To those that lived through the “quartz crisis” of the ’70s — when cheap Japanese quartz watches threatened to overtake the market, pushing Swiss watches into luxury territory — this message is going to sound a little familiar.
The Swiss watch industry is in trouble.
“Swiss watch industry exports fell faster than at any other time in the first half” of the year, said a report that was recently released by Federation of the Swiss Watch Industry FH. For 11 months straight, exports of luxury watches out of Switzerland have fallen — and it could get worse.
Compagnie Financière Richemont SA, parent of A. Lange & Söhne, IWC Schaffhausen, Jaeger-LeCoultre, and Cartier, erased 350 jobs this year, and Swatch AG, which makes cheap plastic models as well as luxury brands like Omega, saw profits fall 54% year over year, according to Bloomberg.
The factors that are causing such pain are being referred to as a “perfect storm” by Bloomberg View columnist Leonid Bershidsky.
He says these factors include:
- A strong Swiss Franc.
- Anti-corruption campaigns in China.
- The Chinese population starting to favour experiences over expensive items.
- Weakening Chinese currency.
- Lessened tourism due to terrorism fears.
- High gold prices.
Bershidsky concludes that while most of these factors are outside of the industry’s control, there may still be other, less measurable factors at play. Watches, especially of the Swiss variety, still represent an Old World status. And they’re still being sold that way, even to a generation that increasingly looks to the future and what technology can do for them.
The industry has also suffered from a lack of response to the growing threat of technology and attractive gadgets like the Apple Watch. More wearables than Swiss watches were shipped globally in February, according to Bloomberg. With many would-be customers saying they can just check the time on their phone instead of wearing a watch, this trend isn’t likely to slow down.
Traditional watch brands have also been reluctant to transition to online sales in an attempt to maintain their air of prestige, but this runs counter to customer’s overall changing preferences for online shopping. Respected watch news blog Hodinkee, for example, has seen some success selling vintage and modern timepieces in its online shop.
Switzerland doesn’t seem fazed by this. In fact, only one Swiss watch company, Tag Heuer, has even released a smartwatch. Only 25% of Swiss watch CEOs see wearables as a threat, according to a 2015 survey from Deloitte, even though the hardest-hit watch category this year is the one that wearables like the Apple Watch typically fall into ($200-400 export price).
Brands will be forced to adapt to these growing forces, however. And the sooner the industry can adapt, the better off it should be.
Business Insider Emails & Alerts
Site highlights each day to your inbox.