Latest news with #KarineSzegedi
Business of Fashion
23-05-2025
- Business
- Business of Fashion
Can Swiss Watches Compete on Value?
With the price of gold soaring, the Swiss franc still trading high and US tariffs looming, luxury watch companies are facing a growing problem: Watch prices keep rising. That consumers have become more price sensitive and value conscious amid a downturn in overall luxury spending and growing competition from rival luxury categories only compounds the issue. Can luxury watches still compete? 'People want to get something for their money,' said Karine Szegedi, a partner at Deloitte and author of its annual Swiss Watch Industry Insights reports. 'They don't only buy a watch because it's luxury: it has to be priced at the right level. Pricing has gone up so far, so what's the right price now?' The question is vexing brands, too. 'In more than 20 years in this industry, I've never experienced something like this,' said Edouard Meylan, chief executive of the independent watchmaker H. Moser & Cie, which has annual revenues of around 100 million Swiss francs, according to estimates by Morgan Stanley. 'Setting the right price has become more and more challenging. We believe in pricing that reflects the real value of what we create, not the noise around it.' If one thing seems certain, it's that buyers are buying fewer new watches. According to the Federation of the Swiss Watch Industry (FHS), export volumes continue to tumble, down 5.8 percent year-on-year to the end of March, following a slump of 9.4 percent last year. Over the past decade, total volumes have almost halved, decreasing from 28.1 million units in 2015 to 15.3 million last year. 'Consumers today are demonstrating a more value-conscious approach,' said Yves Bugmann, president of the FHS. 'The current environment reflects a more cautious and discerning mindset.' Since the launch of Apple's Watch a decade ago, luxury watch brands have aimed to create clean air between them and the smartwatch market. Today, while some direct-to-consumer microbrands sell mechanical watches marketed as accessible luxury for under $1,000, Swiss-made mid-market luxury mechanicals typically now start at around $2,000, with prices rising quickly from there. Brands are about to find out just how much price elasticity there is in their products. With gold prices hitting $3,500 an ounce in mid-May, a rise of around 40 percent in 12 months, and tariffs of 31 percent on Swiss watch exports to the US set to take effect from July 1, brands have already started pushing prices up. Independent research has shown that average prices of Swiss watches available online in the US spiked in April. Watches priced over $100,000 were most impacted, rising on average 17.5 percent, according to the Geneva-based agency Digital Luxury Group. The group's research showed price increases became more marginal the lower the price segment, with watches costing less than $10,000 increasing only 4.2 percent on average. But few watches in this price bracket contain gold. One watch retailer suggested that this trend was temporary, though, and that price increases would soon level out. 'Recent years have seen extraordinary trends of price increases, which has adversely impacted volumes,' said Brian Duffy, chief executive of Watches of Switzerland Group, which operates a network of watch stores across the US and UK and last week reported revenues for its most recent financial year of £1.65 billion, an 8 percent year-on-year increase. 'We believe that this period is largely over.' Even then, brands have been left battling to shore up their value propositions. Many have settled on a path to the low-volume, high-value category, where it's thought consumer price sensitivity is lower. According to Bugmann, export figures suggest this might be a smart play. 'Despite prevailing economic headwinds, demand among affluent consumers remains comparatively robust,' he said. 'In 2024, the segment of watches with an export price above 3,000 Swiss francs recorded a slight increase of 1.0 percent, further underscoring the sustained strength of this market tier.' One critic said brands had only themselves to blame for their current predicament. 'Brands are caught in an economic trap, exacerbated by their own short-term thinking during the pandemic,' said Chris Hall, author of a weekly watch industry newsletter called The Fourth Wheel. 