WATCH-AFICIONADO 2/15 by Europa Star HBM

WEB & IPAD SPECIAL WATCH AFICIONADO

Cover Story

Patek Philippe Métiers d’art “Setting the record straight”

BASELWORLD 2015

www.watch-aficionado.com WATCH BUSINESS PAPER – USA & CANADA – VOL.51 N° 2/2015 MARCH - APRIL

WITH INDEX OF ALL IN-DEPTH ARTICLES PUBLISHED ONLINE

SIGNALS

Featuring this month on:

www.watch-aficionado.com

Taboo

After receiving a timepiece as a gift by a visiting British Minister, Ko Wen-je, the Mayor of Taipei, said “I can just re-gift it to someone or take it to a scrap metal dealer and sell it for cash.” Why such a brash reply? In Taiwan the giving of a timepiece as a gift is taboo and it is thought to bring bad luck! (Taipei Times) AUBE SUR LE LAC, REF. 993/100G by Patek Philippe Pocket watch with dial and caseback decorated with miniature painting on enamel with silver spangles. The dial displays details of works inspired by five Swiss painters: Alexandre Perrier, Edouard Vallet, Mafli, Ferdinand Hodler and Paul Klee. Both sides of the watch are decorated with enamelled silver leaves embedded in hand-engraved settings. The caseband is set with 54 cabochon diamonds. Cabochon emerald-set crown. Two brilliant-cut diamonds on the bow. This one-of-a-kind piece was created to commemorate the manufacture’s 175th anniversary. (See further details on page 4) www.patek.com EDITORIAL Awaiting the new conquistadors SIGNALS COVER STORY Patek Philippe – Métiers d’art – “Setting the record straight” THINK TANK Time - The Grand Illusion BUSINESS A glass half-full or half empty? Market on the move: A review of 2014 and a preview of 2015 INTERVIEWS TAG Heuer’s strategic departure Antonio Calce at the helm of the good ship Sowind Aldo Magada, Zenith – “The chassis is ready, now we need to build it up” INDEPENDENTS / PART 2 An informal chat with two standard bearers of independent watchmaking – Philippe Dufour and Max Busser MELB Holding – Beyond niche Case studies: Louis Erard, Slyde, Cabestan, Laurent Ferrier PORTRAITS Fossil Group, Swiss made watches for the Chinese market WATCH GALLERIES Mechanical mastery, Tourbillon of tourbillons, Subtle sophistication, Skulls & skeletons, Chronomania, Ladies first, For the love of chocolate STRATEGIES Japanese watchmaking moves upmarket Watches & Automobiles Petrol power RETAILER PROFILE “Watch brands in Switzerland will come back to the retailers” LAKIN@LARGE Clocks, the Bible and a koala

Read all articles on www.watch-aficionado.com

Year of the Goat Ulysse Nardin celebrated the Chinese New Year (February 19, 2015) by adding a new watch to its Classico collection, inspired by the upcoming Year of the Goat. The 18-carat rose gold Classico Goat timepiece features a minimalist design which supposedly embodies the goat’s quiet and calm nature. (Global Blue)

Swiss made

TAG Heuer is entering uncharted waters. Its new smartwatch might not be marked as “Swiss made” because 50 % of a watch’s movement need to be produced in the country to earn the label. The brand’s lack of expertise in communication technology has resulted in a partnership with Silicon Valley to produce its new smartwatch, according to Jean-Claude Biver, Head of Watchmaking at LVMH. (Bloomberg)

Made for a woman

While men continue to be the dominant demographic for the watch industry, the first wristwatch was made for a woman. In 1810, Napoleon’s sister, Queen of Naples Caroline Murat requested a watch that could be worn on a thin band, and Breguet delivered a small minute repeater which chimed the time. During that period, men preferred pocket watches and considered hand-worn “wristlets” only fit for women. (Tech Crunch)

Big club = big clock As part of its recent 3-year sponsorship deal with FC Barcelona, Swiss watchmaker Maurice Lacroix has introduced a special collection of timepieces, naturally focused on the male market. The crown jewel of the partnership is a big clock on the scoreboard at the Camp Nou stadium. The backlight timepiece measures 4 meters in diameter, matching the stature of the big club. (FC Barcelona)

1915

Breitling have designed a limited edition watch to commemorate the 100 year anniversary of the chronograph push-piece, the invention which allowed the control of chronograph operations separately from the crown. The Transocean Chronograph 1915, featuring a new hand-wound Caliber B14 movement, is fittingly limited to only 1915 pieces. (Breitling)

