Watch Aficionado 5-19

SPECIAL ISSUE

WHAT’S NEXT?

THE FUTURE OF WATCHMAKING

We selected six major issues which are having a profound impact on the watch industry’s present and also on its future. Some forty industry figures responded to our questions. From page 8 to 31

WATCH.AFICIONADO

A EUROPA STAR GROUP PUBLICATION

USA VOL. 55 NO. 311 | CHAPTER 5/2019 | WWW.EUROPASTAR.COM

EDITORIAL

Watchmaking in the age of digital complexity Serge Maillard

Disruption is everywhere, fundamentally changing our daily lives and the very essence of the existence of Homo sapiens. Seen on that scale, the current upheavals in the 400-year-old watchmaking industry might seem microscopic. But through the microscope we at Europa Star have trained on the watch industry for four generations, these changes seem immense! And they are accelerating at an exponential rate.

After a period of doubt about its impact, the smartwatch is now asserting itself as the standard everyday watch (rather like the Swatch in the 1980s and 1990s).

Let’s start with distribution, which has been totally disrupted since the arrival of digital technology. Unlike the well-oiled networks of the past, the jungle we’re dealing with today is more or less impenetrable to everyone. So far, online sales have mainly favoured the secondary mar-

ket (the watch having an unusually long lifespan), the disposal of unsold items (aka the grey market), but also counterfeiting. The options for buying a watch are so numerous today that it’s impossible not to get lost in the complexity.

Today, the real price of a watch is increasingly determined by its resale price. This leads to another striking effect of the digital upheaval: the growing polarisation between winners and losers in the industry. In a nutshell, the players that are “in-between” (manufacturers or retailers without strong recognition from end buyers) have suffered from the upheavals brought about by the digital revolution.

The watch as an object has also been fundamentally transformed. After a period of doubt about its impact, the smartwatch is now asserting itself as the standard everyday watch (rather like the Swatch in the 1980s and 1990s). What does this leave for the Swiss watch industry? Fundamental rethinking, and difficult strategic choices in the face of increasingly complex sales channels and consumer habits in the digital age.

Digital networks, which are supposed to make our lives simpler and more fluid, do exactly the opposite: our daily lives are both faster and more complex. Watchmaking is not immune to this ontological upheaval.

Carl F. Bucherer Eco-conscious watchmaking COVER STORY

A week in the Silicon Valley Read our report on page 28

Fuseproject in San Francisco

by

With the new Patravi ScubaTec Black Manta Special Edition, Carl F. Bucherer pursues its support of the Manta Trust charity, which we introduced on the front cover of Europa Star exactly two years ago. This time, the brand has gone further, as the rubber strap of the watches is made from recycled plastic bottles recovered from the Mediterranean Sea. Design-wise, the new model also proves that it is absolutely possible to be both sustainable and exciting. A presentation. (Read on page 4)

DP MEP 2019_B 534x353 Europastar USA_PAN INTER BAT.indd 1

24/10/2019 11:27

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COVER STORY

SPONSORED CONTENT

COVER STORY

WATCH AFICIONADO | 5

Carl F. Bucherer Eco-conscious watchmaking

by

Serge Maillard

The fight for the preservation of the environment is a battle that goes far beyond the watch industry. Climate change has, as we have seen this year, propelled thousands of people into the streets, worried for their future in light of the increasing pressure put on the planet. Giants in the food, fashion and car industries all try to promote a “greener” face, as consumers press for change.

While many watch brands are also tackling this issue, some have been more committed than others to this agenda. Carl F. Bucherer is definitely one of them. More than seven years ago, the brand started supporting the UK-based charitable foundation Manta Trust, which has dedicated itself to the cause of rare

manta rays since 2011. Today, it is active in over 20 countries, with the goal of preserving the maritime ecosystem and the rays’ habitat on a long-term, sustainable basis.

And actually two years ago we partnered with Carl F. Bucherer to create what was really the first “eco-conscious” front cover of Europa Star with manta rays swimming around the Patravi ScubaTec Manta Trust Limited Edition. The 188 watches produced then all featured a different manta ray engraving on the back, transforming each of them into a unique piece. It was also a good opportunity to interview Guy Stevens, the CEO of the Manta Trust, to learn more about concrete steps the charity is taking to preserve the well-known but fragile manta rays and their natural habitats around the world.

PATRAVI SCUBATEC BLACK MANTA SPECIAL EDITION REFERENCE NUMBERS: 00.10632.28.33.99 MOVEMENT: Automatic, CFB 1950.1 caliber, chronometer (COSC), diameter 26.2 mm, height 4.6 mm, 25 jewels, power reserve 38 hours Functions: Date, hour, minute, seconds CASE: DLC-coated titanium, titanium/ceramic bezel, automatic helium release valve, screw-down crown, sapphire crystal with anti-reflective coating on both sides, water-resistant to 500 m (50 bar), diameter 44.6 mm, height 13.45 mm DIAL: Black dial with manta ray silhouette STRAP: Rubber strap with recycled PET, diving folding clasp in DLC-coated titanium

The Patravi ScubaTec Black Manta Special Edition Two years later, the issue of environmental preservation is even more acute. And Carl F. Bucherer is going even further in its commitment this year, as time is ticking for the future of the oceans.

With the new COSC-certified Patravi ScubaTec Black Manta Special Edition, the brand reflects its long-standing partnership with the Manta Trust, with a focus on a particularly rare species: the black manta ray. But this time, it’s not only about financial support: the timepiece itself is made of sustainable and recycled materials: this diver’s watch is not just dedicated to the oceans, it also embodies some of the ways they can be protected.

The fabric used in the distinctive natural rubber strap of the Patravi ScubaTec Black Manta Special Edition, sewn with bronze-coloured contrast stitching, is composed entirely of recycled bottles

recovered from the Mediterranean.

Around 30 plastic bottles are needed to create one metre of the yarn used for the textile components in each strap. The fabrics are manufactured in Italy, which guarantees short transport distances.

Several million metric tons of plastic waste end up in the oceans every year – an enormous threat to our ecosystem and obviously to the habitat of the manta rays too. In a clever and coherent approach to environmental protection, Carl F. Bucherer “unites” several causes: the watch itself shows how recycling can be used in the industry, while part of the revenue goes to protecting an endangered species that is suffering from this very waste.

Guy Stevens explains it best: “Thanks to the kind support of Carl F. Bucherer, this year the Manta Trust will be able to launch an exciting explorative research project to gain new insight into the movement patterns and behaviour of manta rays in the Yucatán Peninsula.

Increasing our understanding of this little-studied species will enable us to introduce more effective regional protection.” >

COVER STORY

6 | WATCH AFICIONADO

About the Manta Trust This charitable foundation has dedicated itself to the cause of rare manta rays since 2011.

The Manta Trust is active in over 20 countries, tirelessly leading projects and awareness campaigns on behalf of this endangered species. Its goal is to conserve the maritime ecosystem and the rays’ habitat on a long-term, sustainable basis. The Manta Trust works to achieve this with an international team of researchers, scientists, conservationists, and education and media experts in the fields of research, teaching, and cooperation. Carl F. Bucherer has already contributed in a number of ways over the years – for instance by sponsoring satellite tags to track the movements of manta rays and funding an educational film. Together, the partners hope to make a lasting contribution to the conservation of this fascinating species.

COSC-certified, DLC-coated and ready for action Following its launch at this year’s Baselworld, the Patravi ScubaTec Black Manta Special Edition has been available around the world since September 2019. Unlike the model introduced two years ago, this edition is unlimited.

The timepiece combines an elegant sporty aesthetic with robustness, useful functions, and a water resistance of up to 50 bar (500 m).

Its 44.6 mm titanium case – new in the Carl F. Bucherer collection – boasts a DLC coating whose black hue contrasts with the case’s bronze-

coloured elements, as a tribute to historic diving helmets. SuperLumiNova adorns the indices and hands, which frame the silhouettes of two manta rays on the black dial.

The unidirectional rotating ceramic bezel enables the wearer to set the dive time – one of the watch’s safety features, alongside the automatic helium release valve. The DLC-coated titanium case back features a detailed engraving of a black manta ray.

The timepiece is powered by a CFB 1950.1 automatic movement with a power reserve of 38 hours. Its high level of precision has earned it official chronometer certification from the independent Swiss Chronometer Institute (COSC). Each watch is accompanied by an individual COSC certificate.

COVER STORY

Carl F. Bucherer’s bold approach to sustainability The Patravi ScubaTec Black Manta Special Edition is not just a symbol of sustainability; it also makes an active contribution to the conservation of the oceans and the responsible use of our resources. It is showing the industry new ways to embrace this important topic.

As a company, Carl F. Bucherer has indeed also comprehensively embraced sustainable working practices over the years. We can testify to it, having been a partner of the brand for many years now. It also demonstrates the important point that the best companies take a long-term approach to business.

The most successful watch brands are rewarded for their continui-

WATCH AFICIONADO | 7

ty and reliability in the way they treat their long-term partners (and we’ve been around for more than 90 years). That has never been clearer than it is today. A sustainable spirit encompasses many aspects: financial, social, environmental and, ultimately, human.

The new timepiece introduced by Carl F. Bucherer equally goes to show that good (and bold) design in timekeeping goes hand in hand with sustainable processes, at a time when many brands are asking themselves how to incorporate new ways of crafting watches. We end with a revealing anecdote on this point: the Patravi ScubaTec Black Manta Special Edition also served as design inspiration for the watch we spotted on Sylvester Stallone’s wrist in “Rambo - Last Blood”. The most iconic heroes also move with the times!

The watch that Sylvester Stallone wears in “Rambo - Last Blood” is a one-of-a-kind version of Carl F. Bucherer’s ScubaTec collection. Can you see the resemblance to the new Black Manta Special Edition?

WHAT’S NEXT?

8 | WATCH AFICIONADO

WHAT’S NEXT?

the future of watchmaking Challenges are stacking up on every side. The watch industry finds itself facing not a single threat, however big that might be, but a whole series of challenges. All manner of questions are jostling for attention; questions about the product itself, the technology it uses, and how it is distributed. But there are also societal, sociological and geopolitical questions. The world is changing. The world is moving on. The world is a very confusing place. It’s hard to see the way forward; it’s difficult to make the right decisions, to know which path to take. Europa Star has launched a vast survey, and talked to many leading figures in an effort to begin to plot a course through the uncharted territory that lies ahead.

an international panel We selected six major issues which are having a profound impact on the watch industry’s present and also on its future. Some forty industry figures responded to our questions. Certain trends are clearly discernible, but there are some discordant notes. Together, they offer a pertinent image of the watchmaking landscape as it currently stands. Here are the questions we put. a special dossier compiled by

Pierre and Serge Maillard

ENTRY-LEVEL What future do you see for the more affordable part of the Swiss watch offering in the face of the increasing domination of the Apple Watch in this segment?

POLARISATION We see a growing polarisation between some brands or models that are highly sought-after and the rest of the offering in the Swiss watch industry. How do you explain this?

DISTRIBUTION There is more complexity than ever in distribution channels. What is your view on the evolution of watch distribution? What will be the role of the traditional retailer, ecommerce sales and direct-to-consumer sales by brands?

PRE-OWNED How do you explain the rise of the pre-owned segment, operated now by brands themselves and traditional retailers, alongside the online platforms that were already active in this segment?

OPPORTUNITIES Is it possible to increase the pool of people interested in Swiss watches around the world? China has now been more or less conquered, there is no “new China”, and production volumes are falling in Switzerland.

HIGH-END Can the watch industry live solely off its high-end offering? Doesn’t it need a broader ecosystem to survive?

