FT SPECIAL REPORT Watches & Jewellery Thursday March 27 2014 www.ft.com/reports | @ftreports Price cuts are a sign of the times Inside » Budgets blown for Swiss fairs Brands cannot Market expectations afford to stay away for Baselworld are despite rising costs Page 4 likely to be subdued, reports James Shotter Rethinking China New data suggest s record-breaking years go, appetite for luxury 2013 was a somewhat down- beat one for Switzerland’s watches may be on watchmakers. Although the rise again exports hit an all-time high, Aat SFr21.8bn ($24.8bn), they were just Page 8 1.9 per cent above the level achieved in 2012. For an industry used to double-digit Generation Y growth, the slowdown was something hits saleroom of a shock. So it is no surprise that as members Collectors in their of the industry gather in Switzerland at the annual Baselworld trade fair, 20s and 30s set which opens in the city on the the pace in Asia French-German border today, there is more than a little caution in Page 10 the air. “I think it will be a difficult year,” says Michele Sofisti, who doubles as Exclusive and head of Gucci’s watches division and irreverent chief executive of Sowind Group, the Swiss haute horlogerie company that Anticipation: the Baselworld fair opens in Switzerland this week Getty Inside the private owns the Girard Perregaux and Jean- Richard brands. world of designer “Of course, things can improve; it change of direction in an industry everyone pays very close attention to “For example, if we have a collec- showy watches, reflecting the zeit- Glenn Spiro depends on the world economy. But that has seemed able to raise price, to ensure that customers are tion of watches with prices ranging geist,” he says. I’m not sure when the turnround will them almost at will in recent years. getting very good quality for their from €1,000 up to €6,000, we might Mr Linder agrees. “I think there Page 21 come. I think there is quite a lot of “There has been a change,” com- money. The years when you could put now have more watches close to will be a return to simplicity, and a inventory out there.” ments Jean-Frédéric Dufour, chief any price on a product are over,” he the lower end than we had in the focus on timeless and classical Analysts agree. “Market expecta- executive of Zenith, one of LVMH’s says. past.” watches. tions for Baselworld will be prudent stable of brands. Even watchmakers that are not This mood of caution is also likely “The industry goes in waves and, this year,” says Thomas Chauvet, lux- “Lots of watchmakers are pulling overtly cutting prices are reviewing to be reflected in the types of time- for the past five to six years, there On FT.com » ury goods analyst at Citigroup. “The prices down a bit to make sure they the balance in their collections pieces that shimmer behind Basel’s has been a focus on extreme products, mood is unlikely to be bullish after a are competitive. This trend was between more and less expensive plate glass cases, reckons Jon Cox, over-design, oversize. I think there Wearable wars disappointing 2013 performance for already there [at SIHH] in Geneva, watches. head of Swiss equities at Kepler Cheu- will now be a shift back to more the Swiss watch industry.” and I can imagine that Baselworld “We are changing our mix,” con- vreux, a Europe-wide financial serv- simple and understated watches,” he Join us on Twitter A sign of this caution is that a will confirm it.” cedes Stéphane Linder, who took over ices company. says. March 28 4-5pm number of brands are considering Mr Sofisti takes a similar line. “I as chief executive at TAG Heuer, “In terms of new collections, I cutting prices in 2014 – a noteworthy think this will be a year in which another LVMH brand, last summer. expect the there to be fewer glitzy and Continued on Page 2 GMT #FTLuxury 2 ★ FINANCIAL TIMES THURSDAY MARCH 27 2014 Watches & Jewellery News Diversification Assembly plant shows fashion leader’s commitment. By James Shotter Chanel begins to lift the lid on its Swiss secret ashion, Coco Chanel once staff at its Swiss site from about 270 “Especially at the high end, custom- other arrivals from the world of fash- Precision: a watchmaker at work in the habits of the industry by being said, is “not something that to 350. And it opened a factory in 2012 ers want to know where their watches ion has been bigger than such rela- Chanel’s factory in Switzerland feminine,” she says. exists in dresses only”. Cou- that more than doubled the floor have been made. We felt it was impor- tively small figures might suggest – In terms of market share, the ture houses have often