Suffering

Flat growth

High-end watches are still suffering in the Asian market, as the Chinese government continues to hamper conspicuous spending. With the demand for diamond and gold-based luxury goods diminished, the Chinese are buying watches with a lower average value than previous years, focusing more on steel timepieces. (Reuters)

2014 showed flat export growth to Hong Kong, which is the world’s top buyer of Swiss watches. Exports from January to November last year totaled 3.81 billion Swiss francs, compared to 3.78 billion Swiss francs in 2013. (Federation of the Swiss Watch Industry FH)

Segmented market

Brick and mortar

Control According to Swatch Chief Executive Nick Hayek, “if you do not control the lower market segment, you do not control the overall market.” So far, the business model has paid off with the dominance of its Swatch brand, but that is increasingly being challenged in 2015. (Tech Crunch)

While many brands are increasingly moving to e-commerce, Japanese watch company Seiko is sticking to the traditional model.“In the future, we might look at [e-commerce]. But honestly, our brick and mortar retailers continue to be the backbone of Seiko’s business today,” says Atsushi Kaneko, Managing Director, Seiko India. With its focus on high quality (Business Today) luxury timepieces, the Swiss watch industry is very susceptible to counterfeiting. In 2014 about 350,000 auctions of counterfeit Swiss watches were halted, and each year thousands of websites which offer counterfeit products are shut down. Japan’s leading watch brands are (European CEO)

Smaller players in the smartwatch market are not trying to make a “do-all” product like the Apple Watch, suggesting a segmented market for wearables. According to Jeff Orr, senior practice director for ABI Research,“there’s a lot of discussion by wearable manufacturers about specialization and trying to reach a certain demographic.” (International Business Times) looking to seize greater market share

350,000

Market share

19%

The start of 2015 saw falling shares for the big watch brands. Swatch shares fell 19% in the first three weeks of the year, while Richemont shares fell 17%. The new challenge posed by smartwatches and the surging Swiss franc have added to the decline. (Bloomberg Business)

in the high-end of the North American market. Citizen is resurrecting the former Swiss luxury brand Wittnauer there, while Seiko is pushing its Astron series of GPS-mounted wristwatches through its sponsorship deal with tennis star Novak Djokovic. (The Japan Times)

10% According to Barclays, just a 10% move in the Swiss franc can impact earnings by as much as 14%-18%. A heavily export orientated industry, Swiss watch brands are particularly vulnerable to the rising value of the Swiss franc. For instance, about 85% of the revenues of the Swatch Group are based on sales outside of Switzerland. (Seeking Alpha) WATCH AFICIONADO | 3

COVER STORY

PATEK PHILIPPE – METIERS D’ART

by Pierre Maillard

“

Métiers d’art… Métiers d’art… Métiers d’art…” These days, the phrase seems to be on everyone’s lips, as if it were a password that could magically open the doors to international renown. In recent years, artistic crafts have become watchmaking’s new frontier. Far from mourning their demise, we see enamellers, engravers, miniature painters, straw marquetry artists, plumassiers, stone mosaic specialists and embroiderers popping up all over the place. Thierry Stern comes right out with it: “I want to get a few things straight, for the record.” Faced with this groundswell, the young CEO of Patek Philippe has decided to come out of the woodwork and speak his mind about this resurgence of interest in crafts with which he is eminently familiar. And for good reason. From its earliest days, and throughout the intervening 175 years, Patek Philippe has relied on master craftsmen to create its exceptional engraved, painted, enamelled... you name it... pieces. And they have done it discreetly, without shouting from the rooftops. At certain periods of their history they have continued this practice for the sole purpose of preserving the traditional crafts, when virtually no one else seemed to value them any more. “We have never stopped producing decorated pieces, not even when artistic craftsmanship seemed to be at its lowest ebb. We have always considered it crucial to continue to give work to artisans, to ensure the survival of their crafts,” explains Thierry Stern. “During some of these periods we have had as many as 80 Dome table clocks in stock. And when you realise that every one of these clocks requires four to six months’

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work, and that we generally make a maximum of ten or fifteen per year, you can understand what such a stock represents, not just in terms of asset value, but in accumulated expertise.” In its 175 years of working with enamellers and engravers, Thierry Stern concedes that Patek Philippe has amassed “a colossal amount of knowledge”. “The artisans love that, because they know that not only do we work on a longterm basis, but our quality standards are among the highest in the world. Each piece must be perfect, museum quality. What is more, some never even go on sale. They are immediately added to our collections, to take their place in our Patek Philippe Museum in Geneva.”