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“WE HAVE TO REINVENT THE SWATCH OF THE 21ST CENTURY” Jean-Christophe Babin, Bulgari ENTRY-LEVEL

“The weight of Apple is relative” “The weight of Apple in this segment is relative in my view. It’s difficult to compare it with the core and entry-level watch offering. This type of product addresses a market which is not really part of the more traditional watch offering. Smartwatches are an interesting product technologically, but this kind of technolo-

gy suffers from rapid obsolescence.

Moreover, they generate absolutely nothing in the way of emotion. The user will sooner or later go upmarket: to a Swiss watch that will last and with an emotional investment.

The future of Swiss watchmaking lies in the over-CHF1,000 category – barely the price of an iPhone X that procures zero emotion and will be fit for the bin in 2022.

“That said, it is true that watchmaking can’t limit itself exclusively to what we call the high-end. The industry needs volumes, in other words brands with a reasonably priced entry-level offering. Sadly,

the current trend is to erode that segment in particular, which has been neglected in favour of a general rise in prices, often over-thetop. Today more than ever, badly positioned, uncreative entry-level brands are doomed in the long run.

Many brands can still respond by reversing the trend. Which I hope they will do! But before that, they need to innovate and dare to stand up to Apple. The Swatch Group are the only ones capable of doing it, but apparently they don’t want to go down that path despite their huge expertise in electronics.”

WHAT’S NEXT? DISTRIBUTION

WATCH AFICIONADO | 9

PRE-OWNED

“The best multibrand stores will become even stronger”

“I absolutely refuse to get involved in this grey market by another name”

“The distribution models we’ve known for decades, unchanging, are undergoing a revolution. Agents have disappeared off the radar.

Basically, there are three active channels today: brand-owned boutiques, multibrand stores and e-commerce.

For the brands that have a sound network of proprietary boutiques, cutting the number of low-performing multibrand stores is gradually developing into a major policy trend. As a matter of fact, we’re in the process of resizing our network of multibrand retailers to work only with the best in a true partnership spirit. This development is dictated by the market and its players, who have changed enormously. As for ecommerce, that is set to grow. But certainly not to the point where it will make physical stores disappear.

They will remain the ultimate point of connection for the customer.”

“This phenomenon concerns a handful of large, traditional brands first and foremost, those who figure among the most dominant in the watch collection market. At the same time, that allows those brands to exercise greater control over the flows of their own products and over their perceived value. Of course, that’s without mentioning the collateral advantages, such as increasing their existing customer database. But now let’s be honest: 80% of pre-owned watches have never been worn by any customer. It’s a grand bargain sale of new, unsold watches with a 40% discount, which is very damaging to the watch industry. I get phone calls every week and I absolutely refuse to get involved in this grey market by another name.”

OPPORTUNITIES

“Large swathes of China don’t yet know what Swiss mechanical watches are all about” “As regards China, only a part of the Chinese continent has been conquered, because they know about Swiss mechanical watches.

Large swathes of the country don’t yet know what Swiss mechanical watches are all about. The slowdown in China has nothing to do with the fact that Swiss watchmaking has reached everybody and the market is saturated, far from it.

Above all, it is a result of economic and political mechanisms.”

HIGH-END

“The model for the industry has always been a pyramid”

“A GENERAL POLARISATION OF THE MARKET”

“The model for the industry has always been a pyramid, which is how it forged its success and staying power. And that model has to go on. But the responsibility for that rests on the shoulders of groups, who control those segments and have the brands for them. And who today are alarmingly immobile. We have to reinvent the Swatch of the 21st century. Ice Watch have done it, but they’re not Swiss.... We at Bulgari aren’t affected by that, because we’re at the very high end of the market, which is doing fine, and in a jewellery group which underpins that position.”

Jean-Claude Biver, LVMH “The future of the entry-level range will be tough. We have to create new needs and striking innovation, as Swatch did in its time, for example. It’s not a comfortable position to find yourself in today, between the two opposite poles of the smartwatch and the mechanical watch.

And distribution is also increasingly polarised, between multibrands and monobrands, added to which there’s a concentration of the multibrands themselves. So there’s a double polarisation!”

“WE MUST ELIMINATE THE MISTAKES OF THE NEW SWISSNESS LAW” Ronnie Bernheim, Mondaine ENTRY-LEVEL

“Most of the Swiss originated cost is not counted in the law” “Recent years have harmed the lower and middle price category of Swiss watches because of the new Swiss law, which is based on a fundamental misconception. I am in favour of

a solid Swissness law, but without the destructive flaws we needed to adapt to. Today, we cannot count as Swiss content most of the Swiss originated-cost, such as our offices, legal fees, rent and the essential after-sales service. The law does not honour elements which are at the core of ‘Swissness’, such as quality and longterm reliability through an international after-sales programme. Let us correct the framework and we can be more successful again in a world where newcomers from the digital world and start-ups use marketing as their key factor of success.”

OPPORTUNITIES

“Any industry needs volumes to succeed” “I am optimistic for the Swiss watch industry if we can re-adapt the framework of operating in the middle and lower price category, mainly by eliminating the mistakes of the new Swissness law. Any industry needs volumes to succeed. Rolls Royce and Bentley had to be taken over by mass producers in order to

benefit from the know-how gained through competitive and innovative mass production. Research in materials, technology and procedures are essential for the long-term development of high-tech equipment. In the 1970s, Switzerland was already trapped in luxury watches only. Swatch, M-Watch and the like have proved the financial viability of lower-priced products and showed efficient ways of producing and marketing Swiss watches in spite of aggressive low-priced Far Eastern products, while the German and French watch industries collapsed.”

WHAT’S NEXT?

10 | WATCH AFICIONADO

“THE HIGH-END SEGMENT CANNOT EXIST WITHOUT THE REST OF THE INDUSTRY” Andreas Leibundgut, Delma POLARISATION

“Many brands are actually more relevant than ever” “I don’t share this analysis. Over the past years, a lot of brands have experienced substantial growth and have developed greatly to the point that I think they are more relevant in today’s market than they have ever been, both in the highend and more affordable price segments!”

DISTRIBUTION

“Fewer, stronger partnerships” “E-commerce and direct-to-consumer sales will continue to grow as consumers and especially the brands get more comfortable with it. With the growth of these channels, the retail space occupied by brands will be more selective, especially for bigger brands with their own boutiques. Traditional retailers will seek to differentiate themselves with the brands they carry and the experience they offer their customers. Brands and retailers will value fewer, stronger partnerships.”

“COMPLEXITY IS THE NEW NORMAL” Vijesh Rajan, Favre-Leuba POLARISATION

“Technology gives a new meaning to watches” “Three factors are crucial. Technological innovations are giving a new meaning to watches: a few brands lead the market and consumers are gravitating towards them. On the other side, some traditional brands have failed at implementing meaningful innovations, which has led consumers to shy away from them.

Third, oversupply of stocks with problems of discounting etc. has led to a shift in the consumer mix, which has fewer ‘true’ watch enthusiasts. Brands must engage with a new generation of globally connected consumers who have been totally swept up by better efforts from other connected categories.”

DISTRIBUTION

“E-commerce will grow but eventually settle down” “Complexity is the new normal in all parts of the value chain of business, including distribution.

However, traditional distribution

methods will continue to remain lead channels over the next 5-10 years. E-commerce will grow rapidly, undoubtedly. But it will settle down at low double-digit contribution levels in most places.

Consumers still attach importance to the touch and feel of products, to the physical shopping experience, and these are vital aspects which brands must also promote responsibly. Direct-to-consumer channels will similarly grow but plateau at some stage. Retailers too need to enhance the consumer shopping experience, and invest in increasing trust and convenience factors if they want to stay relevant in the scheme of things. Those who do better will grow and consolidate.”

“Global penetration of Swiss watches is still low in many countries.

But brands will have to take a local view of markets and dig deeper to leverage opportunities. This is especially true of Asian markets and lot of other rising economies, where the Swiss tag has a lot of aspirations.

Brands will have to take a more serious view of these ‘low priority’ markets. They will also have to go beyond Swissness and take a look at how their value proposition is more meaningful for end consumers.”

“A new piece of the pie for retailers and brands” “It is a reasonable next step. It is a growing segment within the watch market and neither the brands nor the traditional retailers have previously had a piece of that pie. Thus, I think it’s only logical that brands move in as they like to exercise control over that market and gain access to the consumers they have missed out on so far, while the traditional retailers want to stay relevant with these consumers and want a piece of that growing pie too.”

OPPORTUNITIES

“China is saturated” “The pool of people interested in Swiss watches will not grow endlessly. But there is still great potential ahead in several markets, although not as big as the Chinese market. At the same time, China has been moving from a growth market to a saturated one and as such it will become even more important for brands in China to differentiate, clearly position themselves and engage with consumers.”

HIGH-END

“There will always be a demand for all segments” “The high-end, mid-tier and lowend propositions have always coexisted and will in my opinion continue to co-exist. I do not think that one can exist without the other. One feeds the other and there will always be a demand for higher-end, more exclusive and exquisite timepieces, just as there will be demand for lower priced watches. The question is rather what defines these segments and the products that are active in it.

What do the consumers desire from products in these different segments and where do we, as a brand, want to operate in the future?”

OPPORTUNITIES

“Go beyond Swissness”

PRE-OWNED

HIGH-END

“Don’t abandon a large demographic dividend” “The survival of an industry is a factor of the costs and premiums available. It does not matter which end of the segment is operating.

There is a very large demographic dividend available in operating at the mid- to low-end of the market, which Swiss brands should certainly strengthen. The cost challenge is important but, if modelled correct-

ly, it can pay back attractively. The high-end market will be a timeless one, where consumers will always be looking for something special and price will not be a constraint.

Having said that, ecosystems need to evolve and many new directions start from unrelated industries that end up affecting the watch industry too.”

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“SWISS BRANDS LEFT TOO MUCH SPACE FOR GENERIC WEBSITES” Mario Peserico, Eberhard & Co ENTRY-LEVEL

“Smart watches are a considerable challenge” “Even if we do not operate in a market segment that is affected by the Apple Watch, I think that the producers of Swiss watches sold below 1,000 Swiss francs are facing a considerable challenge. Smart watches in general may not have experienced the fast development that was probably expected at the beginning, but they have certainly gained a market share that belonged to someone else, and numbers that make them the biggest ‘item’ among watches.”

POLARISATION

“Always existed, but more evident today” “I believe that a certain polarisation has always existed, but it’s probably been more evident recently, particularly in the medium-to-high market segment. It is possible that the unprecedented diffusion of information in the last ten years has helped reach new people, to the point that some products tend to

identify the brand, rather than the reverse. This is sometimes the case with our Chrono 4 model for Eberhard. What is sure is that bigger brands have financial resources that allow them to implement communication campaigns that are totally out of reach for independent producers, hence the increase in the visibility gap.”

DISTRIBUTION

“Swiss brands left too much space for generic websites” “The switch to digital channels has been more rapid in the fashion universe than in watchmaking. This has left space for the growth of generic websites that have not helped to enhance the image of watchmaking, presenting all brands and models at the same level, with big discounts and without poetry. For this reason it is important that Swiss producers support their traditional retailers in developing their own e-commerce, so that their expertise and experience are transferred to the digital world. Moreover, recent studies show that the average price of watch sales online is not increasing as expected, and big players are realising that consumers of high-prestige products are not particularly motivated to buy online.”

PRE-OWNED

“A watch is considered a first step towards a better watch” “The change comes from a new attitude towards durable consumer goods. I remember the time when we had to fight to buy pieces that we wanted for our historical collection. Now, a watch is often considered a step towards a new, more expensive timepiece, so it is re-sold more easily. The positive aspect is that this is a new entry door to the universe of Swiss watches for those who cannot afford to pay new prices. It is another way to disseminate watchmaking culture.”