'When demand was running out of control, they hiked prices just because they could. Now, having budgeted for a 'new normal' that could never have been sustained, they have been hit by more legitimate reasons to raise prices: the cost of raw materials, currency fluctuations, tariffs and so on. So customers have seen watches that are completely or substantially unchanged rise more than 40 percent in some cases.' Many brands are resorting to smaller watches or more affordable materials so they can offer watches at prices that appear to offer a stronger value proposition. In April, Rolex introduced a new line called Land-Dweller with a new-generation time-and-date movement and a mix of steel and white gold in its case and bracelet that it calls Rolesor. The two materials are all but indistinguishable, but the 36mm watch retails from $14,450, considerably less than the $40,200 list price of the solid gold version of Rolex's Day-Date 36. 'Brands are responding to value and affordability issues through product innovation and increasing focus on value through a move to steel from gold, and simpler functionality,' said Duffy. Also in April, TAG Heuer reintroduced the Formula 1, a collection of colourful 38mm watches based on a design that helped grow the brand in the mid-1980s after Heuer was acquired by the Saudi group Techniques d'Avant Garde and renamed. The contemporary collection starts from $1,800 with a watch with a solar-powered movement and a case made of a bio-polymer the brand is calling TH-Polylight. 'Value doesn't mean a cheap watch,' said Nicholas Biebuyck, TAG Heuer's Heritage Director. 'The case material in the Formula 1 is a robust material tested in our laboratory, the movement has 10 months of autonomy and long service intervals, and the watch comes with five years of warranty. This is something of great quality.' Some brands, including TAG Heuer, have been criticised for investing heavily in marketing. Antoine Pin, the company's chief executive, told The Business of Fashion earlier this year the brand spent almost 20 percent of its revenues on marketing. TAG Heuer is part of LVMH, which is spending a reported $1 billion over 10 years on a Formula 1 sponsorship deal that has made TAG Heuer the sport's official timekeeper. But Biebuyck is unrepentant. 'I've lost count of the number of disruptors in this industry who sell watches for under $1,000 and don't advertise or sponsor,' he said. 'Either they die a death very quickly, or they end up going down the traditional marketing route and putting stickers on a rally car or something, because you have to elevate the prestige of your brand in the mind of the consumer.' Some Swiss watch brands are betting big on value. Oris, an independent company that sells 40,000 watches a year with an average retail price of around 2,100 Swiss francs, according to Morgan Stanley estimates, introduced a steel sports watch with a mechanical movement called the Big Crown Pointer Date last month, priced from $2,300. 'We have tried to bring watches that are more at the entry-level of what we do and make sure we have a very attractive and interesting offer there,' said Rolf Studer, the company's co-chief executive, noting that in some countries the strength of the Swiss franc accounted for as much as two thirds of recent price rises. 'It is a problem for our industry that our currency keeps getting stronger, and it's a problem for the middle class and entry-level luxury buyer, because an offering that was in reach only a short time ago may have gotten out of reach.' Duffy recognised the sentiment. 'Luxury watches are a low-frequency category and we experienced some purchase deferrals, impacted by high price increases,' he said. 'But we have seen a normalisation of consumer behaviour in 2025 and consumer sentiment towards the luxury watch category remains strong.' Others said they expected volumes to remain low and that this would heat up the battle. 'We are past the period of absolute expansion in luxury,' said Biebuyck. 'Gone are the days when people wanted 50, 100 watches; now they want 10 or 20 great watches. And that means brands are now fighting for dollars and having to take clients from competitors. It's tooth and nail out there.' While global economic and political uncertainty persists, few expected the value challenge would ease off. 'In the current economic context, marked by fluctuating exchange rates, increased tariffs and rising raw material costs, it is likely that some watch companies will need to further adjust their pricing strategies in order to protect margins,' said Bugmann.