AUBE SUR LE LAC, REF. 993/100G Pocket watch with caseback and dial decorated with miniature painting on enamel with silver spangles. The back of the watch pays tribute to the work by Swiss painter Louis Baudit (1870–1960) entitled Le matin devant Cologny, which dates from 1943. The painting is part of the private collection of Philippe Stern, Patek Philippe’s chairman.The dial, created using the same technique, displays details of works inspired by five Swiss painters: Alexandre Perrier, Edouard Vallet, Mafli, Ferdinand Hodler and Paul Klee. Both sides of the watch are decorated with enamelled silver leaves embedded in hand-engraved settings. The caseband of the 44.1 mm diameter case is set with 54 cabochon diamonds. Cabochon emerald-set crown. Two brilliant-cut diamonds on the bow. This one-of-a-kind piece created to commemorate the manufacture’s 175th anniversary is presented in the centre of a white gold arch decorated with hand-engraved and enamelled leaves, mounted on a translucent blue enamel circular base.

THE GREAT CONFUSION Thierry Stern has decided to lay his cards on the table and speak openly about the métiers d’art gospel according to Patek Philippe, because there is at the moment, in his view, “great confusion on the ground. You can’t suddenly declare yourself to be an enameller or miniature painter. This status is the result of lengthy professional development, complex apprenticeships. In my view, a solid background in history and art is essential for anyone embarking upon this path. Any enamellers who work for us must be among the best in the world. Now that the métiers d’art seem to be flavour of the month, you find many young people who claim to be enamellers, without truly mastering all the intricacies of the profession. There’s enamel, and then there’s enamel. There’s a world of difference. There are workshops today where artisans work virtually on a production line, each one applying a different colour, while someone else prepares the cloisonné. If you want things to be done properly you can’t work like this, not really taking account of the materials with which you are working, not understanding the chemical compatibility of the colours, not having

all the firings and chemical interactions at your fingertips. Not to mention the specific talents and stylistic tastes of every enameller worthy of the name. But our clients are not fooled. They appreciate the depth of the colours, how they work together, their almost organic subtlety, the quality of the gold wires, the consummate mastery and fluidity of their shaping, the style... these elements are what make the difference.”

MINING A TRADITIONAL SEAM Sandrine Stern, Thierry Stern’s wife, is creative director at Patek Philippe. She is in charge of all the artistic pieces, which are subsequently individually assessed by the family company’s management board. She explains the procedure the firm follows to create its works of traditional craftsmanship. “In the beginning everything is done by hand, starting with the preparatory sketches. These drawings allow us to identify and select the exact techniques or combination of techniques that will be used; these might include various forms of enamelling and miniature painting, but also engraving and gem-setting. The sketches are then formatted and adapted to the spe-

cific shape of the Dome table clocks, pocket watches or wristwatches. The decoration must harmonise as closely as possible with its case, in a refined and subtle manner.” The inspiration for these preliminary sketches could come from anywhere. Even, as on the day of our meeting, from a simple but beautifully decorated thank-you card sent by a retailer. But the main source of inspiration remains the Patek Philippe Museum and the many treasures housed within its exceptional collections. Lakeside landscapes, odes to nature, exotic animals, birds of every hue, floral motifs, scrollwork, ornaments, portraits... an incredible diversity of immense richness, bearing witness to the long and illustrious history of enamelling in Geneva. Far from dying out, this traditional craft with its highly decorative motifs has continued uninterrupted up to the present day. “We still favour the traditional approach: our clocks and watches must be enduring, they cannot be allowed to follow the currents of fashion, which is by definition ephemeral. Each generation nevertheless brings its own new ideas and its slightly different techniques, and research continues constantly. But we owe it to ourselves to create pieces that will stand the test of time, that stand outside time, that are timeless.”

