Luxury, With More Mechanics and Less Bling
New York Times, January 18, 2015
GENEVA — Twenty-five years ago, Cartier and a coterie of Swiss watch brands quit the industry’s largest and most established trade fair — a springtime show held in Basel since 1917 — to open an alternative event at this city’s Palexpo center. They named the new fair the Salon International de la Haute Horlogerie, or SIHH.
It was a gamble on the future of the mechanical watch business, and on one aspect in particular. The breakaway firms — which also included Baume & Mercier, Piaget, Daniel Roth and Gérald Genta — staked their fortunes on the high end.
“We all went that first year with questions on our minds,” recalled Roberta Naas, an American watch writer and veteran SIHH attendee. “Was this going to work?”
The organizers anticipated, correctly as it turned out, a spike in demand for high-end Swiss watches. From 1990 to 2013, Swiss watch exports more than quadrupled in value, from about $5.4 billion to $24 billion, and the show grew in lockstep with the market.
Over the years, SIHH has seen many exhibitors come and go, but it has remained an exclusive affair. Today, the 40,000-square-meter, roughly 430,000-square-feet, show is home to 16 brands, including 12 that are owned by Compagnie Financière Richemont. All but a few produce timepieces that sell for upwards of $200,000.
The new Portuguese Annual Calendar from IWC Schaffhausen. Credit IWC Schaffhausen
Fabienne Lupo, chairwoman and managing director of the Fondation de la Haute Horlogerie, the fair’s governing body, described SIHH as a bellwether for trends. In 2009, the show began taking place in January, as opposed to March or April, when its much larger rival, Baselworld, opens for business.
Few people familiar with SIHH would quibble with Ms. Lupo. For all its exclusivity, the five-day, invitation-only event is a benchmark for the industry at large.
“The fact that it happens in January gives you a jump on all the news,” Ms. Naas said. “You can certainly gauge based on what you see there what you’ll see at Basel.”
At the 25th edition of SIHH, opening today, an emphasis on sober-looking men’s timepieces with low profiles and dressy styling is expected to set the tone for a year of restraint. “Classical fine watchmaking remains very strong — more than sport pieces,” said Jérôme Lambert, chief executive of Montblanc.
At Jaeger-LeCoultre, the new Master Calendar — a graceful 39-millimeter timepiece featuring a round dial fashioned from a piece of meteorite that originated in the asteroid belt between Mars and Jupiter — is an example of the watch trade’s obsession with astronomy.
Elsewhere at SIHH expect an abundance of skeletonized movements as watchmakers draw attention to their mechanical wizardry. Cartier will announce its third Rotonde de Cartier Astrotourbillon since 2010. This year’s model, which leaves the moving parts exposed, is housed in a ghostly 47-millimeter case of 18-karat white gold.
At Roger Dubuis, the iconic Excalibur collection gets an upgrade with two new models: the Excalibur Spider Skeleton Flying Tourbillon and the Excalibur Automatic Skeleton. The tourbillon, for example, comes in a 45-millimeter titanium case and, like all of the contemporary skeletons from Roger Dubuis, features a prominent asymmetrical star motif.
The vogue for slim watches continues, as does the battle among watchmakers to claim the thinnest models on the market. Piaget, known for its slender movements, takes the thin-is-in quest to new heights, so to speak, with its Altiplano Chronograph, a pink gold wafer of a watch with a hand-wound movement that measures 4.65 millimeters thick.
Meanwhile, IWC Schaffhausen has dedicated 2015 to its redesigned Portuguese collection, which turns 75 this year. At a press event in New York in October, the chief executive, Georges Kern, touted the brand’s first annual calendar.
Like many of its fellow exhibitors, IWC opted to introduce a pre-SIHH collection before the fair. While the watchmaker is not promoting its new Portofino Midsize collection as a ladies’ offering per se, the line’s diamond-strewn dials and 37-millimeter unisex styling clearly are intended to endear the masculine brand to a female audience. At an event in Miami in December, Mr. Kern said IWC would refrain from using its tagline “Engineered for Men” in ads for the new pieces.
Richard Mille, the avant-garde watchmaker best known for creating technically ambitious timepieces in space-age materials, is making a similar play for the ladies market.
“I have been pushing very much the women’s collection. I have on my back a sticker that has been written ‘technical material,’ and I wanted to escape that a bit,” Mr. Mille said. “The ladies segment is increasing every year. Right now, it represents in turnover 20 percent and I am aiming for 30 to 35 percent.”