OPPORTUNITIES

“The biggest challenge is the new generation” “It is becoming more and more difficult to open up new territories, there are hardly any left. The best that we can do to increase the pool is to conquer the interest and passion of the new generations, for the sake of our commercial results and of Swiss watchmaking culture.

This is the biggest challenge today. Nevertheless, there are some huge territories (the United States for example), where the population size and average income leave ample room for growth.”

OPPORTUNITIES

“THE SWISS WATCH INDUSTRY IS BECOMING AN OLIGOPOLY – WHETHER WE LIKE IT OR NOT” Dr Frank Müller, The Bridge To Luxury ENTRY-LEVEL

“Pray that Apple doesn’t go round!”

“In the face of the technical advantages of connected watches, the brands able to offer social status, exciting storytelling and emotions will continue to enjoy success. However, branding is expensive and distribution selective. Hence, those who just offer mechanical functionality and design will struggle to survive. The industry needs to pray that Apple does not one day offer an iWatch in a round steel case.”

POLARISATION

“Every crisis strengthens the strongest” “The answer is powerplay. The strong brands have got stronger over the years. Every crisis such as 9/11, Lehman and so on helped them gain market share at the expense of smaller and mostly independent brands. Better access to classical distribution, resources to build up retail (own boutiques) and online, stronger marketing budgets made sure that the powerful brands leveraged access to consumers’ minds and emotions. The polarisation will continue.”

DISTRIBUTION

“Consumers are not looking for self-praise from the brands” “It will still take some time until the industry finds out what the consumer wants: a neutral place of judgement that ennobles watch brands, and not self-praise. That place used to be the traditional watch and jewellery retailer. But it may be too late.

In many mid-sized cities traditional, family-owned and competent retailers have vanished as the brands created their own distribution universe and moved away to the big cit-

“Not a traditional business cycle, a structural crisis” ies. Consumers need to be educated to dare and enjoy luxury in a complex process of sophistication.

Brand boutiques and online platforms will not sufficiently provide for that journey.”

PRE-OWNED

“A single logic: owning the consumer relationship” “First retailing, then online and now pre-owned, all these developments follow the same logic for the brands: owning the consumer relationship, controlling the sales cycle and eventually making more money. The reasons? Changing customers, stronger competition, dividend-hungry owners and ambitious executives in search of sales bonuses.”

“The luxury industry in general and the watch industry in particular are not facing – as many brand owners, CEOs and executives would still like to believe – a downturn of typical business cycles but a structural crisis. The democratisation of luxury, a change in social values around the world, the technical revolution, demography, globalisation and other factors will lead to a barely growing, if not shrinking, consumer base.

There will be no new China – and only those brands who adapt to this new reality fastest will have a chance of suffering less – as the industry will continue to suffer. The big players will be able to cope with painful restructuring processes. However, it will be very tough for independent brands to survive in stagnant and saturated markets. The Swiss watch industry will change dramatically over the next two decades, becoming an oligopoly – whether we like it or not.”

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WHAT’S NEXT?

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“WE ARE ONLY AT THE BEGINNING OF BUSINESS IN CHINA” Julien Tornare, Zenith ENTRY-LEVEL

“Strong competition, but not all clients want a smart watch” “I believe the low-end brands are definitely facing very strong competition with the Apple Watch, but I also believe that there will be a concentration of the strongest players and a decrease of the others. Not all clients want to have a cell phone on their wrist, even if they cannot afford an expensive brand. I am not too concerned, as connectivity will expand to more formats and the watch will be only one of many.

And let’s not forget that a cell phone on your wrist does not differentiate you from your neighbour and also that a smartphone is obsolete when you buy it. A mechanical watch with a soul and emotion is eternal!”

POLARISATION

“It will change again in the near future” “Some models became iconic and mean a lot to the buyers. But there has always been such a phenomenon in the past and things evolve constantly. I believe it will change

again in the near future and other models and brands will also play a primary role.”

DISTRIBUTION

“Some important markets are missing strong retailers” “Mono-brand boutiques are a great tool to build up brand image, awareness and desirability, but I also believe strongly in the retailers’ business model. We don’t sell shirts or shoes, we sell complicated products and many clients enjoy having the neutral advice of a multi-brand retailer when they don’t know what they really want, or they need information on the watches themselves. In a mono-brand boutique you will be told that the brand is the best in the world, of course!

However, some important markets are missing strong and dynamic retailers and that is why some brands decide to go with a boutique. This is a risk. E-commerce will improve, but gradually, as volumes today are still very small for the industry.

Successful sales are often for special limited editions available only online. People going online are also looking for discounts and can end up on unofficial websites where they take the risk of buying a fake or poor-condition timepiece.”

PRE-OWNED

“Good news for our industry” “Pre-owned is good news for our industry and is natural in today’s world where we're all talking about sustainability and second-hand products.

This segment is getting stronger and brands should get ready and organise themselves to facilitate this and offer it as a service to their clients.”

OPPORTUNITIES

“We must not rely only on tourism, but develop locally” “I don’t believe China has been conquered. Maybe from a European point of view. The country is huge and its middle class is growing, offering enormous potential. We are only at the beginning of our China business. Other countries will grow and more clients will emerge. One key is to work on local clientele as well and not only rely on tourism flows, as they represent a big risk when things go less well. Indonesia, Vietnam, India, Latin America and Africa are still to be developed, and let’s not forget that new clients are emerging everywhere as a new generation.”

“THE OBSESSION WITH CHINA IS HARMING THE REST OF THE WATCH MARKET” Andrew Block, Second Time Partners ENTRY-LEVEL

“Too many irrelevant brands” “I actually see a very dim future for the affordable Swiss watch segment, but it is not all attributable to the strength of the Apple Watch.

First, this segment is too crowded with many irrelevant brands.

Second, there has been little innovation or excitement: many of the Swiss brands within this segment are part of luxury groups that show no signs of escaping the internal strategic paralysis that has impacted brand performance globally. I also believe that ‘Swiss’ as a label is a ‘non-factor’ in the consumer mindset within the affordable category. My advice: fewer brands, more innovation, embrace

digital as the primary distribution channel and start understanding the market demographics for this segment and how to approach them.”

POLARISATION

“Auction vs. grey market”

“The simple explanation is that the phenomenon is limited to four brands: Rolex, Patek Philippe, Audemars Piguet and Richard Mille. All have been active players in the global auction market and have seen their watches either maintain or increase their value. They have operated directly within the auction market, helping rising prices. This strategy has obviously worked. The other (more complex) explanation is that these brands have mostly refrained from using the grey market as a channel to eliminate inventory

issues. Those that have been active on the grey market have seen their brand value erode dramatically.”

DISTRIBUTION

“Look at the consumer studies” “Distribution of Swiss watches has been a strategic rollercoaster for over ten years. But studies have shown the following: consumers want choice when selecting a watch, they want to see at least three brands before deciding what to buy and half of them are unsure of what they want when they enter a store.

So there is a place for multi-brand retailers, especially as they hold long term relationships with consumers. They can coexist next to mono-brand boutiques, which play a role in building brand awareness.

Unfortunately, many brands have

exited multi-brand stores to support their own direct-to-consumer strategy, which they still know so little about. E-commerce has also a huge role to play in the distribution mix.”

PRE-OWNED

“A viable new channel for watch brands” “Pre-owned owes its recent popularity to the lack of strategic focus by the brands in their distribution. Retailers have embraced pre-owned because they have lost brands and need to satisfy consumer demand. Brands have only now begun to focus on the secondary market as a viable channel, which they previously totally ignored. Pre-owned has proven to be a market that new and young consumers have embraced and specialised digital platforms have done a good job marketing this category.”

OPPORTUNITIES

“Focus on the United States and digital” “The Swiss watch industry has focused on China as the next emerging market for well over the past two decades. It has affected watch brand strategy in ways that have not always proven to be beneficial to selling watches to the rest of the world, with less allocation to other countries and reduced margins, as China has always had a lower margin structure from the rest of the world and less marketing support. Where is the next market opportunity? Focus on the United States and digital! The penetration of fine watches in the USA is still minuscule. Yet for the longest period of time, it has been looked upon as ignorant when it comes to luxury and too expensive.

Digital is also a huge opportunity.”

WHAT’S NEXT?

WATCH AFICIONADO | 15

“BRANDS ARE STARTING TO UNDERSTAND THE MECHANICS OF E-COMMERCE” Stéphane Waser, Maurice Lacroix ENTRY-LEVEL

“The race for market share with Apple is not achievable” “It depends how you segment the offer you call ‘affordable’. The price points in competition with Apple watches are very competitive: the race for market share is not achievable, as the Apple offer is quite complete. At higher price points, the consumer does not need wearables or smartwatches and we enter the category of luxury goods and accessories. Craftsmanship, heritage, de-

sign, exclusivity and quality play a role. The consumer need is different and it’s toward this that we need to cater our product offering.”

POLARISATION

non-functional design elements.

The brands that have recognised this trend are the most popular ones today.”

DISTRIBUTION

“The cycles are slow “Transparency and but the trend is clear” accessibility are key” “Watches, just like fashion, rely on trends. The cycles are slower but the trends for luxury watches are clear. Do you remember the end of the 1990s, when fully integrated steel watches with straps were so hyped? Today, the trend is for designs from the 1990s, integrated bracelet and cases, case and bezel shapes with straight lines, and

“Digitisation and improved logistics are creating a more connected and faster world. But we have new tools to manage it. For a retailer today, it is essential to operate a digital business alongside brick-and-mortar in order to increase customer satisfaction. Transparency and accessibility are key. I have seen retailers successfully managing their set-

up while running offline and online businesses simultaneously.”

PRE-OWNED

portance of being to prevent uncontrolled brand activities through nonauthorised sales platforms.”

“Watch brands did not understand the potential at first”

“We are in the Asian century”

“When e-commerce started a few years ago, watch brands did not understand the potential and the logic of digital. Some very smart people have seen these gaps and opportunities faster than the industry. The recent development of brands operating in the pre-owned market is a sign that they are starting to understand the mechanics of online and the im-

“China is not the only potential source of growth for Swiss watches. Emerging markets like India or Russia are very interesting markets.

However, it is believed that by 2050, 50% of world consumption will come from Asia – the so-called ‘Asian century’. Even though consumption of luxury watches in China has faltered in recent years, it will continue to deliver growth in the future.”

OPPORTUNITIES

“EVERY WEEK, I SEE HIGH-END WATCH OWNERS SWITCHING TO APPLE WATCHES” Max Büsser, MB&F

DISTRIBUTION

“If your team is ENTRY-LEVEL really great, you are “I would be terrified” going to survive” “If I was the CEO of an affordable watch brand, I would be terrified. But even high-end brand managers should be seriously scared.

Every week, I see high-end watch owners switching to Apple watches. Convenience is trumping all the rest. Let’s face it, our industry is mostly responsible for that. By mass-producing what used to be high-end artisanship, by focusing on status instead of education, by creating boring look-alike products, by ‘dumbing-down’ the buyers, the industry has reduced the emotional attachment it is possible to have for a mechanical watch. One day, it could actually be too late.”

POLARISATION

“There is no reason watch distribution should not follow a variation of Darwin’s theory i.e. ‘you either bring value or you disappear’.

Certain retailers who keep on thinking that location and carrying the most sellable brands are their main assets may be replaced by brandoperated e-commerce. They will be saved by having a great team on the shop floor, who not only love watchmaking and are super knowledgeable but actually can inspire, engage and help you curate your choices.