PROFESSIONAL JEALOUSY Within this formal and yet artisanal framework there is considerable variety in style and in the elements of craftsmanship. As Sandrine Stern points out, “Each enameller, each miniature painter has their own tastes, their own inclinations, their specialties and their secrets. We work with around twenty different enamellers in total who, together, represent a huge amount of accumulated knowledge, and to whom we have a long-term commitment. Some of them work on our premises, but many of

them are artists in their own right. As such, they are possessive of their way of working, fiercely independent, defensive of their style. We recognise this explicitly, as every one of our pieces is signed by the artist who created it. Everything goes through our internal team, who check each item. Their expertise comes from a daily diet of 175 years of history and extensive experience working with these crafts!” “They appreciate and listen to what we ask of them, because we never ask the impossible,” adds Thierry Stern. “When we demand that they push themselves to the limit, it’s because

we are intimately familiar with what these limits are, and the difficulties of their craft. They know they are dealing with a team of professionals who know exactly what they are talking about, who will supervise their work, back them up, and accompany them on their journey. They also know that we are committed to this relationship over the long term. From that point of view the continuity of a family business is a welcome guarantee against the vagaries of the market.” Another factor is the rarity of these pieces, which is part and parcel of their unique character, given that they are all the unique products of the hand that created them. “This paucity, if I can call it that, is a real problem, but it’s a good problem to have,” says Thierry Stern with a smile. “It is certainly a source of frustration, and we have to be able to handle that. Take, for example, the Sky Moon Tourbillon, which combined a sculpted case with a dial in cloisonné and champlevé enamel. We received 650 requests for the 75 pieces we produced. It just goes to show... But there is no room for compromise. We could increase production, but the quality would automatically decline, and that is something we refuse to countenance.” Such is the enduring appeal of Patek Philippe. p

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BUSINESS

MARKET ON THE MOVE:

2014 was a year of note for the watch industry. The Swiss, for instance, exported a record number of timepieces abroad. Previously untapped markets were also developed, as increasing wealth in countries ranging from Brazil to China to Russia contributed to increased global sales. But the start of 2015 has hinted that the permissive economic climate of last year will not last. Geopolitical issues, economic slow-down and fluctuating exchange rates have resulted in a more difficult climate for purchasing high-end luxury timepieces, suggesting that the watch industry is not isolated from broader global issues. Watch brands have started to adjust, reprioritizing their target markets and demographics in preparation for the year to come. To asses key trends and provide a prognosis for 2015, we partnered with Digital Luxury Group and seven of its international correspondents, including insiders from Brazil, China, France, Hong Kong, Italy, Russia, and the U.S.A. Each provided a retrospective analysis of 2014 and a projection for 2015 for their respective market. Their findings suggest that for 2015 to be a year of success, brands must refocus on the mid-range market and get their prices right. They must also be aware of the purchasing power of the international tourist, and take seriously the potential of fashion and smart wearables.

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USA: REPRIORITIZING A MATURE MARKET, WITH A TWIST

by Ariel Adams, Founder & Editor in Chief, aBlogtoWatch

n 2013, growth was almost a given in the luxury watch industry, as emerging countries like China offered the promise of new clients in untapped markets. Because such developing markets were not yet mature, marketing strategies, pricing, and growth were relatively straightforward. But the landscape is different in 2015. The watch industry no longer has as many new developing markets to tap into and brands are once again re-focusing on mature markets such as Europe and the United States. But as long as watch companies answer to shareholders, they will always need to focus on profits. Doing so in mature markets is simply more difficult, because they require more consumer education and higher marketing costs as part of a brand’s sales strategy. 2014 also saw brands once again focus on the extremely rich demographic. It is a trend likely to continue into 2015, for two reasons. First, the extremely rich are relatively more insulated

from changes in the economy. The fact that they have more disposable income allows them to maintain their usual consumption patterns even in economic slowdown. Second, brands are also more easily able to increase prices for the extremely rich demographic, which can absorb rising prices better than the low to mid-range demographics. At the risk of alienating consumers on the lower scales of the market, brands should once again offer solid value propositions and product choices under $5,000.

The “fashionification” of luxury watches, as seen in 2014, is also likely to continue. The “fashionification” of luxury watches, as seen in 2014, is also likely to continue. Brands are increasingly defying their own roots and attempting to become fashion brands by placing a price premium on their name. Such a strategy might work with less educated consumers, but in the long run it can result in the loss of brand equity. The danger is losing cache with educated consumers and alienating their traditional consumer base. On a more positive note, the marriage of communications technology and watches in 2015 should make horology more mainstream. The release of the Apple Watch, as well as other smartwatches, should have a major impact on how consumers think about watches, which will add an interesting flavour to how the watch industry continues to evolve in 2015 in the United States.

