countries. There are also three regional editions, for the primary watch markets of Switzerland (Europa Star Première, in French), the USA (Watch.Aficionado, in English) and China (Watches for China, in Chinese). The Europa Star web platform reaches more than 700,000 unique users per month, in English, French, Chinese, Russian and Spanish.
30 | WATCH.AFICIONADO
“It’s suicide to play around with prices!” are expensive… to make! Which more than justifies the price.
Stung by Europa Star’s feature on the sensitive issue of the pricing practised by watchmakers, François-Henry Bennahmias, CEO of Audemars Piguet, felt impelled to respond: no, price should not be the main question of the day; but yes, transparency is set to become the new norm in watchmaking. He talked to Europa Star.
In fifteen years, watches priced at over 3,000 dollars have grown from representing 10% to 60% of the value of Swiss watch exports. Aren’t we experiencing the backlash of this “gold rush” today?
portantly, the models you compared have evolved: we’ve moved on to an open-worked design, a manufacture calibre, a larger size, and so on. It’s a better model! And I’ve got an eagleeye for figures. They just jump out at me. I’m a bit like the main character in Rain Man...
It all began with a phone call. On the other end of the line was FrançoisHenry Bennahmias, Audemars Piguet’s CEO. Courteous but irritated, he explained that the last feature in Europa Star, devoted to the delicate or even taboo issue of watch prices, made him “take off like an Ariane space rocket”. Especially the table comparing the growth in the prices of iconic models since 2000, which showed a substantial increase in prices. “Your figures are inaccurate! Those models have evolved, and you can’t compare apples and pears…” And: “Price-wise, the watchmaking industry is very restrained compared with what goes on in the leather goods or hospitality sector, or even the automotive industry!” You can feel that the issue is a sore point. “I want to be constructive and I’m absolutely transparent!” So, to discuss the matter further we agree to meet at Le Brassus for a long conversation – which, besides prices, reveals many other facets of the watchmaking industry and the mindset of Audemars Piguet, its boss and the notion of value; all this in the presence of his figurines of Master Yoda, Arnold Schwarzenegger’s autograph and even an evocation of the film Rain Man... In a recent report (Europa Star Chapter 1/17), we published a table based on a handful of iconic models on the French market which showed a strong global rise of around 60% in watch prices between 2000 and 2010, which then slowed down to around 12% between 2010 and 2015. François-Henry Bennahmias: You published your table and I did the same thing here. I mobilised my teams to find those figures and I didn’t get the same result as far as the steel Royal Oak model with the date display is concerned. But more im-
I feel that watchmakers have been extremely measured compared with other sectors of activity or other brands. Here’s an example: in the year 2000 the price of a room in a luxury hotel cost the equivalent of 160 dollars. How much do you imagine it costs today? Over 1,000 dollars! Another example: in 1994, for my thirtieth birthday, I was given a Hermès messenger bag. At the time, it cost 14,000 French francs, or around 2,000 dollars. The price today? 8,000 dollars. Similarly, a pair of quality women’s pumps cost 500 French francs, under 100 dollars, in 2000, compared with at least 600 dollars today! Even so, comparisons with other sectors aside, the question of price is still of prime importance for the customer, you can’t just brush it off… Prices have been an issue for two years. Nobody talked about them in 2010. So why are they doing it today? Because there’s a kind of crisis. People think they can find a solution with prices. It’s not the right solution. The solution lies in innovation, that’s where we have to look. You can’t simply equate luxury with price, that’s a slippery slope. On that point I agree with Jean-Christophe Babin when he says in your feature that “we associate crisis with a lack of money, but it’s not necessarily the right reflex response, nor a solution, and you don’t necessarily get out of it by lowering prices”. Yet a certain number of brands have lowered their prices, and numerous retailers are offering huge discounts. Is there any going back? Look: the answer is this watch that I’m wearing on my wrist, the new black ceramic Royal Oak Perpetual Calendar. It’s worth 91,800 dollars – not much less than a Royal Oak
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For this model and the others, do the price increases for watches seem justified to you?