Retailers need their own variation of Apple’s genius bar where everyone can enjoy talking about the watchmaking world with people who share the same interests or who can bring them to the next level.”

“When status-hungry PRE-OWNED clients meet the gaso- “I don’t understand line of social media” why it did not “It probably all started when the happen before” fire of status-hungry clients met the gasoline of social media. Add a dose of greedy speculators whose interest in watchmaking starts and ends with money, and you have the recipe for one hell of a bonfire.”

“I actually do not understand why it did not happen before. There is no reason the watch world should not follow the example of the car industry. Caring for your second-

hand market is just great long-term thinking and investment. Until very recently, buying a pre-owned watch on the unregulated secondary market was one hair-raising very high-risk experience. I once bought a preowned Rolex from a ‘reputed’ eBay merchant. After inspection, the dial was not original (even though the vendor swore it was) but I knew it as that reference had never come with that dial.

What I did not realise (and could not detect on photos) was that the case back was not from that reference, neither was the crown, and the crown stem was, well… a piece of metal but not from a watch.

And… the glass was not a watch glass, but a piece of plexi which had been machined after market and glued on!”

OPPORTUNITIES

“The pool of new clients can be multiplied by ten” “The pool of new clients can be multiplied by ten – and does not need new geographical boundaries.

It needs to rethink the reasons mechanical watchmaking exists and why it touched people’s hearts thirty years ago (when quartz had decimated our industry). Let’s talk soul, creativity, beauty, humanity and artisanship.”

WHAT’S NEXT?

16 | WATCH AFICIONADO

“YOU CREATE A COMMUNITY OF BELIEVERS, NOT JUST BUYERS” Olivier R. Müller, LuxeConsult ENTRY-LEVEL

“The war of the connected watches has been lost” “To put it bluntly, I would say that the war of the connected watches was lost by the Swiss watch industry five years ago. There are a few minor initiatives (in terms of volumes) which show that we could have competed, and I always like to mention Alpina and Frédérique Constant. Apple dominates a market in which the object – the watch – is not the critical factor. It is the data acquired from the contented and largely captive users of the ecosystem which is making the difference.

Apple and Samsung aren't competing with watches, but with connected devices. We need to recalibrate the whole business model in terms of price positioning, margins and communication channels. Swatch is dead, let’s reinvent the new Swatch!”

POLARISATION

DISTRIBUTION

“A few brands create a community of believers, not only buyers”

“The best retailers will be forced to open mono-brand boutiques”

“Why do Patek Philippe and Audemars Piguet perform so well currently with very few but very iconic watches? Because there is strong brand equity and a product which over time has become an absolute icon by not changing. I think the brand which is best in class for doing the same thing for more than 50 years is Rolex. Once you have gained a strong and positive brand awareness, you create a community of believers, not just buyers. The clients of luxury goods want to be reassured that the brand is giving them the status they want to show. Louis Vuitton and Hermès are referential for bags, so are Patek Philippe and Audemars Piguet for high-end watches.”

“The mix of sales and communication channels depends of course on the size of the brand. If you are small, going directly to your end consumer will be the most efficient way to communicate and sell.

It rewards you with higher margins, brand equity control and, last but not least, data on your clients.

Multi-brand retailers are not dead, but many will disappear, and the remaining ones will have mainly to concentrate on the B brands. A few – the AAA locations - will face the decision of operating mono-brand boutiques – mostly as joint ventures with the brand – or losing the coveted A brands. Successful brands will use a network of showrooms, mono-brand boutiques and e-commerce. The days of powerful retailers dictating the rules are gone!”

PRE-OWNED

“Preserving your brand equity in the long run” “Let’s face the reality: the big online players were playing an easy game – and still are with some weaker brands – by moving goods, which you can also qualify as grey market.

Interestingly, the first initiatives to regain control over the sales of secondhand watches came not from the big brands, but from niche players such as Greubel Forsey, F.P. Journe or MB&F who realised that controlling the CPO (certified pre-owned) preserves your brand equity in the long run. The most coherent approach was recently made by Audemars Piguet who opened up CPO boutiques, thus making sure that the watches resold have been controlled and that no counterfeits are sold.

Major retailers such as Bucherer have also finally understood that, as in the car business, people won’t keep on buying new watches if they can’t resell their old ones.“ OPPORTUNITIES

“We can still develop a lot of business around the world” “Even though there won’t be a ‘new’ China any time soon, we can still develop a lot of business around the

world. Keep in mind that the Swiss watch industry controls only 2% of volumes (est. for 2019, 20 million watches on 1 billion units sold worldwide), but 53% in value, as 95% of the watches above USD 1,000 retail are Swiss made! We are too niche and we have abandoned the lower price segments. This is a major and potentially lethal mistake! We have lost more than 10 million watches since 2000 and that figure could be even worse if mechanical watches hadn’t compensated for some of the losses made by quartz watches.”

HIGH-END

“Only volumes can justify the R&D and the manufacturing capacities” “Nurturing a whole industry doesn’t work anywhere! If you look at the car industry, even though BMW is a premium brand they keep selling at an accessible price range with the 1 and 2 series. Porsche as a luxury brand has never given up the premium level where they sell to aspirational clients… the clients of the future for the brand! You can only compete on a global basis if you make sure that you occupy all the price segments, because only volumes can justify the R&D and manufacturing capacity. A pyramid whose basement becomes thinner and thinner will collapse one day!”

“THE SMART WATCH IS BECOMING A HEALTH MONITORING DEVICE” René Weber, Vontobel ENTRY-LEVEL

“We will continue to see a decline” “As we have already seen in recent quarters, the low-end will continue to see a decline but the mid-end is impacted, especially quartz watches. Smartwatches, like the Apple watch, are increasingly turning into health monitoring devices and therefore offer an additional benefit, which is not the case for Swiss watches in the affordable sector.”

POLARISATION

“Limited production, but also longterm focus” “One of the main reasons for this polarisation is the limited production of brands like Patek Philippe (62,000 units per year) and Audemars Piguet (40,000 units) or even Richard Mille

(4,600 units). But even the largest Swiss watch brand, Rolex, belongs to the category of ‘sought-after’ watches, despite its high production volume (est. 0.9mn). Its success is also explained by marketing and its very long-term focus.”

DISTRIBUTION

“Large watch retailers will become even more important” “There is a big difference between brands and their distribution strategy; the no. 1 (Rolex) and the no.

4 brand (Patek Philippe) focus on selective watch retailers, whereas other brands have a mix of own stores and third-party stores.

In the watch retailing industry, we have seen a strong consolidation with Bucherer becoming the no. 1 in the world through its acquisition of Tourneau in the USA, but also the UK retailer Watches of Switzerland expanding through acquisitions. Brands will contin-

ue to reduce the number of points of sale, but the large watch retailers will become even more important in the future as brands will focus more on professional retailers. E-commerce will grow but it will continue to be a small part of the high-end watch industry. After having seen a strong expansion in mono-brand stores, we do not expect many more openings as most brands now have a global network.”

OPPORTUNITIES

“A big problem remains countries with high import taxes” “We believe there is still some potential in the world, but of course it cannot be compared to the Chinese impact we have seen in the last few years. However, there are countries which have a very small exposure to Swiss watches, which are also impacted by luxury and import taxes.

For example, India makes up just 0.7% of Swiss watch exports, com-

pared to 8.1% for Mainland China or even 1.3% for Thailand. The Philippines and Indonesia remain also very small. In Latin America, we see high import duties in Brazil and Argentina; for example, Brazil represents just 0.1% of Swiss watch exports, whereas Mexico in comparison has 1%. A change in the tax regulation is necessary for these markets to get a higher share.”

HIGH-END

“It already accounts for 89% of the Swiss watch industry” “We believe that brands like Rolex, Omega, Cartier and Patek Philippe will continue to be a “product” which people are dreaming about.

The Swiss watch industry will continue to innovate and therefore we also expect further growth for the Swiss watch industry. In terms of value, the upper- and high-end segment (export value CHF >500) already accounts for 89% of the total Swiss watch industry!”

Xavier de Roquemaurel

WHAT’S NEXT?

WATCH AFICIONADO | 17

“AFTER-SALES SERVICE IS COMPLETELY IGNORED IN CURRENT THINKING” Christophe Musy, Mauron Musy ENTRY-LEVEL

“Connectivity isn’t going to stay on wrists for long” “It is true that that this segment has been severely affected, especially by the advent of smartwatches. Yet these smart gadgets aren’t likely to stay on wrists for long, they’ll migrate closer to the brain. So I see a threat for the moment, but only for a limited time. Let’s hope the major groups in this segment will be able to resist long enough by introducing innovative products.”

DISTRIBUTION

“The change was caused by the brands themselves.”

“The change was caused by the brands themselves. In the short term, the different means of distribution are having to live together, but in a relatively near future, the neighbourhood retail trade is going to have to reinvent itself. It has a huge card to play, because after-

“SWISS PEOPLE SHOULD BE OUR BEST AMBASSADORS, BUT SO MANY KNOW NOTHING ABOUT WATCHES!” Yvan Arpa, Artya

sales service is clearly being sidelined at the moment.”

ENTRY-LEVEL

PRE-OWNED

“More and more older people are interested in smartwatches”

“No longer the same fondness for objects as before”

“Of course the under-1,000 franc price bracket is going to suffer even more as a result of the development of smartwatches: since they branched into the health sector they not only interest geeks, young people and early adopters, but older people too, for whom they offer a real bonus. Moreover, you can’t just talk about the Apple Watch; I’ve worked for Samsung, for example: the players are many, the smartwatch market is highly competitive and Apple isn’t the leader in every country. To resist, you need to give a high added value alternative to what the smartwatches are offering today. For instance, buyers appreciate niche concepts which are unique.”

“The new generations don’t have the same fondness for objects. So they’re delighted if they can pay a much lower price for a watch and sell it again on a whim. That was unthinkable for watch buyers a few decades ago.”

OPPORTUNITIES

“Increasingly tough to sell high volumes” “For high-volume brands, it’s going to be very tough. They can’t go on growing. That’s why we’ve gone for a business model with limited annual production of watches. The Swiss watch industry needs to place greater emphasis on quality watches, whereas today, the top range is defined ultimately by the marketing budget first and foremost. A new ecosystem to explore is that of sustainable development in relation to future generations, with locally sourced components.”

POLARISATION

“People sometimes behave like sheep”

“DIGITAL NATIVES AND CROWDFUNDING ARE OPENING UP PROMISING PATHS” Thierry Huron, Mercury Project ENTRY-LEVEL

“The 8.5 million loss in volume will never be made good” “The 8.5 million watches lost from the entry-level range of the Swiss watch industry over the past five years as well as non-Swiss fashion watch volumes will never be made good. Among other things, this slide is a result of the irresistible rise of smartwatches, but also of the Swiss watch industry’s delay in embracing online sales. Innovations in functionality (hybrid watches) and materials (watches in recycled plastic), as well as distribution (online sales,

Kickstarter and other crowdfunding sites, ‘affluendors’) are all sources of inspiration for further, much-needed innovation in this segment, where the shake-up isn’t over yet.”

POLARISATION

“Social recognition or economic turbulence” “The historic success of watchmaking is due, at the very most, to 5 to 8 brands representing virtually 60% of global sales. With their strong identity and ability to play on the scarcity of their offering, they have everything it takes to accomplish their strategy. As vectors of social recognition and prestige in numerous countries, they will escape the turbulence affecting hundreds of other brands.”

DISTRIBUTION

“Recover the intermediaries’ profits and databases” “The most powerful watch brands want to deal directly with the end customer in a dynamic of profitability and image control. That enables them to recover their intermediaries’ profits, gain far easier access to their customer data and exert greater control over their supply chain.