Modern times, eternal elegance.

Visit us at Baselworld, Hall 2.2, Stand B05 Ernest Borel S.A. +41 32 926 17 26 / info@ernestborel.ch www.ernestborel.ch

Success in 2015 will therefore be based on a combination of product availability, the amount of marketing dollars spent, and overall brand awareness. As a result, the most sophisticated and well-funded brands will likely succeed, while the smaller players are likely to struggle. Larger brands will continue to shift power into their corners by introducing more own-brand boutiques, which will increase their hold over the market, adding even further pressure on smaller retailers.

such as Rome, Milan, Florence and Venice, are locations where the overwhelming majority of buyers are foreign. Those cities have also been the scenes of new mono-brand or flagship boutique shops, directly operated by brands or franchised to local partners. Increasing international competition has resulted in a concentrated market in Italy, and the country’s strong tourism potential and an emphasis on monobrand boutiques are key areas for potential growth in the market going forward.

ITALY: ECONOMIC CRISIS AND THE HOPE OF TOURISM

CHINA: THE POWER OF THE TOURIST

HONG KONG: TARGETING THE MID-RANGE MARKET

by Joseph Chu, Honorary Consultant, Prince Jewellery and Watch Co. Ltd, & Advisor of Federation of Hong Kong Watch Trades & Industries

A by Carlo Ceppi, European Sales Manager, Officine Panerai

by Henri Liu, Editor in Chief, Watch Brand Intro and Operation

he Italian market for high-end watches in 2014 was evolving. On the one hand, increasing globalization and a generational shift placed family-owned businesses - which have traditionally characterized the domestic market – intro crisis. On the other hand, the stagnation of the Italian economy has stymied the usually dynamic Italian market and increased the burden on local consumers.

The stagnation of the Italian economy has stymied the usually dynamic Italian market. Although Italy remains one of the major markets for the high-end watches industry (5th globally, with 1.23 billion CHF according to FHS), the market is increasingly concentrated. Specifically, international tourist destinations, 10 | WATCH AFICIONADO

he luxury watch market in China in 2014 was notably different than previous years. While entry-level luxury watches did well, the high-end sector of the market showed a downward trajectory in the country. The biggest surprise of 2014 was perhaps that Chinese travellers continue to purchase strongly overseas. As a result, the global marketing strategy of luxury brands is expected to increasingly target the Chinese market, as well as favourite travel destinations for Chinese tourists. Because the proportion of watches sold to Chinese tourists at overseas outlets will continue to grow, we should expect less local retail activity in the domestic market. With regard to trends for China in 2015, the major brands will focus on promoting classic elegant dress watches through the introduction of new collections or the re-launching of old ones. The mid to low-range price points will be emphasized, with a renewed focus on on-line retail and ladies’ watches.

fter 11 consecutive years of rapid growth, 2014 saw slowing sales figures in Hong Kong. The luxury watch and jewellery sectors suffered most, recording an average drop of 13% compared to 2013. Some individual watch retailers even recorded a drop of more than 30%! Changes in government policy and negative sentiment towards Chinese visitors contributed to the declining market. As a result, wealthy Chinese consumers changed their travel plans and travelled to Europe and North America instead.

Luxury watch brands may start to lower retail prices in hope to boost sales. Fluctuating currency exchange rates also dented the luxury market in Hong Kong. The sudden appreciation of the Swiss Franc and the strong US dollar dampened the desire to buy luxury goods for both locals and tourists visiting Hong Kong. Anticipating a continuing downward trend in 2015, luxury watch brands may start to lower retail prices - following the likes of Patek Philippe - in hope to boost sales. The watch market will also cater to middle class consumers in the midrange luxury price range, focusing on increasing the value for money of Swiss watches.

BRAZIL: ADAPTING FOR LONG-TERM GROWTH

RUSSIA: TROUBLE AT HOME AND ABROAD

by Richard Courbrant, President & CEO, TWG

by Yury Khnychkin, Contributing Editor Watches, Robb Report

he Brazilian market has undergone a substantial change over the last years, showing an effort to consolidate a presence in a developing and growing market. This has included the installation of regional brand managers and the creation of own-brand subsidiaries in the country, a trend that still persists. While such changes