in gold. We presented it the Friday before the SIHH and it sold like hot cakes. Every retailer wanted it. Now, I haven’t received a single email demanding explanations about its price. We could have sold more, but our production capacity is limited to 100 items a year. All this talk of competition makes me laugh: today, the competition for our brand doesn’t come from other watch brands, it might come from a work of art, a car or a travel package. Real luxury isn’t a question of price. What is your definition of luxury? For me, the luxury threshold starts at 7,000 dollars. Going below that would be suicidal! Do you know why no watchmaker has prices that end in .99? It smacks of supermarket promotions. That’s not the world of luxury. Psychologically, what counts more is the 10,000-dollar barrier: the difference between 43,000 and 49,000 dollars is less important than that between 49,000 and 55,000, for example. But what really counts is emotion! And when you have money, emotion comes before the sole criterion of price. Recently, one of our ambassadors came to visit the manufacture with his children. They’re children of the digital age – how could a mechanical product like a watch possibly be of interest to them? Well, I can assure you that they were just blown away. They let go of their tablets, I can tell you. But it’s those tablets that keep consumers better informed – and more punctilious and aware of whether prices are pertinent or not.
Today, the customers are often better informed than the sellers. Retailers talk a lot about money and price, because all too often it was their main weapon. I often notice that car salespeople know more about their product than people who sell watches. If the only argument the latter have left is the price, they’ve failed. Whether it’s a matter of prices, the way watches are distributed or innovations on offer, social, geopolitical and digital change is happening so fast that many watchmakers seem a bit disoriented... With society changing the way it is, everybody’s heading off in all directions. It’s anarchy, we’re seeing 360° turns in strategy. And behind all that, we can see that the notion of transparency is becoming more and more important. We’ve entered the age of transparency! The industry cannot go on hiding everything. And we want to play fair. Go and see other watch brands and see if they’re as transparent as we are on the question of price. But if we understand you properly, above a certain threshold the issue of price no longer plays a role in whether someone buys or not? You have to pay attention to the price, of course, we carry out benchmarking, but it’s a factor that has to be taken out of the equation pretty fast. The price and the perceived value have to coincide exactly. Two years ago the boss of Hermès, Axel Dumas, hit the nail on the head when he said at the Forum de la Haute Horlogerie: Hermès products
Make no mistake, selling luxury products is still an extremely difficult exercise! Many small, independent brands are currently experiencing difficulties, despite the fact that they sell quality products. Demands are high and you can’t afford to disappoint; on the contrary, you have to surprise people. But if I offered a Royal Oak at under 7,000 $, I’d kill the brand! Price is not an end in itself when you’re talking of real luxury. The current crisis is not a luxury crisis. There has never been so much wealth and so many potential customers in the world. But when the storm clouds gather, people turn to the stronger brands, the ones which put quality before quantity. We’re one of them and we’re reaping the benefit: that’s why we achieved turnover of nearly 900 million dollars in 2016. Even back in the crisis of 2008-2009, we were already seeing this concentration on the better brands. We absolutely have to figure in the top third of the list. What sets you apart from the others? We’re a serious brand that doesn’t take itself seriously. Codes have changed. You can no longer judge people by appearances: I always say to my teams, ‘treat a customer in shorts the same way as you would a customer in a suit and tie!’. But I’m surprised how hard it is for some luxury brands to adjust. Another anecdote: recently, I was in a major Paris hotel at brunch time, casually dressed, and when we walked in the maître d’hôtel said to me: “Let me draw your attention to the fact that it will cost 150 dollars”. Incredible, indefensible! You must also have customers who are increasingly used to having free access to services and products, like music or films. What can you do to withstand that kind of pressure? Quality and creativity take time and have a price, or rather: value! Today, the notion that you can get everything for free has done a lot of harm to our society. I never download music for free, I always buy it. But I believe that in this throwaway, everything-for-free age, people are paradoxically in search of greater authenticity. They want to discover what’s behind the façade and they want it to coincide with the image it presents. So a high price – ok, but only if it’s justified.