Swiss watch industry @ Credit Suisse Reports

A-Celebration-of-Women-Feature-Banner

Credit Suisse has recently published a major study on the Swiss watches industry. The main topics include: the importance and upsurge of the sector, industrial concentration and distribution, the weight of China and emerging countries.

The Credit Suisse report highlights that the watch industry is an economic driving force for Switzerland. Between 2010 and 2012, it recorded an average growth of exports of 17% per year, far ahead of other industries. In 2012, the volume of its sales abroad reached a record high of 21.4 billion Swiss Francs despite the strength of the Swiss franc and the wave of crises in the euro area. Watch exports now account for nearly 11% of all Swiss goods making their way to international markets. This makes the watch industry the third largest exporter of the country. However, the study overlooks the fact that, shortly, the watchmaking sector should reach second place.

Early exploration of emerging markets

According to Credit Suisse, the undeniable success of the industry, in addition to its position in the luxury world, depends on “an early and intensive exploration of emerging markets.” It is indeed Asia that has by far contributed most to the increase in watch exports in the last decade. “About 70% of recorded growth between 2000 and 2012 can be credited to Asian countries, and Hong Kong and China in particular. In all, these two destinations accounted for about 28% of Swiss watch exports in 2012, against only 14% in 2000,” explains Damian Künzi, one of the authors of the study.

damian credit swisseThis prominence of emerging markets is only just beginning, the bank expects. Vietnam, India, Russia, Ukraine, Malaysia and Mexico are expected to significantly increase their share in Swiss watch exports in the coming years. In contrast, according to the model developed by the bank, mature European markets such as Italy, Germany and the United Kingdom are expected to lose their importance.

According to the bank’s study, Brazil, Argentina, South Africa, Thailand and Turkey should also rise in the ranking of the top destinations of “Swiss made” watches. However, most emerging nations start from a very low level. As for the high tariffs levied on Swiss watches, they represent significant barriers to entry.

Concentration of the sector will continue

Overall, the Credit Suisse economists see a positive outlook for the watch industry in the medium term, without giving specific figures. “In the next few years, we expect continued growth in watch exports, albeit at a slower pace.” According to the bank, the major groups in the sector (Richemont, Swatch Group, LVMH, etc.) as well as traditional independent brands in the upper price bracket are best positioned to capitalise on the expected global demand for luxury goods. Small independent suppliers, however, are suffering from increased pressure due to several structural challenges. The authors of the study point to a continuing concentration process in the sector.

The reports also indicates the lack of consolidation in the industry, especially due to the vertical integration of the various stages of production While employment was up 14% between 2009 and 2012, the number of firms fell by 7%. This has resulted in a tougher subcontracting situation with brands that sometimes take over their partners to control their supply chain. All this is largely due to the will of the Swatch Group, announced more than ten years, to stop, in the long term, its deliveries of movements and components to third parties.

Distribution represents another challenge for small manufacturers. For obvious cost reasons, they are struggling to follow the trend in another form of vertical integration initiated by large groups that have the capacity to open outlets in their own name in the most prestigious locations. Smaller players are also penalized with respect to retailers that view lesser known brands as a financial risk. In contrast, large groups have far stronger negotiating power allowing them to impose their brand, or even eliminate competition or demand the best positions at the point of sale.

According to Credit Suisse, vertical integration does however offer some opportunities. It frees up space in independent multi-brand boutiques, now available for other brands. Other possibilities are the use of agents or concentration on markets where companies maintain good personal contacts. So much for the theory. Because, in practice, most small independent manufacturers will tell you that it is increasingly difficult to find a place in the sun. More than ever, size and financial strength are a key competitive advantage.

What future for the Chinese market?

We knew that the Chinese market was experiencing a slump. During the first eight months of 2013, Swiss watch exports to mainland China fell 17% year-on-year. Credit Suisse concludes that the market today shows some risks for the watch industry. The sharp slowdown in export growth as a whole is also mainly due to the decline in demand from China. The only positive aspect is that the number of watches exported increased by 9%. Demand has therefore shifted as fewer high-end watches are currently heading towards China. The reason is simple, according to the bank: “besides the weakening of China’s economic growth, anti-corruption policy measures and restrictions on advertising for luxury goods weigh on demand.” Given the rapid expansion in recent years, however, CS sees the decline in exports to China as a normalization rather than a collapse.

In the medium and long term, the report emphasizes the rapid increase in the standard of living of the Chinese population will more than offset short-term policy measures. China is expected to consolidate its position as the largest export market for Swiss watches in the coming years. The free trade agreement between Switzerland and China will certainly help. However, due to the growing experience of luxury goods buyers, we should expect a change in buying behavior.

lorre watch Vacheron-Constantin-boutique-Macau-150x100Vacheron Constantin boutique Macau

lorre watch Omega-store-Shanghai-150x89Omega store, Shanghai

lorre watch Hermes-watches-store-Beijing-150x102Hermes watches store Beijing

lorre watch Breguet-store-Shanghai-150x84Breguet store Shanghai

“Some evidence suggests that the preference is currently going to understated styles and rarer small luxury brands. This would also affect the export of watches and change their structure,” anticipates Credit Suisse.

Thanks to Lorre White, The Guru of Luxury

RELATED: Giselle Rufer Delance – WOMAN of ACTION™

A-Celebration-of-Women-Feature-Banner

About Team Celebration

Team Celebration is a devoted group of women dedicated to sharing information that will better the lives of all women making this space a truly convenient Resource for Women globally. Speak Your Mind: You are invited to leave comments and questions below.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
You simply type a KEY WORD into our SEARCH BOX at TOP RIGHT of Homepage and a list of associated topic articles offering truly educational and informative features will be at your fingertips.

Copyright 2022 @ A Celebration of Women™ The World Hub for Women Leaders That Care