Thursday, July 28, 2016

Swiss Not Happy

***Export of Swiss Watches in Decline

Swiss watch corporations are freaking out: the latest data shows that the export of Swiss watches has declined for 11 consecutive months. The reason apparently is the high Swiss Franc and the price of gold. Richemont Group just fired 350 people and Omega is apparently contemplating doing the same.

While this explanation may sound plausible to shareholders, the problem is far more complex. The price of gold is on the rise, but gold is still 30% cheaper than it was in 2012/13 when export was booming.

In May, Richemont CEO Richard Lepeu said Swiss watchmakers "should never be arrogant" and shouldn’t rule anything out. "Technology's progressing very fast, and we never know what might happen."

Lepeu is referring to smart phones. Once again, it appears that Swiss underestimated the impact of new technology: except for TAG, no major Swiss watchmaker is interested in getting into the smart watch business.

However, in my opinion the real reason for a decline in export and sales is a more obvious one: the price of Swiss watches went through the roof. The product is simply too expensive and there are only so many watch buyers who can afford to spend $10,000 on a new timepiece every few months. The other even more obvious reason is the crazy idea that Swiss watches should be sold exclusively throughout 'brand boutiques'. Getting rid of independent retailers who were able to sell volumes of watches at somehow discounted prices is now firing back. Just a few years ago, one could have bought a new Omega watch from a number of dealers located from North Shore to Parramata. Today, there is just one independent AD who still has an Omega account.

The solution is simple: lower the prices, open more independent retail accounts, make the spare parts available to independent watchmakers and watch your export sales go through the roof.

Happy collecting,

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