The weak growth of the economy and the fluctuations in exchange rates might not necessarily result in predictable consumer behaviours. are not immediately substantial, their impact can only be analyzed based on performances in the medium-term. For instance, Hublot’s new marketing strategy during the World Cup in Brazil was a success in the short-term, achieving unprecedented visibility. Importantly, the brands’ general perseverance on the market has allowed it to also consolidate its position for the medium and long-term as well. Looking to 2015, beyond the prospective of weak economic growth, we will have to consider the impact of the strong Swiss franc and the depreciation of the real.2015 will be marked by an adaptation by the market, because the weak growth of the economy and the fluctuations in exchange rates might not necessarily result in predictable consumer behaviours.

he Russian watch market rapidly devolved over the last one and a half year. Geopolitical and financial issues, including a weakening rouble, the degradation of Russia’s relations with the West over Ukraine, and the decline of oil prices, have all created a “perfect storm” which have affected the watch industry. Limited travel by Russians abroad lowered sales to Russian tourists in European and American boutiques in the summer. At the same time, the weakening rouble dropped the prices of timepieces by up to 40% compared to Europe and the USA. While Western tourists also took advantage, mostly Chinese visitors emptied out Moscow’s boutiques in December 2014. So too did Moscow’s upper-middle class, who bought everything from real estate to premium cars and wristwatches. But after the impressive sales of December, Moscow boutiques are now looking like museums: they have spectators but no buyers.

The degradation of Russia’s relations with the West over Ukraine, and the decline of oil prices, have all created a “perfect storm” which have affected the watch industry.

This already implies a very difficult forecast for the Russian market in 2015. Consumer demand will largely depend on factors like oil prices and exchange rates, as well as the persistence of Western financial sanctions on Russia. The 2015 market will depend on how well Russia deals with internal issues and keeps herself free from complications abroad. As a former Russian imperial statesman once stated, La Russie ne boude pas; elle se recueille (Russia is not sulking, she is composing herself).

FRANCE: PARIS: A BAROMETER OF THE NATIONAL CLIMATE

by Laurent Picciotto, Founder, Chronopassion

he French market in 2014 was complex: the period from January to May was a difficult one, but sales picked up again in December, yielding positive results. The start to 2015 has also been surprising, and the reasons can be found in Paris: The attacks of January 7 on Charlie Hebdo helped to drive tourists away, while the strong Swiss franc compared to the Euro drove up retail prices by as much as 20%. Curiously, these events have not had a negative effect during the first two months of the year, which might be explained by preemptive calculations by some consumers to buy early. For those same reasons, 2015 can be a notably difficult year for the watch industry in France. The situation will also not be helped by the launch of the Apple Watch in the spring, which can pose a risk to the industry similar to the quartz revolution thirty years ago. Only time will tell….p WATCH AFICIONADO | 11

PORTRAITS

FOSSIL GROUP, SWISS MADE WATCHES The American giant is hoping to conquer Asia on the strength of its catalogue of prestigious brands at affordable prices. But first, a stopover in Switzerland. Explanations.

tor of activity. “Between the first pencil stroke and delivery to the shops, it takes between one and two years. Sometimes our contacts in Milan and London don’t understand why it takes so much longer than a handbag!” Things nevertheless move quickly, she assures us: “We represent fashion brands. On average, that means four new collections every year.”

DISCRETION IS THE ORDER OF THE DAY

by Serge Maillard

t Antima, a Fossil Group subsidiary in Biel, the very fabric of the building symbolises the DNA and the ambitions of the American watchmaking giant. On the first floor is an open-plan office housing dozens of designers, all busy thinking up new faces for the watches of tomorrow for one of the world leaders in the fashion sector. In the ground floor workshops the atmosphere and decor are completely different. Here you hear local accents, you see watchmakers’ tunics; this is where the prototypes dreamt up by the designers upstairs are brought to life. So it’s fashion, but with a Swiss made label. And that basically sums up the current aims of Fossil Group, which established itself in Switzerland in 2002 through the purchase of Antima. Christelle Vaccari, Senior Director of Design and Development for Antima, gives us the grand tour. She is often away at meetings with her main interlocutors, the design director at Fossil Group’s Dallas headquarters, obviously, but also the heads of licensed brands Emporio Armani in Milan and Burberry in London. These are Fossil’s two main Swiss made brands (recently joined by