The consolidation currently in progress is also working in favour of the most experienced retailers in the best geographical locations. The latter work with the most powerful brands, either bydenegotiating prefFaubourg Cracovie King integratedinchronograph erential5 Hz locations their stores (Rolex, Patek Philippe), or by man-

“People sometimes behave like sheep and don’t dare to stand out from the crowd, thinking they will be better accepted if they wear and behave exactly the same as their ‘tribe’, until it is too late and they regret they did not live their dreams, passions and love. On the other

aging proprietary stores (Omega, Breitling, Audemars Piguet). The current retailers in the entry-level range are facing fierce competition from networks external to the watchmaker/jeweller ecosystem. As for the future of distributors in difficulty, that lies in partnerships with lesser-known brands wishing to add a conventional distribution network to their original online network.”

OPPORTUNITIES

“Duty-free offers the most favourable prospects” “Just one market seems to be offering a favourable outlook. That’s the duty-free and travel retail market, which is showing promising poten-

hand, for others, money is so important that they think that buying a piece that is highly sought-after will be easier to sell later, but everything changes.”

DISTRIBUTION

“Stop being so arrogant or snobby in sales” “The process of evolution is accelerating in every domain, so of course also in distribution. The old business models are over. I think that the new keywords are authenticity, creativity, honesty and value: if you offer those, you can sell in a store, online or directly to customers and offer a true shopping experience, rather than doing it in an arrogant or snobby way.”

OPPORTUNITIES

“There is still so much to do in after-sales service” “We must think quality and not only quantity. There is still so much to do in terms of after-sales service: when I hear the deadlines and prices of some of my competitors, it is unbelievable. We must educate the planet about our industry and it should begin in the Swiss schools. So many Swiss don’t understand a thing about watches and they should be our best ambassadors.”

tial in the medium term, especially in Asia, owing to the growing number of Chinese and Indian travellers. But new and innovative paths are opening up elsewhere, driven by the digital natives. There are powerful examples in the entry-level watch range, such as MVMT in the United States and Paul Valentine in Germany (online pure players), or in crowdfunding sites (more than 240 watch brands were successfully launched on Kickstarter in 2018).”

WHAT’S NEXT?

18 | WATCH AFICIONADO

“SINCE THE POOL OF CUSTOMERS IS NOT EXPANDING, EVERYBODY WANTS TO GET INTO DIRECT SELLING” Thomas Baillod, Mercari Academy ENTRY-LEVEL

“The mid-range customer is less well-off ” “In the entry-level range, there’s a phenomenon of consumers who are going to move on from smartwatches to mechanical watches. But the effect on the bottom line will be nil, because even more are going to be replacing their Swiss watch with a smartwatch. Which explains why quartz is receding. There’s also an economic phenomenon, with an increase in inequality: a 500-dollar watch is still very expensive at the global level. The mid-range customer is less well-off, they no longer have the means to buy a watch in the $500-$2,000 range, which is suffering. The gap is widening. Moreover, the 60%-Swiss-made standard has had a direct impact on quartz brands without much added value. They used to offset that with the movement. Today, they’re having to raise their prices. On the other hand, the ‘false’ Swiss-made watch costing less than 100 francs will survive.”

POLARISATION

DISTRIBUTION

“A brand rationale rather than a financial one”

“Direct-to-consumer sales are moving upmarket”

“The industry is very polarised, with four brands leading the dance: Rolex, Patek Philippe, Audemars Piguet and Richard Mille. Yet they have very different business models when it comes to distribution: the first two work exclusively on a wholesale basis, while the last two are transitioning towards a wholly retail model. At the same time, they share fundamentally identical traits: independence, a certain vision and freedom of decision applied over the long term. They’ve adopted a brand rationale rather than a financial one. In stock groups answerable to shareholders, collectors are well aware of the fact that they lack identity and soul.”

“As is often the case, the groundswell of ‘direct-to-consumer’ sales first began in the entry-level range, with Daniel Wellington and brands launched on Kickstarter. This phenomenon is slowly moving up through the ranges. In any case, the distribution networks are saturated, so a new brand is almost automatically going to head towards direct selling. Today, some distributors have just abandoned the entry-level segment, because everything is available over the internet.

For those brands, the savings made by the ‘direct-to-consumer’ model allow them to do more marketing.

That has also sown huge doubts in consumers’ minds: ‘Why should I pay so much for a watch?’

“A business always sets out to make profits by the shortest route. But all romanticism aside, watchmaking is still business: people don’t count for much. And today, where distribution is concerned the shortest route is online sales, especially if a brand already has name recognition. A brand will achieve more growth by selling directly online than it can by selling to China or Hong Kong today.”

ENTRY-LEVEL

“Smart is a gateway for mechanical watch purchases” “Advertising the first Apple Watch as a luxury device was broadly considered a failure. Redefining it as a health and fitness device made it a success, finally. However, I am not concerned about the mechanical watch industry. The latest US surveys show that during the rise of the smartwatches, the overall number of people owning a wristwatch rose by 25% within only 5 years.

We assume that the smartwatch will make people want a real watch, rather than replacing it long-term.

So we consider the smartwatch as a gateway for future mechanical watch purchases.”

POLARISATION

“Family-owned brands vs. groupowned-brands” “The family-owned brands, namely Rolex, Patek Philippe and Audemars Piguet, follow a very long-term strategy in making their brand as desirable as possible. While the demand for their iconic sport models is reaching new records again and again (the search volume on Chrono24 for the Patek Philippe Nautilus increased 40% in 2019), the production volume cannot be increased fast enough. That obviously drives prices up, e.g. the Rolex GMT Master II ‘Pepsi’ is sold at 100% over official retail price on our marketplace.

“The group-owned brands act differently. As a publicly listed entity, short-term revenues are much more important for them, so they tend to sell as much as they can. But we do

see some positive signals here as well.

Some groups adjusted their bonus schemes for sales and key account managers so they stopped flooding dealers’ stores with unsellable goods.

Parallel market prices are much higher now than a few years ago and we think that this is really healthy for the entire industry. Many watches are trading on Chrono24 above par now.”

DISTRIBUTION

“Each of the three channels will take a third of the market” “Historically, traditional traders have accounted for the lion's share of the business. Today, luxury watch customers have much more diverse needs: some prefer to buy online, some prefer multi-brand stores and others want to indulge into a brand’s very own experience. Some custom-

OPPORTUNITIES

“We need to be less individualistic, the “That’s signing the watch industry has a death warrant of selective distribution” global battle to fight” PRE-OWNED

“The largest suppliers to the grey market are the brands themselves.

And they instigated the crime by forcing their retailers to take more stock. The latter had to expand their customer base via the internet and by using the catch-all term ‘pre-owned’. A large part of the preowned market is liquidation in disguise: it’s a term that encompasses a large number of watches that come straight out of the factory and so can be sold without damaging image. But beyond the discount, there’s also a whole, very lucrative market to be developed, because via the pre-owned market retailers have access to products

“SOME GROUPS ADJUST BONUS SCHEMES SO THAT MANAGERS STOP FLOODING DEALERS” Tim Stracke, Chrono24

they don’t have in their boutiques.

That’s signing the death warrant of selective distribution. Today you can see more Rolex models in the windows of certain non-licensed retailers than in the licensed ones.

Also, the difference between price (displayed in-store) and value (the actual price a consumer is willing to pay) is now plain to see. Chrono 24 and WatchBox have become the Standard and Poor’s of the industry. Today, the curtains have been drawn back and the king is naked!”

ers like to go into the luxurious ambience of a high street jeweller, others are deterred by the security sluice and prefer to search for the right watch on their smartphone while on the move. In the medium term, we assume that all three channels will survive while attracting around 1/3 of total revenue each.”

PRE-OWNED

“Brands realise how hard it is to buy and sell pre-owned” “There are many reasons why people prefer to buy pre-owned: new releases are becoming more and more expensive, watches can last a long time and there are more and more limited or discontinued editions.

The epic draught of Rolex, Patek Philippe and Audemars Piguet models was certainly also a main driv-

“The current problem is that if the battle to win wrist share and extend the consumer catchment area is going to be global but profitable for everybody, every brand will be fighting for its profit margins in the next quarter. I often use this metaphor for the watch industry: the ice sheet is melting, but every bear tells itself it will survive if the neighbouring bear dies and it gets its fish! The profit equation is margin multiplied by quantity. But the plate isn’t getting any bigger, just the opposite, volumes are falling: 2.2 million fewer watches since the start of the year.

As a result, the brands are focusing on increasing their profit margins through direct selling.”

er behind the strong interest in preowned. The brands have, of course, acknowledged the trend and most have jumped on the bandwagon. But, besides Richemont’s smart acquisition of Watchfinder we have not seen nearly as much about that category as we have heard chatter about it. Some brands have probably realised how hard it is to buy and sell pre-owned.”

OPPORTUNITIES

“So much market potential with CPO” “Many observers see the CPO market as the ‘New China’. We estimate the annual trade volume with used watches at approximately 17 billion euros. However, the potential of the ‘undiscovered treasures’ still slumbering in drawers or attics is even greater: the value of these watches is estimated at around 250 billion euros. So there is still a lot of market potential here. We are also following the sales figures of smartwatches with interest. This is a great opportunity to inspire people who have decided in favour of a smartwatch as a first step, perhaps as a next step also considering a high-quality mechanical watch.”

WHAT’S NEXT?

WATCH AFICIONADO | 19

“IT’S NOT ONLY THE APPLE WATCH: THE IPHONE IS A TOUGH COMPETITOR WHEN TARGETING MILLENNIALS” Georges Brunet, ZRC ENTRY-LEVEL

DISTRIBUTION

POLARISATION

“Focus on Millennials “Few companies who already own are really doing a smartwatch” well, a lot are in survival mode” “I consider it is a good thing that Apple, Samsung and Huawei are developing watches since they are targeting Millennials. The youngest generations are not used to wearing watches, which could endanger the global industry eventually. On our side, we need to focus on their needs when they reach their midthirties or forties and start looking for a mechanical watch. A Swiss mechanical watch is not a fashion product nor a technological one.

It is a jewel. The challenge for the whole industry is to develop new communities of fans: if each brands wants to keep the whole cake for itself, this behaviour will be destructive in terms of advertising, product development, after-sales service and logistics for everyone.”

“This phenomenon is not unusual. Few companies are really doing well and a lot of companies are struggling to survive. In this situation, some think it is best to ‘follow’ the leading brands to make sure they are going to keep the sales figures up. It is a common reaction when crisis arrives. But leading brands are getting stronger and ramping up their advertising presence, while weaker brands rein in their expenses and product development to focus on a ‘survival mode’. Of course, in the short term, it might be profitable, but in the long term it is destructive for the brand image and ultimately it will certainly create more identity problems than solutions.”

PRE-OWNED

“Above a 2,500 euros investment, you still talk to a human”

“It's like a powerful second-hand advertising method”

“This is a big question! We are witnessing the emergence of huge distribution groups, following the post-crisis concentration. I believe that the watch industry is increasingly dividing into three main categories: everyday consumption, premium and high-end watches. Big brands are now taking care of their own distribution, ‘eating’ retail margins to promote and sustain their sales levels. Retailers should consider more sustainable brands with history and originality, and focus on niche markets. Very few brands are really succeeding online, except on the US and Chinese markets. So I believe that above a 2,500 euros investment, consumers still need to talk to retailers and feel the watch first. The problem is that in the past 20 years, at least 25% of retailers have disappeared in Europe and in the USA…”

“It all has to do with price! It is an easier way to start collecting watches. Big brands have to sell hundreds of thousands of units per year, it is not that easy. So controlling preowned watches helps as well as raising brand awareness and presence.

