Watch brands are moving their businesses online to beat the lockdown

Even before the coronavirus outbreak began to weigh on the global economy, the luxury watch industry was struggling. Last year, the Federation of the Swiss Watch Industry (FHS) recorded growth of just 2.4%, a modest increase that masked a sharp decline in volumes (down 13.1% year-on-year) and a decline in exports in the last quarter. .

Then came the Covid-19 and in March, the closure of watch factories and their global distribution network. The sector, which depends on in-store sales – only 5% of new watch sales are made online – has been hit hard.

“We have experienced a complete halt in production and deliveries,” says François-Henry Bennahmias, chief executive of Audemars Piguet, which posted record revenues of 1.25 billion Swiss francs last year (1.28 billion dollars). “Let’s say we sell 40,000 watches a year, or about 3,200 a month or 120 watches a day. Until the end of March, we managed to maintain this number between 80 and 90 per day. But April was a completely different story. Now we face the real challenge.

March FHS statistics show exports fell 21.9% in value and 43.1% in volume. He says the worst will come when the April figures are released this month. Exports have dried up and Baselworld and Watches & Wonders, the two major Swiss watch fairs of the year scheduled for the end of April, have been canceled.

“The industry expects the personal luxury goods market to decline about 30% this fiscal year,” said Luca Solca, analyst at Bernstein, the research firm.

For brands, the problems are piling up. “We didn’t make a budget because it doesn’t make sense,” says Georges Kern, Breitling’s CEO. Breitling’s revenue was up more than 20% year-on-year through the end of March, Mr Kern said, but he declined to make a forecast for the rest of the year .

“Before the crisis, we were on a double-digit increase this year,” says Rolf Studer, co-CEO of Oris. “Now it might be minus 30 or minus 40 percent. A good result would be minus 20 percent.

Along with the issues with manufacturing, distributing and selling watches, the pandemic poses a new and perhaps bigger question for brands. “This phenomenon has had a huge impact on society,” says Kern. “Now we ask, ‘What is the meaning of a mark? What is its purpose?’ Excessive and ostentatious luxury will have a hard time and luxury will become much more casual.

Mr. Studer agrees. “This crisis is accelerating the shift from exclusive to inclusive luxury,” he says. “The hedonistic form of luxury will seem even older after the crisis than it is today. The average price of an exported Swiss watch has increased by 28% over two years at the end of 2019. It’s crazy.

Certain brands and retailers used different means to stay in touch with consumers during the global lockdown. Most have turned to digital channels, especially social media. Instagram Live events such as Omega’s SpeedyTuesday Live and Zenith’s On Air gave consumers direct access to brand executives and partners like never before.

The Fondation de la Haute Horlogerie, organizer of the Watches & Wonders show, wanted to recreate its event online with a website accessible to the public presenting the details of the releases of the 17 exhibiting brands. He said that in the first four days he had welcomed 44,000 unique visitors from 169 countries.

At the same time, Cartier launched a website to showcase its new models, while in mid-April Breitling aired a presentation hosted by Mr. Kern. “We got huge exposure from that,” he says. “Hundreds of thousands. Our server imploded and we had to switch to YouTube. »

Others have created campaigns inspired by the crisis. Oris launched its Local Heroes initiative to recognize the efforts of frontline workers and volunteers. Mr. Studer said Oris would give away 50 watches and had received more than 1,000 nominations from around the world. “Luxury watches are less relevant than they used to be,” he says. “It’s not really a time to sell watches, it’s a time to take care of your community. It was about doing the right thing.

High-end independent company H Moser & Cie, which makes around 1,500 watches a year, produces watches for charity partners, who buy the watches to sell at auction and keep any profit. “In a normal year, we would do one or two of these projects, but now we are working on 10 or 15, producing batches of 20 to 50 watches each time,” explains Edouard Meylan, the company’s managing director.

During the crisis, retailers said demand for the most exclusive products had not diminished. “We have seen continued and uninterrupted demand for Rolex and Patek Philippe,” says Brian Duffy, Group Managing Director of Watches of Switzerland, which has more than 120 stores in the UK and US.

Mr Duffy said the group, which owns Goldsmiths and the US chain Mayors and reported total revenues of £773.5m last year, has again started taking deposits on Rolex watches ahead of the reopening of stores in the future.

It also plans to increase the “by appointment” activity of the stores. In the long term, the industry faces a battle to return to pre-crisis levels, even when social distancing measures are lifted. Mr Duffy says the group’s senior executives have deferred their salaries during the lockdown and will only take 75% of what they are owed in arrears when stores reopen.

The pandemic has forced most physical stores to close ©Getty

But Bernstein’s Solca says the problem is much bigger. “The magnitude of the crisis is directly linked to China,” he said. “The Chinese accounted for nearly 35% of global luxury demand last year, with 70% outside the mainland.” With tourism levels likely to remain low over the next 12 months, brands and retailers agree they will need to focus on local markets to boost sales.

For now, many brands are focusing their sales efforts on e-commerce. “Companies are reporting that their digital sales increased by 50% in the first quarter,” says Solca.

For a brief period in April, Patek Philippe allowed some of its retail partners to sell its watches online for the first time.

Mr Duffy said he had planned to integrate the Richemont Vacheron Constantin, Jaeger-LeCoultre and Panerai brands onto his existing e-commerce platforms later this year, but that date has been brought forward.

Grand Seiko has announced that it will start selling watches online in the UK this month.

At the end of April, Omega announced that it would expand its e-commerce platform across Europe. Previously, it only sold watches online in the US and UK. “E-commerce sales actually performed above average in both markets despite distribution challenges in the current climate,” says chief executive Raynald Aeschlimann, without citing numbers.

Mr Studer says the Oris eShop is performing better, while Mr Duffy says the Watches of Switzerland group’s e-commerce business has grown by more than half compared to the same period last year. However, he adds that online sales represented only 8% of the group’s income before the crisis. Mr Kern says the lockdown and social distancing will boost long-term growth in online sales, but only up to a point. “It will increase to 10 to 15% maximum”, he specifies. “Studies show that people still want shops, experience and interaction. We are not Robots.

Mr. Bennahmias of Audemars Piguet agrees. “I know collectors don’t want to deal with gloves and face masks,” he says. “But out of 40,000 watches we make, do I want to sell 10,000 online? No. The internet is a tool, but not the end of the game.” He says that during the lockdown he delivered watches directly to his best customers. This allowed him to sell about 40 of the new [Re]special edition master 01 watches.

Despite the effect on the economy, brands and retailers are optimistic. “When you look at the Swiss watch industry and the crises it has faced, it has always come out stronger,” says Duffy. “This industry will do much better than most because there is no seasonality in the product.”

Mr. Bennahmias says the greatest asset of the luxury watch industry is emotion. “As long as you’re touched by something that provides an emotion,” he says, “whether it’s a product or a fancy restaurant, you’re still going to spend that money.”

“People will come back because they are human and want to enjoy life,” says Kern. “There will be a rebound in consumption. I hope it will be soon.

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