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some of Tory Burch’s watches, and not forgetting the group’s most ‘Swiss’, though arguably less well-known brand, Zodiac) in an extremely wide-ranging portfolio. In addition to the aforementioned brands, it includes Fossil, Skagen, Michele, Michael Kors, Marc by Marc Jacobs, Diesel, Armani Exchange, Relic, DKNY, Adidas and Karl Lagerfeld. This all adds up to around 30 million watches per year. The majority are made in China, but a growing proportion (400,000 last year) bear the prestigious Swiss made label. “We’re constantly in communication with Emporio Armani and Burberry. They have to sign off on all our sketches: they are quite careful, given that it’s their name going on the dial!” points out Christelle Vaccari. All these newcomers to the watchmaking scene must adapt to the way things work in their new sec-

Martin Frey

Fossil Group is a giant. It’s the fourth-biggest watchmaking group in the world, with a turnover of around 3.5 billion dollars last year (three-quarters of which come from watch sales). But it is nevertheless a discreet giant. Photographs of its CEO, Kosta Kartsotis, are rarer than hen’s teeth. Luckily for Europa Star, Martin Frey, European MD for Fossil Group, agrees to show his face. He didn’t have far to come: the Texan giant established its regional headquarters in Basel in 2004. Here too, there is an evident desire to get closer to the ethos of ‘Swiss made’ and the historic heartland of watchmaking. “For us, the Swiss made label is becoming more and more important, particularly for winning over our Asian clientele. American consumers also notice it more now, which was not necessarily the case before.” Today, the USA still account for 50% of sales, Europe 34% and Asia-Pacific just 16%. As the director acknowledges, Fossil retains a somewhat mysterious aura, even for other watchmaking groups and brands. “It’s only been about two years since we started communicating more about our activities in Switzerland.” The group has more than doubled its watch sales in the space of five years. “We came through

SMART WATCHES ON THE HORIZON The brands in the Fossil Group catalogue are present in around 30,000 points of sale worldwide. “Ideally, we will go to our retailers with a package of brands from our portfolio. But we don’t impose it as a sine qua non condition for getting hold of one of our brands. We use persuasion instead!” Of all the watchmaking groups, Fossil is probably the one that has most clearly advertised its ambitions in terms of smart watches. Closer to Silicon Valley than its Swiss counterparts, a more recent incomer to the watch business, but also in the front line thanks to its entryand mid-level positioning, the group would be foolish not to take an interest. It has already concluded partnerships with Intel and Google, the initial results of which will be presented at Baselworld. The group is also talking more specifically about ‘smart accessories’. “There is huge potential, because people are looking for more interactivity,” notes Martin Frey. Let’s see what Baselworld holds. the 2009 crisis. It even helped us. Unlike other brands, we didn’t cut off our relationships with component suppliers. As soon as the crisis was over we were able to scale up production.” Their catalogue is likely to grow even more. “We are regularly approached by fashion brands wanting to go into watches. But if they are too similar to a brand we already produce, we don’t take it any further. Nevertheless, I think there is still potential, particularly in producing jewellery under licence.” Capitalising on fashion brands with an established reputation and well-defined identity, and transposing their success into the watchmaking world, thanks to an industrial war machine, is a simple but apparently effective recipe. “In China we still have great potential for growth, thanks largely to the Swiss made label. People like our designs, and we have an interesting brand portfolio. Luxury still counts, but I think in China a large sector of the population will be interested in the midrange. Price matters too! Our prices go from 75 francs for brands such as Adidas or Fossil, up to above 2,000 francs for Burberry and Emporio Armani.”

20 today), in a surface area four times what it is today. In the midst of the strong franc crisis, when China is in slowdown and staff are being put on short hours, it’s quite a bold decision. Only the financial clout of a watchmaking giant could make it possible. Fossil Group, which is also preparing to launch some women’s movements, “is thinking in the long term about adding complications to the STP1-11.” When it is not equipping its Swiss made watches with in-house calibres, the group, which employs around 400 people in Switzerland (and more than 15,000 worldwide), calls upon Soprod, Dubois-Dépraz and Technotime to supply its automatic movements, with Ronda for quartz. Other brands in its portfolio will in the future include Swiss made watches, according to Martin Frey. “But we must be very careful about the quality of our products. As we are newcomers to the Swiss made business, we can’t afford to make mistakes!”