It is like ‘second-hand advertising’ if I might say so. More people are willing to wear your products and if they cannot afford it, they may go for a pre-owned model. Increasing demand and maintaining a higher pre-owned retail value: strategically, it is quite smart. For example at ZRC, a MN64 model dating from 1964 was selling at 400 euros five years ago. Today, you need to spend more than 6,000 euros to acquire a model in good running order. It means that our brand value has multiplied by 15 in five years and since not too many are still available on the market, this value

is actually stable. Controlling the pre-owned market value is a key to increasing brand demand.”

OPPORTUNITIES

“Easier today for independent brands to expand” “The most powerful brands keep demand higher than supply. Very few brands are able to do it. In fact, many brands have faced shrinking sales in the past five years and since the global economy is not booming, it is becoming hard for them to maintain volumes and hit their commercial targets, with the financial pressure they are facing. Independent brands like us have more room and freedom to expand: we can easily double our quantities for the coming years, since we just re-started. The solution is to succeed in convincing millennials to start purchasing Swiss watches, although they are now focused on the new iPhone 11, which is a super hard contender.”

“ALL PRODUCTS SOLD ON IMAGE ARE RAPIDLY DEVELOPING PRE-OWNED” Fred Levin, Troverie ENTRY-LEVEL

“Historical buyers vs. new connected owners” “Below $400, we will continue to see a rapid and consistent decline, outside of the connected segment.

Beyond that, the situation should remain stable, as the decline of the historically older buyer should be balanced by connected watch owners who are dabbling in image-enhancing first Swiss watch purchases.”

POLARISATION

“Endless new players keep entering the industry” “The polarisation is due to a combination of factors. First, with negligible barriers to enter the category, we will continue to see endless new players with new models – and few of these will have serious intentions,

plans or resources. Second, soughtafter models are driven by brand equity, product design and features, as well as marketing, shifting supply beyond natural demand. Third, in most companies, leaders are most concerned about being promoted or keeping their jobs: critical decisions are often made based on what is the safest path and not what is in the best interests of the brand. Finally, the global pricing system will continue to fuel polarisation.”

DISTRIBUTION

“Jewellers help build success over decades, not months” “I believe that for the next 50 years, independent jewellers will continue to be an important element.

Leading brands will have everything to say about this: the top 5 brands (with Rolex leading the way) represent well over half of the market by value and I see them recognising the cost-effectiveness of jewellers, for building sustainable businesses and brands over decades (and not months or years).”

PRE-OWNED

“Disproportionate because of the nature of this product” “Technology and global communications have created liquidity on the Swiss watch market to unlock the value of pre-owned goods. This development will continue to fuel the segment. All products that are sold on image are rapidly developing pre-owned categories. This has and will continue to impact the watch segments disproportionately because of the high value and high portability of the product.”

WHAT’S NEXT?

20 | WATCH AFICIONADO

Pre-owned – it’s been a long time coming, but now it’s here Nothing will ever be the same again. Long confined to the shadier corners of the digital grey market, fed by oversupply, short-term greed and brand managers’ bonus schemes, the “used” watch now has a new, more elegant name: pre-owned. Never mind if, more often than not, it’s actually “never worn”. Boosted by online sales, the secondary market has now joined the primary market, with established brands and retailers giving it a boost of legitimacy with their own services and certifications.

In the watch industry, the “fusion” between the primary and the secondary market is well under way. If you need proof, the selling price of new watches is increasingly determined by the resale price. And non-authorised online sales platforms have become references for establishing the “real” value of a watch. To find out the current rating of a brand, many turn to the websites of pre-owned giants WatchBox or Chrono24.

“Google likes what the user likes.

And many users want to know the price of watches, first and foremost,” says Tim Stracke, co-CEO of Chrono24, the leading online sales platform, which recorded transactions worth 1.3 billion euros last year. The manager estimates trade volumes for pre-owned at €15 billion per year. In comparison, the value of the worldwide market for new watches, at retail prices, is approximately €37 billion per year.

“Consumers are empowered by social networks and digital devices,

and since they are no longer bound to a store’s hours of operation, they dictate how and when they want to interact with a brand,” says Danny Govberg, the founder of WatchBox. The heir to a prestigious jewellery firm from Philadelphia, founded more than a century ago, he has completely reinvented his business around the pre-owned market.

Discounts and unicorns: both factors of growth There is no official estimate of the potential value of pre-owned, but the figure could well be astronomical. There are many reasons for the emergence of Certified Pre-Owned (CPO), but you first have to start with the object itself – the mechanical watch, a particularly durable and tradable item. It’s actually a wonder that the pre-owned mar-

Bucherer store in Zurich, pre-owned corner

ket did not rise more rapidly. “Rolex has about $8 billion dollars a year in new watch sales. That means, just in the last ten years, there are $80 billion dollars in pre-owned watches out there,” points out Paul Altieri, CEO of Bob’s Watches, a leading American platform for sales of preowned Rolex. “Of course, not all these timepieces are for sale. But the brand has been around for decades.”

The emergence of online sales has first and foremost benefited second-hand watches (and counterfeits), not new watches. Two opposite phenomena seem to have taken the secondary market to new heights: on the one hand, customers are attracted by discounts on some models, while others hope to invest in watches whose prices are skyrocketing.

More broadly, the emergence of “true” watch collectors, a community that first began to talk directly to each other on forums, is making a major contribution to the re-evaluation of timepieces from the past, and to the growth of watch culture in general. Another striking element is the appeal of vintage mechanical watches to younger generations.

ing has started for this segment.

A strong signal of the changing face of pre-owned happened when luxury giant Richemont bought British secondary platform Watchfinder.

Another came when the world’s leading retailer Bucherer purchased American watch chain Tourneau, a specialist in certified pre-owned.

A third was when pre-owned giant WatchBox set up an office in Switzerland. Established retailers like London Jewelers or Les Ambassadeurs have cemented alliances with second-hand specialists such as Crown & Caliber and WatchBox. More recently, Breitling also partnered with Crown & Caliber to launch a trade-in programme. And an alliance was announced in the Middle East between leading retailer Ahmed Seddiqi & Sons and WatchBox. In the current reconfiguration, a new question emerges: who will ultimately be the main player in the pre-owned market? Third-party platforms, retailers or the brands themselves?

Organising a digital jungle

A new keyword in this structure is the widespread use of the concept of “certified” pre-owned (CPO), which is meant to provide assurances to consumers still wary of buying expensive items used and online. Even Amazon has introduced a “certified pre-owned” section on its platform. Paul Altieri of Bob’s Watches is sceptical about this new wave of certification: “A true certified pre-

However, the secondary market is a jungle in which true vintage, pre-owned and never-worn coexist. Brands want to regain control of this jungle, which is also an interesting channel for unsold timepieces. A new phase of restructur-

What does “certified” actually mean?

owned product can only be offered by the manufacturer of the product, or from an independent provider who is established and a recognised authority.” Just like the word “pre-owned” itself, the label “certified” is often in a grey zone.

In an effort to bring more clarity and transparency, some brands, like Omega most recently, have released “certification of authenticity” programmes.

In establishing pre-owned practices that are closer to the “normal” procedure in the world of Swiss watches, one traditional actor is now playing a big role. Bucherer, the largest global watch retailer, has opened a new dedicated service, beginning with its boutiques in Geneva and Zurich, soon to be extended to the German and British markets. It also has a dedicated e-commerce platform, and already conducts preowned operations through Tourneau in the United States.

“We have global ambitions. After we acquired Tourneau in January 2018, we learned a lot of important operative details for the Certified Pre-Owned business,” says Odilo Lamprecht, Head CPO Europe at Bucherer. “That has enabled us to launch a highly mature product onto the European market now. Our experience with Tourneau has also shown us that customers appreciate the fact that the Certified Pre-Owned offering is integrated in our existing boutiques. It’s all about convenience for our customers.”

In thinking about the future of the watch industry, expect “pre-owned” to change notions of how, when and why we buy and sell timepieces.

WHAT’S NEXT?

WATCH AFICIONADO | 21

“WE ARE READY TO REVOLUTIONISE THE PRE-OWNED MARKET” Odilo Lamprecht, Head CPO Europe, Bucherer

boost our sales of new watches, because customers may trade in their own watch for a new model.

What triggered your decision to enter the pre-owned market?

However, the competition is already tough on this segment…

More and more people are interested in beautiful watches, and vintage models with a history are especially popular. There is rapidly growing demand. We have been keeping an eye on those developments for a long time. As watch experts, we understand that buying a pre-owned watch often comes with uncertainties. Our Certified Pre-Owned concept aims to give watch enthusiasts an entirely new platform and redefine the pre-owned watch business.

There are plenty of companies in the market. But many of them are startups that rely primarily on online sales. Most sellers do not even have an offline presence. We sell offline as well as online. We believe that the offline range displayed in our boutiques is an important key to success.

Customers like to be able to see and try on the watches. It turns the purchase of a luxurious watch into an emotional experience. With a company history dating back more than 130 years and a wide-spread presence in the market, Bucherer exudes tradition and important values, such as reliability. Trust is crucial in the Certified Pre-Owned business.

Can you share your expectations on the longer run?

Bucherer aims to revolutionise this market and reintroduce pre-owned watches into the luxury segment.

After all, coveted brands and models retain, or even increase, their appeal over time. We can offer collectors a carefully curated range of rare models and limited editions that they would otherwise be unable to find. A good selection of vintage items additionally gives us access to new customers. They are the ones who probably wouldn’t spend a lot of money on a new watch. We also believe that the pre-owned concept provides us with an opportunity to

What are the next steps in your expansion plan?

We have global ambitions for our Certified Pre-Owned business. After Geneva, Zurich and Hamburg, there will be more outlets soon: in spring 2020 Paris and London will follow.

But even if the Certified Pre-Owned offering has not yet a physical point of sale in a local Bucherer boutique, customers can still browse the range of our Certified Pre-Owned watches online.

“WE WERE NEGLECTED THEN FEARED, NOW IT’S FINALLY CHANGING” Philipp Man, co-founder of Chronext “More and more brands understand that online selling is a very real phenomenon and is here to stay. At first we were not on the radar of the brands at all. Then we were greeted with a degree of fear, and finally now we have strong cooperation. As a result, we now work directly with 15 brands. The mindset of most brands is changing.

What we really want is to become the partner of established brands when it comes to pre-owned. The ideal scenario for us would be to become like authorised retailers, but specifically for second hand.

For a very long time, anything that was not authorised or official was

considered ‘grey’. The term is not clearly defined.

However, what is clear is that the industry has serious distribution challenges. To resolve them, a real understanding of actual stocks and prices is required. Brands are angry about discounts on online sales, and yet retailers do exactly the same thing in physical stores.

Only, because it’s not public, they don’t have a problem with it... How can the industry get a better grip on inventory movements? The best solution would be a platform that welcomes both brands and retailers, pre-owned and new timepieces. And price parity between the store and the website that is good for the brand.”

“WHAT WAS MISSING WAS A TRUSTWORTHY LINK BETWEEN DEMAND AND SUPPLY” Joachim Ziegler, CEO, Les Ambassadeurs “When we launched our new CPO activity last April, we simply couldn’t keep up with the first wave of customers that were interested in this new service. Even though the product is the same, the approach in dealing with used watches differs quite a bit from selling new ones, and it was a challenge for everyone involved. Our team has adapt-

ed quickly and pre-owned is now an integral part of our business.

The world is constantly evolving, and so is retail. With the watch business booming for years, there are large quantities of watches waiting for a second life in our clients’ drawers and safes. At the same time, we have seen a continuing trend for retro watches. So the supply is there, as well as the demand.

