What we call a ‘crisis’ is, in fact, a change leading to a new era, says Pierre Maillard in a commentary posted on the Europa Star, an online magazine. It is a painful change. Yet, it is a question of survival, nothing less. According to the magazine, in the opinion of Jared Diamond, professor at the University of California, expressed in his book The Fate of Human Societies the idea of development being synonymous with more growth and more consumption is, quite simply, suicidal. He affirms that Americans and the industrialized nations of the world must accept to consume less. They must lead the way, by example, to stop the mad race of the developing nations—China, India, and Brazil in the lead—to achieve the living standards of the Occident. What is at stake is nothing less than the survival of our society.
The preceding, the author says, is perhaps a long detour from what we are focused on here—the watch industry—and our concerns for its future. The watch bubble is now bursting under the pressure of the ‘virtual’ crisis that has hit the real economy. As might be expected, the market is quite naturally turning towards what it perceives as sound value and high patrimonial potential (obviously what comes to mind are the remarkable examples of Patek Philippe, whose prices at auction seem to be immune to weakness, and the timekeeping fortress of Rolex). These two brands have not—or perhaps very little—given in to the ‘impatience’ that has gripped a watch industry possessed by the new rhythms dictated by the giants of luxury. Imitating the tempo of the fashion world, watch brands have started introducing one new product after another, in a race that makes us think of the high-flying subprime game. In the domain of mortgage loans, it is the credit-worthiness of the borrower that was in doubt. However, in the realm of watchmaking, it was quite simply the ability to make good on its promises—in other words, to merely deliver the announced timekeepers to retailers. When, after having handed over your deposit, you must wait two or three years to receive (sometimes just barely working) what you had ordered—and during which time the same brand announces three new and even more spectacular items—you will most certainly begin to have a few doubts yourself.
The present deflation of the bubble can also be seen as an opportunity for the watch industry to return to its basics. In the current context of the deliberate depletion of our natural resources, doesn’t watchmaking have a wonderful advantage? What other product can boast that it can function for dozens of years, and even more, without consuming anything other than its own energy? Watchmaking has a fabulous card to play—that of ‘quality’. To change our consummation habits means to consume less, of course, but it also means to consume better. ‘Better’ consumption signifies opting for the mid- and long-term. Franco Cologni, President of the Fondation pour la Haute Horlogerie (FHH), had this in mind when he declared that, in his opinion, Haute Horlogerie is going to lose a little of its attributes as a pleasure object while transforming itself more into an investment tool and a safe haven for investors. “We have certainly seen the end of just-for-show marketing,” he said.
In its own way, the ‘crisis’ denotes an important cultural transformation. The inflation that has been symbolic, in terms of image, and concrete, in terms of size, of the gigantic ‘monster’ timekeepers - these ‘über-watches’ that have flourished nearly everywhere - is now over. It reminds us of the car lots full of unsold Hummers and SUVs. Featuring useless complications and testosterone-filled forms, these timepieces are all now OUT. They are being replaced by more rigour, more measure, and simply put, more reliability. The notion of after-sales service - and therefore assurance for the long term - is thus reclaiming its rightful place, which should be front and centre. Watchmaking still has a good hand of cards. One of them was just recently highlighted in the eighth study on luxury goods conducted by the strategy consulting agency, Bain & Company. Watches ‘are generally the first luxury article purchased in emerging economies,” says the report. The watch industry should thus be able to weather storms much better than many other sectors. But there is a condition: companies must recognize that they cannot return to the past, that it is not enough to ‘put their back to the wind, waiting for the storm to pass,’ but that the crisis signifies the emergence of a new era.
Most of the ‘analysts’ are in full agreement: it is the mid-range of the market that will suffer the most during the current downturn. (We admit that even this word ‘analyst’ makes us smile a bit since aren’t these the same oracles who officiated before the crisis, the same who did not see it coming, and the same who still preside today?) I, for one, however, would like to take exception to this majority opinion. This is in spite of the latest statistics from the FH that underscore the decline of more than 20 percent of exports of watches valued at between 500 and 3,000 CHF (price at export). More precisely, I have the impression that the category divisions that we use today in the luxury sector are going to change. When a store such as Hennes & Moritz sells a collection designed by Karl Lagerfeld for an inexpensive price, is this luxury or is it not? Is it in the ‘low end’ or the ‘mid-range’? Or, we might ask: regardless of price, is this collection in the ‘haut de gamme’ segment in its own special way? In the chaos of creations from the newest watch companies, the trade press has had a tendency to attach great importance to those ultra-niche brands offering concept watches, while ignoring the novel creativity that the mid-range has shown. A brand such as Louis Erard, for example, is following an exemplary strategy in this area. (It is not alone, however, as we can also cite Frédérique Constant and, in another domain, the interesting rebirth of Marvin, while there is hardly a need to mention the vigorous health of Raymond Weil.) The heart of the Louis Erard offer is situated between 200 and 500 CHF at export, which ultimately means retail prices of between 600 and 2,000 CHF. One distinct advantage of this particular positioning is that there is not too much competition in this space. “And, because all our competitors have a tendency to move upmarket, they encourage me, on the contrary, to remain anchored in this segment,” explains Alain Spinedi, the brand’s CEO, “even if this presents a complicated challenge.” He continues that “it is not correct to say that this segment is ‘not expensive.’ No, 1000 CHF is not ‘nothing,’ especially outside of Switzerland. On the other hand, it is a definite advantage for distribution, placement, and stock, especially today when cash flow is a key element. In fact, we offer watches in the Haute Horlogerie sector at affordable prices, and this is exactly what a whole group of people are looking for, a group of people that have felt mistreated by the large groups.”
Perhaps it is this new fracture line, in these changing times, that will redraw the watch landscape. It is not so much a demarcation based on economic divisions as it is a selection process by the consumer - and the retailer - that includes a balanced and fair price (‘fair’ being three, four, five, or even six figures, depending on the actual sophistication and the rarity of the product). This could herald the end of daylight robbery and marketing for the sake of marketing. The categories of low, medium, and high-end sectors that the brands use to classify themselves are now perhaps, thanks to the ‘crisis’, beginning to fall apart. “Less in appearance, and more in reality,” we might say in other words. And, it is perhaps also that times are changing.
