In the absence of a big enough domestic market, Swiss watchmakers – and suppliers all the more so – have always looked to outlets abroad: royal dynasties in the past and commercial dynasties in the present!
This is their great strength, as witnessed by the fact that when people think of watches, they instantly think of Switzerland. Indeed, few items are so closely associated with a specific country or region. But of course it also makes them vulnerable, as they are intrinsically dependent on the health of their principal markets.
This largely explains the cyclical nature of the industry’s activities. And when one outlet closes, there is the challenge of finding an equivalent or better one, something which takes considerable prowess. During the COVID pandemic, the absence of Asian tourists whose custom had driven the industry was largely offset – in fact in some cases more than offset – by an influx of new local customers, particularly in the United States but also in Europe and the Middle East, spurred on by factors including liquidity injections by central banks, the search for alternative investments, the strength of cryptocurrencies, and promises of watch collections increasing in value in the long run.
The situation right now is more complex, with China yet to bounce back as luxury goods analysts had hoped, while the US market, a huge customer base for Swiss watchmakers, is only just stabilising and India has yet to fulfil its potential. As a result of this uncertainty about what lies ahead, suppliers are not getting the orders they had anticipated when supply was unable to keep up with demand. This brings us back to the eternal dilemma surrounding adjustments to Swiss production… How can we manufacture goods steadily over long time frames if everything can come to such an abrupt standstill?
As we noted recently, watchmakers and laboratories operate on a relatively short-term basis, while stock markets are geared to the long term. Will we ever be able to resolve this problem of differing time frames?
Fortunately, the most agile brands and suppliers have not stopped innovating, as they know that this will be key to a successful recovery. To some extent, the waning dominance of the neo-vintage style in recent years may signal a resurgence in new materials, fundamental research and complications – all the things that fuelled the boom in Swiss watchmaking in the 2000s in particular, that decade of effervescent creativity which also ended in a major crisis.
Another fundamental challenge for the future is the need to ensure sufficient volumes for the Swiss industry, although it has already largely adapted to the supremacy of the high-end market (focusing on the importance of finishes and the ability to produce small batches). Some of the players to emerge in recent years have demonstrated, again with great agility, that it is possible to find a market for more affordable products. After all, the Swiss industry functions as an ecosystem, continuously bringing forth new market entrants to whom one must also offer dreams with creations priced below the four- or five-figure range.
Finally, coming on to suppliers more specifically, recent years have seen an attempt to diversify into new areas, such as the medical sector. This remains a considerable challenge, as standards and practices are often nothing like those in the watchmaking industry. Even so, such dialogue is vital to mitigate the impact of economic cycles.
In the thick of these business challenges, it is more important than ever to put yourself out there. This is the advice I give all the players I meet, whether brands or suppliers. In an industry that showcases human virtuosity and dexterity and is increasingly geared towards quality over quantity, moving beyond Excel spreadsheets is vital: more than ever, it is people who represent the real opportunities…
By Serge Maillard, publisher, Europa Star