What was missing was a trustworthy link between the two.”

“MARKET PRICES ARE CHANGING MUCH MORE RAPIDLY TODAY” Paul Altieri, founder of Bob’s Watches “The pre-owned business is hotter now than ever. And the first concern of the buyer today is not price but authenticity. Watches are expensive items, so customers deserve to get some guarantees. We help to ‘clean up’ the market by offering original watches, but there are still a lot of Frankenstein watches out there.

A new challenge is that market prices are changing much more rapidly than 10 years ago. Then, prices could change ten times per year.

Now it’s once per week. A lot of factors explain this evolution: social media, shortage of steel models, a lot of press and excitement. There’s been so much attention on pre-

owned that prices are much more volatile. For the most part, prices have been up. Some claim it’s a bubble. I don’t think so. The only element that could stop prices growing would be a global recession, way beyond the world of watches.

Another challenge: there are still a number of dealers that are a bit ‘shady’. We don’t work with dealers, all of our watches are purchased directly from individual customers.

Moreover, I see more and more certification programmes established by the sellers themselves. This is wrong. The only person who can certify a watch is a third party, you cannot certify your own product.

That’s a conflict of interest! If you want to certify a diamond, for instance, you go to the GIA, you don’t deliver your own certification.”

“WE USE THE POWER OF TRACKING TOOLS AND BIG DATA” Susanne Hurni, Marketing Director, WatchBox Switzerland “How can we have turned a blind eye to this phenomenon for so long? The brands have been a little arrogant in wanting to impose new watches. Young people have changed their consumption patterns and no longer necessarily want to own items for the long term.

We are neither a marketplace nor a consignment site, but currently own watches worth about $60 million.

We only sell what we have in stock.

It actually all began with a segment of the WatchBox app which ena-

bled customers to register their collections online, to find out about and monitor the popularity of their watches. With new tracking tools and Big Data, we can easily identify and cross-check which watches from which collector interest which other registered collectors.

We offer a form of market cleansing that also keeps the brand image strong, rather than asking for knockdown prices or destroying watches. Letting retailers resell last year’s watches 40% cheaper or destroying stock only weakens the brand image and annoys collectors.”

22 | WATCH AFICIONADO

DIFFERENT CASES,

DIFFERENT FUTURES As part of our “WHAT’S NEXT?” dossier, Europa Star takes a look at a number of case studies, with a particular focus on the watch industry sectors that appear to be in the most trouble: the entry-level and mid-range.

What lessons can these different stories teach us? It’s hard to say, because the overriding impression is that everyone has to invent their own solutions. This might be by moving up-market, devising new initiatives, mining the brand’s history, or even ripping everything up and starting again.

Everyone must draw their own conclusions.

DE BETHUNE DW5 ARMILIA The Armilia, a strangely fascinating retro-futuristic one-off piece, is inspired by the world of graphic artist and production designer François Schuiten, one of whose drawings is engraved on the rose gold case. The Armilia is the product of extreme miniaturisation, its mechanical workings subsumed to the design as a whole, of which the time is just one element.

INTERVIEWS & CASE STUDIES

INTERVIEWS & CASE STUDIES

WATCH AFICIONADO | 23

Guy Sémon – “Not enough connection between management and consumer” A physicist, mathematician and craftsman, all at the same time, Guy Sémon is without any doubt one of the most brilliant researchers in horology. It is to him that we owe the development of the V4 from TAG Heuer, chronographs that are accurate to 0.001 sec., then to 0.0005 sec., the TAG Heuer Connected, the creation of new, revolutionary escapements such as the Pendulum or, more recently, the blade regulator of Zenith’s Defy, or again the carbon nanotube hairspring, to cite only a few examples. by

Pierre Maillard

“Let’s liken quartz to Kodak. And mechanical watches to painting” “How is the Swiss watch industry developing? That can be summed up in a few figures: in 2010, Switzerland produced 30 million watches, including 4 million mechanical watches. In 2018, it only produced 21 million, including 8 million mechanical watch-

The Zenith Defy revolutionary blade regulator created by Guy Sémon and his team of researchers.

es. Quartz has shrunk by one-third in eight years, and it’s not over yet.

Another comparison: in 2000, 85% of the value of the Swiss watch industry was divided between 15 brands.

In 2018, 85% of its value was divided between seven brands, estimated as follows: Rolex 7 billion, Cartier 4 billion (but including jewellery), Tissot and Longines 3 billion together, Omega, 2.5 billion, Patek Philippe 1.5 billion and Audemars Piguet 1 billion. A total of 19 billion. The biggest names have continued to accelerate, the others are now lagging too

far behind. Another thing we’re seeing is that all the brands with prices below CHF 4,000 are losing ground.

We can draw a parallel: let’s liken quartz to Kodak. And mechanical watches to painting. Kodak didn’t go digital and nobody even knows their name any more, even though they were an iconic brand, present all over the world. Painting never had to go digital, and not only does it still exist, today it’s attaining previously unheard-of prices.”

“Too late to get smart” “We launched our TAG Heuer smartwatch in 2015, just at the right time. We sold 120,000 in three years – a highly profitable operation in terms of image. A very fine marketing operation. There were two things you couldn’t afford to get wrong: a new watch incarnation, thanks to a watch exterior worthy of the name, and ‘Made in Switzerland’. With the new ‘Swiss made’ at 60%, you need to develop software in Switzerland.

But that’s impossible. Smartwatches are part of a global ecosystem and that ecosystem is totally dominated by Apple. And now it’s too late.

There are only two major players left: Apple for lifestyle and Garmin for sport. You can forget about Swiss made smartwatches.”

Are wrists on the way out?

“Lots of people are saying now that connectivity in wristwatches is just a passing fashion and it will soon migrate to other supports, or even become physically hybridised. I reply to that kind of fantasy with an image: the Romans travelled in chariots, with wheels and a platform.

Animal traction has given way to engines, but we still travel around on a platform with wheels.”

“I reply to that kind of fantasy with an image: the Romans travelled in chariots, with wheels and a platform. Animal traction has given way to engines, but we still travel around on a platform with wheels.” Guy Sémon

where. Soon, there will only be three or four categories left: those who are looking for a gift for a special event, and that concerns every price bracket; watch lovers who know nothing but have loads of money to spend and go for the bling-bling or whatever seems to be the fashion; enlightened watch lovers and aficionados, but they’re a limited group; and lastly, the real collectors, of which there’s only a handful.

There’s a strong focus on a few brands, because a very large proportion of consumers go for what they already know. The sheep instinct predominates, especially in China, but not only there.”

“The actual terrain is unknown territory to many executive” “There will always be Haute “The new management of the larger groups is now made up for the most Horlogerie, the part of experts in Excel spreadsheets real thing” and PowerPoint presentations. But the actual terrain is unknown territory to them. A blank space. When I was director of TAG Heuer, I regularly went incognito into the stores to do the selling myself. There’s no better way of understanding what really motivates the consumer. Today, those who really need a watch are becoming systematically rarer, because you can see the time every-

“Whatever happens, there will always be Haute Horlogerie, the real thing, where manual and intellectual dexterity are mingled. There will always be people who love things that embody what we are and what characterises us, intelligence and time. That’s what makes me always want to go on creating.”

INTERVIEWS & CASE STUDIES

24 | WATCH AFICIONADO

Peter Stas – “We’re already in talks with health insurance companies in Germany” Smartwatches? They account for 12% of turnover at Frédérique Constant and 35% at Alpina. With the creation of MMT, Peter Stas is one step ahead in the smartwatch race. And the race isn’t over yet. But that hasn’t stopped them from also offering a perpetual calendar at an astonishingly low price. The horological splits? No, convergence. We met him. by

Pierre Maillard

Europa Star: In what way are smartwatches a danger for the Swiss watchmaking industry?

Peter Stas: The way I see it, and I already said this three years ago at the launch of MMT (Manufacture Modules Technologies SA), if the Swiss watch industry does not get involved in smartwatches, it will see sales fall increasingly and irrevocably. At Frédérique Constant, smartwatches already account for 12% of turnover, and at Alpina 35%. Next year, we’re going to introduce new technology that will raise these percentages even further. In my view, and we’re already seeing it although

the official statistics aren’t showing it yet, watches in the over-CHF 1,000 range will also be affected. The cannibalisation effect is gradual and is going to affect even the high-end brands.

Can the industry make up for lost time?

Another reason for this development, which is inevitable in my view – and that’s also an opportunity for the industry – is that the health aspect is going to become increasingly important, especially among the over-55s. The algorithms have already been developed, but not implemented yet. But gradually, smartwatches with “health” func-

tions are going to become indispensable items. Apple will go there, but the first one to offer genuine, effective and reliable solutions will carry off the trophy. We’re talking about millions of items a year.

Swiss made has a serious card to play here, because not only does it go hand in hand with expertly crafted watch exteriors – does a “health” watch have to be ugly? – it is also synonymous with reassuring reliability and quality. As proof that the medical world is keenly interested, we’re in talks with health insurance companies in Germany for watches they’d like to buy directly to offer them to their insurance customers. It’s a potentially huge market.

Including China, around 150 million smartwatches a year are being produced today. There’ll be no going back.

One idea that we’re hearing more and more from the heads of watch companies is that smartwatches worn on the wrist are just a passing fashion. And that its functions are going to migrate…

Migrate? Yes, connectivity is going to be built into clothes, glasses and so on. That will come too, but after four years of experience I can tell you that getting reliable measurements with a watch on the wrist, even though it’s an ideal place, is already a tough task. And in a watch, even though it’s a tiny object, you still have room to place a dependable battery, a screen under a real dial, a mechanical module and an electronic module. You can fit all that in a watch case, and by the way, we’re going to issue a lady’s smartwatch with a 36mm diameter. But that’s impossible with glasses. There’s not enough space, they’re too small. How can you fit a battery worth anything in there?

It wouldn’t be very reliable. You can also conceive of an earpiece, but there again, it’s too small, too fragile. We need to think along different lines. Today 95% of smartwatches are still a kind of black box. But with MMT, we’re offering other solutions, with real dials, real hands. I can tell you that the number of interested brands, including the biggest, is growing all the time.

How do you explain the fact that you’re one of the rare Swiss brands to have really invested in this field?

Horological Smartwatch Gents Classics

Probably because I come from elsewhere. In the Netherlands I worked at Philips for eight years, which taught me quite a few things, especially about electronics. Then I went into watchmaking, in Holland, right in the middle of the quartz crisis. I also studied the Swatch phenome-

AlpinerX Mike Goulian Edition

At the same time, at the other extreme, at Frédérique Constant you’re selling a perpetual calendar for CHF 3,850. That’s an unheard-of price for this kind of complication.

“Including China, around 150 million smartwatches a year are being produced today. There’ll be no going back.” Peter Stas non at Harvard Business School and I remember that Nicolas Hayek said back then that to succeed, the Swiss watch sector had to be strong in every segment, from the top to the bottom range. It’s a lesson which still stands. And the risk culture is lacking. Where there’s opportunity, there’s always risk.

But I feel that the tone is changing. I recently talked with five or six CEOs of major companies and I noticed that discussion is different now, they’re more open. Yet our door has been open from the start.

MMT has become my priority and that of my wife, Aletta. We’re going to focus our efforts on that.

The market is difficult for everybody. You have to offer innovative items with an excellent price/quality ratio. That’s more important than ever. As it turns out, it’s a limited series to mark our 30th anniversary.

There’s a whole audience of collectors who are very interested. It’s a high-end mechanical watch at an affordable price.

At the other extreme, we can see that smartwatches are also moving upmarket. The Garmin Marq collections, for example, are selling at between €2,000 and €3,000.