New York Times
12-02-2025
- Automotive
- New York Times
As Demand Declines, Watch Prices Continue to Rise
The ball had barely dropped in Times Square when Rolex kicked off the new year with price hikes. In the first days of January, watch industry news was dominated by the fact that prices on Rolex's 2025 list were up by as much as 18 percent, with precious metal timepieces leading the surge. But there was a larger reality. In 2024, Switzerland's watch exports fell far below the lowest levels of the past two decades (pandemic years aside), pushing the industry to rely heavily on ultraluxury timepieces to make up some of the lost revenue. And that reliance has produced a landscape in which rising prices have become to the watch industry what death and taxes are to life: inevitable. 'The industry has opened up to more competition, something you can see at the G.P.H.G. where many awards are handed out to brands that are not Swiss,' said Karine Szegedi, a partner at Deloitte who specializes in the watch industry. (She was referring to Le Grand Prix d'Horlogerie de Genève, the annual watch industry awards event). 'For the Swiss watch industry to be credible and have a future, watch brands are playing in the territory of high-end watches.' According to figures from the Federation of the Swiss Watch Industry, export values fell by 2.8 percent in 2024, to 25.99 billion Swiss francs (or $28.5 billion), while the number of watches exported fell to 15.33 million, 9 percent less than the 2023 total. Oliver Müller, the founder of the Swiss watch consultancy LuxeConsult, agreed that competition from overseas manufacturers had bit into Swiss watch exports, but he added that they also had been affected by smartwatch sales and the younger generations' lack of interest in traditional watches. 'In two decades, the industry has steadily increased its average selling prices in order to offset the lost volumes,' he said. 'At the same time, it has moved further into niche territory.' What did he mean by niche? 'A good comparison is with the auto industry,' he said. 'What would happen to the industrial fabric if the auto industry focused solely on producing Porsches and Ferraris?' Ms. Szegedi observed that the industry also faced risks beyond its balance sheets. 'They need steady production to keep their pricing, expertise and experience intact,' she said. 'You can't train a watchmaker in just six months; it takes a decade to become an enameler.' Industry costs also have continued to rise, boosted by a strong Swiss currency, the expense of producing watches in Switzerland and the all-time high value of precious metals. Gold, for example, was $2,777.40 per ounce on Jan. 25; for comparison, its highest price in 2011 was $1,922 per ounce. 'In this context,' Mr. Müller said, 'watch brands have two options: absorb the higher production costs by reducing margins or raise prices.' But the trend has some analysts wondering if there may be other ways to boost sales and sustain the industry. A New Line In October, Patek Philippe chose to introduce its new sporty wristwatch model, the Cubitus, with a higher price than a comparable predecessor, the Nautilus. At the introduction in Munich, Patek's president, Thierry Stern, expressed confidence that clients would accept the Cubitus Ref. 5821/1A version in stainless steel at 35,000 Swiss francs — even though that was 30 percent more than the price of the Nautilus Ref. 5711/1A when it was discontinued in 2021. 'We set 35,000 francs as an entry-level price,' Mr. Stern said. 'It's a big number, but for Patek Philippe, it is not out of place.' Mr. Müller said the strategy was a considered approach. 'Raising prices when launching a new product line allows a brand to keep production volumes steady while justifying higher retail prices with the 'newness' of the collection,' he said. At the LVMH Watch Week presentations last month in New York and Paris, Hublot unveiled the new Big Bang Tourbillon Automatic Green Saxem, an 18-piece limited-edition model at $231,000, almost twice the $121,000 cost of the Big Bang Unico Green Saxem, a 100-piece limited edition chronograph introduced last year.(The word 'Saxem' stands for sapphire aluminum oxide and rare earth mineral, an alloy of aluminum oxide, which is a raw material resembling synthetic sapphire developed by Hublot.) 'The new price reflects the difficulty in developing Saxem and in producing a clean block in an intense emerald green color,' said Raphael Nussbaumer, Hublot's chief product and purchasing officer. The brand's annual production is 50,000 watches. 