taken space from 8,000m sq m to 18,000 sq m. tant for people to know that their total Swiss watch exports were worth impact of the new arrivals will be felt her at her word, expanding In recent years the notoriously watches are made in Switzerland to SFr21.8bn last year. at the lower echelons of watchmak- Ftheir offerings beyond the items that secretive brand has admitted journal- the highest standards,” he says. “Our “I think we have helped create a ing. “Chanel has had huge success made them famous. ists to the plant, a sleek oblong com- manufacture is a very important part new market,” he says. “There was a and it is able to sell watches for Chanel was one of the first fashion plex on a windy incline just outside of what we do.” time when women’s watches were between SFr3,000 and SFr5,000 on brands to move into watches, intro- La Chaux-de-Fonds – a town also pop- Chanel does not disclose figures just men’s made smaller. Now, there average, but apart from them, most of ducing its Première range in 1987. ulated by workshops for other watch- about how many watches it makes, or is an understanding that you need the other fashion brands’ watches Others, ranging from Hugo Boss to makers, such as Breitling, TAG Heuer what the division’s sales and profits to design watches specifically for have typically sold for between SFr200 Calvin Klein, have followed suit. and Patek Philippe. are. Analysts’ estimates range from women.” ‘Now, there is an and SFr500,” says Stéphane Linder, To underline its commitment to Nicolas Beau, the privately owned 25,000 to 30,000 units a year, with reve- Laurence Nicolas, chief executive of understanding that you who took over as chief executive at horlogerie, in 1993 Chanel bought brand’s international director of nues between SFr100m ($114m) and Dior’s timepieces and jewellery busi- TAG Heuer last summer. Châtelain, a watch assembly plant in watches, says the greater openness is SFr120m, but most concede this is a ness, makes a similar point. “We are need to design watches Analysts largely agree. “They are a La Chaux-de-Fonds, the heart of the in part a response to a growing desire rough guess. very small. We don’t want to be arro- bit of a threat, but not to the high Swiss watch industry. Since 2011 the among customers to understand the However, Mr Beau says the impact gant, we are a drop in a big masculine specifically for women’ end,” says René Weber, an analyst at company has increased the number of provenance of the watches. on the watch industry of Chanel and market. But I think we have changed Vontobel, the Swiss private bank. Price cuts loom as industry sounds note of caution Continued from Page 1 Bank Vontobel in Zurich. “[The US market] is still “In these lukewarm [eco- below the peak it reached in nomic] situations, people 2008, whereas in all the are less keen to show off. other markets we are ahead They want a watch that of 2008 levels.” they can wear on any Beyond the vagaries occasion.”. of different geographical Despite the caution on markets, two issues are display among executives, likely to figure in conversa- however, most analysts are tions around the stands in still predicting the industry Basel’s exhibition centre. will grow at between 6 and One is the advent of 8 per cent this year, more smartwatches. Last year, or less in line with its long- Samsung launched its Gal- run average. axy Gear, and other tech As ever, though, much Wearable: Galaxy Gear 2 groups – including Apple – depends on China. are developing models. Last year, exports to the Some analysts have sug- country – which following a ever, he says Chinese cus- gested that smartwatches decade of roaring growth is tomers have switched away could pose a threat to more now the third largest mar- from expensive gold traditional watchmakers. ket for Swiss watches – fell watches towards more mod- However, for the moment, 12.5 per cent, according to estly priced steel ones, now watch executives are rela- the Federation of the Swiss that they are buying for tively relaxed about the Watch Industry. themselves rather than to phenomenon, although they This was partly the result impress people with whom are following developments of a slight economic slow- they have political or busi- with interest. down. But by far the big- ness relationships. “I had my technicians gest cause was a crackdown “The bad news is that buy some smartwatches to by the Chinese leadership they are buying less; the see what they were like, but on the practice of giving good news is that they still the interface is not yet that luxury gifts, such as love watches,” he says.