TENS OF MILLIONS OF FRANCS INVESTED IN SWITZERLAND Pending the smart watch’s debut, the last big milestone reached by the watchmaking group was the creation in 2012 of its first Swiss made calibre, the STP1-11, assembled in its Manno factory in Ticino. This strategy was dictated partly by Swatch Group’s decision to scale back deliveries of components. “But it wasn’t just that,” insists Martin Frey. “If we hope to become a major player in the Swiss made sector over the long term, we have no choice but to produce our own movements.” Some of these calibres have already been delivered to third parties, “although we don’t aggressively promote this activity,” says Frey. The potential ramifications of the new ‘Swissness’ law were also a factor in this strategic decision. In Glovelier in the Jura, Fossil Group already makes cases and movement parts such as rotors. The factory is about to grow: by next year it should house 100 employees (compared with

The giant is firmly established in Switzerland. Its new 10,000 m2 Basel headquarters, currently under construction, will house around 350 employees beginning from next year. And it can’t be a bad thing, being so close to Baselworld... These technical and administrative investments in the cradle of watchmaking should, in the medium term, amount to several tens of millions of francs. p WATCH AFICIONADO | 13

INDEPENDENTS

(PART II) To illustrate the various difficulties encountered by independents, Europa Star has chosen a series of particular cases.

NO. 4:

LOUIS ERARD

Several battles won, but the war continues

beacon of hope amid the difficulties that are assailing the independent brands today, Louis Erard proves that, with time, it is possible to break through, even if you’re small (the company has 28 employees), and provided that you are flexible and responsive to all the challenges that may arise. It’s not pretty: Director General Alain Spinedi says he has been “on a war footing since 2003”. That year marked a turning point for the brand, then apparently at death’s door. Entrepreneur Alain Spinedi took over, and made the decision to focus solely on mechanical movements. Hence the brand’s motto ‘Swiss Mechanical Watches’, which has stuck, despite the fact that many Louis Erard watches now run on quartz. “When there are 800 brands worldwide, it’s not easy to turn up with the 801st. In the beginning, no one needs you, in theory. In 2003 we adopted an original position, for an independent brand, producing models that cost between 600 and 2,000 francs, equipped with ETA movements.” 14 | WATCH AFICIONADO

What happened then? A series of crises, during which the brand managed to keep its head above water. The first occurred in 2007–2008, when ETA announced that it was unable to increase deliveries of mechanical movements. “We were obliged to raise the price bracket up to 3,000 francs. In parallel, we launched our first ladies’ watch collection. Up until then we had only offered men’s mechanical watches.” The second crisis fell in 2009, and affected the entire watchmaking industry, which lost 25% of its turnover. Here too, Louis Erard managed to limit the damage, recording a drop in sales of ‘only’ 6%. But the third crisis would be the most challenging: the strong franc. And with the recent decision of the Swiss National Bank to abandon the ceiling on the Swiss franc / euro exchange rate, the short-term prospects are far from encouraging. “In Italy, for example, because of the strong franc the price of our watches has virtually doubled. And over the same period, Italians’ buying power and salaries have certainly not increased. Quite the opposite, in fact. And this is a big challenge for us.” Hence the decision to abandon mechanical purity and include some quartz movements, in a bid to retain the starting price of 600 francs. Alain Spinedi is trying to remain optimistic. “Wherever there’s a crisis, there’s an opportunity.” His brand recently proved this adage with a particularly adroit move: further to Swatch Group’s decision to desert Swiss retailer Gübelin, Louis Erard will now be represented by the powerful watchmaking shop network. “Through these crises we have grown from a niche brand to a more complete company. Our image has strengthened.” Starting from zero in 2003, Louis Erard today has a turnover of almost 12 million Swiss francs, and is approaching 20,000 units sold. Nevertheless,

the threats remain: alongside the increasingly strong franc, there are geopolitical upheavals in the Middle East, Ukraine and Turkey. “These days many markets have become unpredictable.” Switzerland still accounts for one third of the brand’s sales, ahead of Russia, whose economy has taken a turn for the worse. The brand is now looking to open new markets, including in China. Twelve years on, would Alain Spinedi do the same again, if he had to start over? “At the time it was possible to launch a mid-range brand, but not any more. It’s no longer a particularly profitable niche for a newcomer. Anyone starting out today would have to bring some new ideas to the table.” Alain Spinedi is disappointed by the current lack of diversity in the watchmaking landscape: “There’s been a kind of lockdown, particularly in terms of distribution. Not so many years ago, watchmaking was a rich source of imagination and inspiration for many designers and entrepreneurs. Today we see the same stereotypical brands in shopping centres all over the world.” (…) Read our series of case studies on www.watch-aficionado.com

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