'Twenty-five to 30 percent of our watches are limited editions intended for specific clients,' Mr. Nussbaumer said. 'Those clients expect innovative products and are prepared to pay for the uniqueness of the models.' Long-Term Strategy Since establishing its watchmaking studio in 1987, Chanel has steadily enhanced its watchmaking expertise, beginning in 1993 with the acquisition of the G&F Châtelain Manufacture in La Chaux-de-Fonds, Switzerland. According to Morgan Stanley's annual report on the watch industry, the fashion house is estimated to produce 75,000 watches per year with sales of 400 million Swiss francs, thanks in part to leveraging the capabilities of specialists it has invested in, including the movement supplier Kenissi and watchmakers such as Romain Gautier and F.P. Journe. Its latest move, announced in August, was to acquire a 25 percent stake in MB&F, the independent brand created by Maximilian Büsser. At the time, Frédéric Grangié, the president of Chanel Watches & Jewelry, said in an interview with the French daily newspaper Le Figaro: 'This announcement is part of our long-term strategy to continue preserving, developing and investing in specialized skills and expertise, reaffirming our position in high-end watchmaking.' The strategy seems to be bearing fruit. Working with Les Cadraniers de Genève, a dial maker owned by F.P. Journe, Chanel produced a one-off 37-millimeter Chanel wristwatch in stainless steel with a diamond-set bezel and an enameled dial featuring an image of a bejeweled Coco Chanel. It sold at a charity auction in December in New York for $220,250. For comparison, a 34.6-millimeter diamond-set in steel is $10,350 on Chanel's website. 'Chanel invests in métiers d'art and mechanical innovation because watchmaking, like high jewelry, continues to integrate highly innovative expertise,' said Corentin Quideau, an independent consultant and global jewelry brand strategist in Paris. 'Watchmaking at Chanel, like its haute couture division, operates as a structured niche,' he said. 'It is an established division, designed not to create the occasional special piece for a one-off client, but to produce exceptional products as a purposeful and strategic direction.' Leveraging Expertise Since 2023, Louis Vuitton has elevated its own watch offerings with sophisticated timepieces at higher price points. 'We want to value the savoir-faire of all our artisans throughout our collections,' Jean Arnault, the company's director of watches, told The Times in 2023, when it introduced its revamped Tambour, starting at $18,000. This year, a new model, the Louis Vuitton Tambour Convergence, powered by the new in-house automatic Caliber LFT MA01.01, was offered at significantly higher prices: the pink gold version at $33,500, and the platinum with diamonds at $60,500. Louis Vuitton has leveraged the technical expertise of La Fabrique du Temps, its watch design and production operation, to support two brands it has revived: Gerald Genta and Daniel Roth. Watches they introduced in 2023 were priced at six figures, with a Roth model starting at 140,000 francs and Genta's Mickey Mouse for the Only Watch charity auction at 170,000 francs. Seasoned collectors familiar with the luxury watch market may be accustomed to price fluctuations as part of the evolution of the market, and less sensitive to price hikes or factors like rarity, craftsmanship and brand value that usually drive up prices. But newer entrants to the industry are far more likely to feel their impact. 'It's very well to make expensive watches but we shouldn't forget about entry level clients and younger, aspirational collectors,' said Edouard Meylan, the chief executive of H. Moser & Cie, in a video interview from its headquarters in Neuhausen am Rheinfall, Switzerland. 'They are the future of our industry.' In October, Moser introduced the Pioneer Retrograde Seconds, a model featuring a distinctive complication that measures 30 seconds before snapping back to its starting position. At 19,900 francs, the model was deliberately priced less than Moser's retail average of 40,000 francs, he said. 'The Pioneer Retrograde offers interesting value at a more accessible price point,' Mr. Meylan said. 'Sure, 20,000 francs is a lot of money, but not for a complicated piece made by an independent Swiss brand.' But the allure of independent brands alone cannot lessen the threats to the Swiss watch industry. 'The production of all the Swiss independents combined is only about 2 percent of the industry's volumes,' Mr. Müller said. 'What we need is to rethink the way we sell our watches.'