The scramble for new customers is set against a backdrop of uncertainty about the medium- and long-term outlook. After years of uninterrupted growth spurred by the mechanical watchmaking renaissance of the late 1980s, and fueled in recent years by the monster appetites of luxury consumers in the Far East, the industry is bemoaning a slowdown in growth.
From last January to November, Swiss watch exports totaled 19.7 billion Swiss francs, or $19.4 billion, a 2.3 percent increase over that period in 2013 — anemic growth compared with an average annual expansion of 17 percent in the three years to 2012.
That said, high-end watchmakers are not going out of business anytime soon. “Even if the growth is small, it is growth compared to last year, which was a record year,” said Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry. Total exports for 2013 were $24 billion.
The biggest challenge for luxury watch brands in 2015 is reconciling their expectations for growth, and the inventory already in the pipeline, with the realities of the marketplace.
Now that demand in China has waned — a weakening economy and anti-corruption initiatives slammed the brakes on high-end watch sales in 2012 — many watchmakers are expanding or inaugurating brand boutiques in European or American cities to capture local clients, not to mention the waves of Chinese tourists expected to descend on foreign shores in the coming years.
Panerai, for example, recently unveiled an expanded flagship salon in Florence, Italy, one of five boutiques refurbished by the Spanish architect and designer Patricia Urquiola to emphasize the brand’s nautical roots. And Richard Mille now has some 20 boutiques around the world, up from 15 in 2013.
This year, Mr. Mille said he intended to keep the momentum going by opening 10 brand boutiques, in cities including Munich, New York and Bal Harbour, Florida, an affluent enclave in the Miami area. He is in good company. The city’s swanky new Design District opened late last year and is already home to no fewer than 11 Swiss watch brand boutiques, including Hublot, Omega, Rolex and A.Lange & Söhne.
The proliferation of monobrand boutiques reflects a desire among Swiss watchmakers to eliminate the barriers that separate them from collectors and clients. To that end, many are incorporating unique outreach initiatives into their marketing plans.
This spring, Roger Dubuis will close its 13-year-old Geneva boutique and replace it with a new flagship location that will include, according to Chief Executive Jean-Marc Pontroué, “a hospitality desk that will bring you to our manufacture in less than 15 minutes — for those interested in an experience beyond the store.”
Left unspoken, but no doubt a topic of concern for Swiss watchmakers this year, is how the industry will cope with competition from Apple, whose first smartwatch is expected this spring.
“If you want to see a classic example of people in denial,” look to how Swiss watch executives have reacted to the Apple Watch, said Reid Sherard, the lead watch and jewelry researcher at L2, a market research firm in New York. “The responses range from ‘It’s not going to affect us’ to ‘It’s a compliment to our product."’
Mr. Sherard said it would be foolish to misjudge Apple’s potential in watches. “Estimates say Apple is expected to sell 30 million devices over its first year,” he said. “That makes Apple between a $10.5 billion to $15.6 billion watch company by revenue, passing Richemont and the Swatch Group to become the largest watch company in the world.”
There are differing schools of thought about how the Swiss should respond to the smartwatch revolution. At Montblanc, the announcement of its TimeWalker Urban Speed e-Strap at SIHH suggests that some brands believe it is possible to offer a hybrid solution: The model’s Bluetooth-enabled smart bracelet augments the mechanical watch’s analog functionality.
For Baume & Mercier, the strategy is clear. “Affordability is one of the key messages,” said Alain Zimmermann, the chief executive of the brand, which is introducing a redesigned Classima collection at SIHH that includes a basic automatic model that costs less than $2,000. “We are opening the back case, and improving features, but we will lower the price,” he said.
For most brands at SIHH, however, the tactic remains much the same as it did on the fair’s first day in 1991: Maintain allegiance to the high end. For Mr. Mille, that means creating more limited-edition timepieces like the RM 19-02 Tourbillon Fleur ladies watch, which he will introduce at the fair in a series of 30, each priced as high as $800,000.
“In this segment, people try to be as competitive as possible,” Mr. Mille said. “So they cut the development budget, they cut costs as much as they can, and at the end, they cut also the possibility of developing fantastic products.”
“I hate volume,” he concluded. “And I love extreme luxury.”