Connectivity is climbing into “our patch”, what the Swiss watch industry thought was its private preserve. And the smartwatch brands are increasingly reactive.

It’s sad to say, but quartz watches are right in the line of fire. You can even find Garmins at €200 – enough to make any young man waver. I’d be very worried if I was in some people’s shoes. But with “Swissness”, the resulting quality, expertise, the Swiss watch industry can and must still have a successful future ahead.

INTERVIEWS & CASE STUDIES

WATCH AFICIONADO | 25

Hamilton: “We’re making the most of the vintage trend” While smartwatches are visible absolutely everywhere in the United States, Hamilton, that most American of Swiss watchmakers, is experiencing a strong resurgence of popularity in the country, especially among younger generations. The brand is reaping the benefits of a long-term strategy from which it has not deviated, based on affordable, vintage-inspired mechanical watchmaking and pioneering e-commerce, while making the most of the industrial support of the Swatch Group. by

Serge Maillard

Over the past year, Europa Star has established a new presence in the United States, making it possible for us to better cover this key market (re-read our major report on this subject from March 2019). America is once again becoming the number one destination for Swiss watch exports in the world, surpassing Hong Kong, which remains in the grip of geopolitical uncertainty. At the same time, there is a strong resurgence of interest in vintage-style mechanical watches in the country, even though the Apple Watch and Fitbit are visible everywhere (during a recent field survey we counted at least one of these models in every row of a Washington-Detroit flight!).

“We have to be careful, because we see a lot of vintage being overused today. Recent brands that make vintage, it doesn’t make sense.” Sylvain Dolla For Hamilton, a Swiss brand with American roots (now owned by the Swatch Group, it was born in Lancaster, Pennsylvania in 1892), the stars are aligning. With a strong presence in the cinema, over the past ten years it has implemented a strategy based around affordable mechanical watchmaking, in a niche between 500 and 1,500 dol-

lars, inspired by models from its rich American past, including Elvis Presley’s Ventura and the Khaki Field. It has also relied heavily on online sales, which are exploding in the country. Today, the United States has once again become its number one market, neck and neck with Japan and Italy.

Direct-toconsumer at 30% growth “Reinterpretation inspired by the past is something we have always done,” says Sylvain Dolla, CEO of Hamilton. “Today, it is in the spirit of the times, but we’re doing no more and no less than before. We are benefiting from the trend of a return to the roots of design, especially among younger generations.

For example, the Khaki Field collection works very well as a graduation gift in the United States. The Boulton’s relaunch in the United States also looks promising.”

For nearly a decade, Hamilton has not deviated from its course, which begins with visibility through the world of cinema. Its first collaboration with Hollywood was back in 1932. Today, Hamilton is very active on the silver screen – this year, we saw the Ventura in the new Men in Black movie, and the Khaki Field Chrono in the Jack Ryan series, as well as the launch of a public version of the Murph seen in Interstellar.

Hamilton is also active behind the scenes, through collaborations with costume guilds, awards for cameramen and film schools.

“We gained a lot of market share in 2019 in the United States,” explains Sylvain Dolla. “The strategic mix of cinema, the American spirit, mechanical movement, affordable price and vintage trend is a winning combination. The digital direct-to-consumer channel is already 30% up from last year. In addition, our major partners are performing well online.”

Khaki Pilot Pioneer Mechanical

Not on the price surge bandwagon Nevertheless, the brand still achieves 80% of its sales in brick-and-mortar stores. Ten years ago, Hamilton boasted twice the number of points of sale in the United States, but it achieved only half of its current turnover. The CEO says: “The fundamental work was to refocus on 360 high-performance points of sale, whether independent watchmakers or regional chains, as well

as to develop our online platform.”

The brand also benefits from its price stability, at a time when the Swiss mechanical industry has taken an “elevator to the stratosphere” since the beginning of the millennium. “The average price has only moved one franc this year, to 900 francs. A move up the range would frighten me: the range between 500 and 1,500 francs offers great potential, precisely because there are very few brands nowadays that offer mechanics at this price. Quartz is secondary, it represents about 20% of our volume.” With ETA as a support within the group, Hamilton

Chrono-Matic 50 Auto Chrono

has invested heavily in developing mechanical calibres, and has introduced silicon balance springs for its chronographs and NivachronTM for three-handed movements.

For next year, Sylvain Dolla has announced a “new, very contemporary and modern pilot line.” And at the same time, a “limited edition of a revolutionary piece of watchmaking history.” For him, it is vital to work on both axes in parallel: “We have to be careful, because we see a lot of vintage being overused today.

Recent brands that make vintage, it doesn’t make sense. We are not following the trend.”

INTERVIEWS & CASE STUDIES

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Victorinox – adapting its strategy to a challenging year

Victorinox, which manages the watch production of both the Victorinox and Wenger brands at its horological centre in Delémont, is active in a segment of the industry – affordable Swiss made watches – that has recorded historically low volumes in 2019. We took the opportunity of the opening of the brand’s latest boutique in Switzerland to discuss this challenge with CEO Carl Elsener Jr.

Europa Star: How important is watchmaking to Victorinox today?

In 2005, you took over your historical competitor Wenger, which also produces watches. What is the positioning of each brand?

Carl Elsener Jr.: Watches have become an important pillar of the brand and now represent 15% of our turnover. As you might expect, the Swiss Army knife remains Victorinox’s flagship product, accounting for 35% of our sales.

Professional knives represent 25% of our sales.

We were in competition for many years but after the takeover of Wenger, we positioned the brands differently within the group. Today, Wenger represents our entry level, with watches whose main collections range from 140 to 300 francs.

Victorinox watches are mainly positioned between 300 and 800 francs,

by

Ash Longet

although we also offer mechanical models that exceed the 1,000 franc mark. Our structure is now clear and we complement each other.

Volumes in the Swiss watch industry have fallen sharply since the beginning of the year, particularly in your price segment. In light of this, what future do you see for Victorinox watches?

It is indeed a big challenge and we are going through a difficult year.

But we are taking several initiatives to address this. We are working on new designs to make our watches more attractive to new customers. We have also begun to invest more in travel retail by setting up a distribution and sales team dedicated to this important niche.

Another essential point is e-commerce, and we have also set up a new team for marketing on social networks. We already have e-shops in Switzerland, Germany, Great Britain, the United States, Canada, Japan and China. Each year we will

“It took time for consumers to realise that we not only produce knives, but also quality watches and travel accessories.” Carl Elsener Jr. add a few countries. And we also collaborate with platforms such as Tmall in China.

Where are the main markets for Victorinox watches?

We distribute our watches in more than 80 countries, and the main markets today are the United States,

Switzerland and Germany, but also India, Hong Kong and Mexico.

The perception of the brand varies greatly between these markets. For example, from the very beginning, we were perceived as a top-of-therange brand in Latin America. This made it easier to launch our watches. In Switzerland and Germany, on the other hand, it took time for consumers to realise that we not only produce knives, but also quality watches and travel accessories. The Swiss were more difficult to convince than the South Americans!

In 2018, you achieved a turnover of 480 million francs. What result do you expect for 2019?

We were expecting an increase in our sales, but for the time being it seems that we should be able to achieve a figure comparable to that of last year. I am not satisfied, but in the general context of the global economy and the challenges we face, it’s a respectable result.

INTERVIEWS & CASE STUDIES

WATCH AFICIONADO | 27

Swatch: new headquarters and a lot of questions

The new Swatch headquarters in Biel, built by famous Japanese architect Shigeru Ban.

The magnificent “serpent” designed by Japanese architect Shigeru Ban for Swatch took more than eight years to rise out of the ground and unfurl its coils in the town of Biel/Bienne. But this uncoiling comes at a time when sales of the watch that in its day “saved Swiss watchmaking” are taking a serious nose-dive. Will it help them level out? by

Pierre Maillard

The new Swatch headquarters is an outstanding building. At its inauguration, the Japanese architect Shigeru Ban, the recipient of the 2014 Pritzker Prize (the Nobel prize of architecture), emphasised his already long history with the Swatch Group, for which he designed the iconic building in Tokyo Ginza back in 2004, and the close collaboration that was crucial to the success of an edifice such as this.

And you can well believe him, because the building – if you can call it such – is one of great beauty and offers an outstanding working environment while at the same time singling out Swatch’s “different” image.

He encompassed the exterior and interior in a broad, reptilian shape, the head of which reposes on a second, lower building housing the Omega and Swatch museums.

The architectural lines are woven into an organic whole. The 240m -long beast, which is 35 metres wide at its widest point, owes its undulating shape to a timber gridshell: a lattice composed of 4,600 beams, each

precisely shaped and positioned, modelled one by one in 3D. Wood was chosen in preference to concrete or steel for numerous reasons – sustainability and ecology, phonic qualities, warmth, “Swissness” – but also because timber can be cut with extreme precision: despite its huge dimensions a structure like this has to be exact to the nearest millimetre.

Most of the façade, again if we can call it such, of this singular but almost immediately familiar shape, is made up of 2,800 elements in a honeycomb arrangement, the opaque, translucent or transparent alveoli of which are reminiscent of the scaly skin of a mythical reptile. Some of these elements open (in case of smoke), while others are translucent and shaped like inflatable cushions, or are in transparent glass. Here and there a balcony projects through the skin (for smokers).

The interior, made up of several staggered floor plates, offers a view both soothing and vertiginous. You feel as if you’ve been absorbed by an immense, vast wooden cocoon.

The open-plan offices, spread over four storeys covering 25,000m² with

no solution to encourage continuity between the different creative, organisational, technical and logistical departments, offer huge but nevertheless warm and diverse workspaces. The acoustics, helped by the presence of wood, seem to be excellent and allow hushed discussions even in this wide open area.

The serpent finally rests its head on

another building, also designed by Shigeru Ban, the Cité du Temps.

This houses the Omega museum on the first floor, the Swatch museum on the second, and the Nicolas G. Hayek Conference Hall on the fourth, an elliptically shaped room that can hold up to 400 people (“reserved exclusively for the Swatch Group”, states the official press release).

Serpent in troubled waters Irony would have it that this inauguration of a superb building, the construction of which was decided nearly ten years ago, comes at a time when Swatch is experiencing a serious downturn. At the time of the competition, won in 2011 shortly after the tsunami, as Shigeru Ban himself recalled, the Swatch Group was breaking all sales records, for the first time crossing the 7 billion Swiss francs mark – a rise of nearly 11 percent compared to the previous year.

That is no longer the case. Turnover for the first half of 2019 is down nearly 4 percent. As for Swatch itself, estimates vary, but all are pointing the same way. According to Radio Télévision Suisse, Swatch sold between three and seven million watches in 2018 (a wildly diverging figure), compared to 15-20 million at its peak.

Nick Hayek himself acknowledges it: “The Swatch brand itself is not

making brilliant profits. But within the Group, thanks to orders for micro-batteries and microprocessors for example, it’s generating profit at Renata and EM-Marin. If you consolidate all that, then yes, Swatch is profitable.”

Nick Hayek also cites various other factors contributing to the flagging enthusiasm for the impish entrylevel watch. He no longer dismisses with a wave of the hand the threat from smartwatches, which are slowly but very steadily gaining ground, noting in passing that Tissot will very shortly have connectivity, via an in-house OS. But he also mentions the breakdown of distribution, underscoring the fact that the Swatch has slid from 8,500 sales outlets worldwide in 2016 to under 5,000 today, and that e-commerce is not yet offsetting this nearly 40-percent loss in physical outlets.

Will the serpent bring luck to the little plastic watch? Will it help thrust it back into the limelight?

It is true that a building cannot do everything and is not enough to turn the tide. But, as we saw with the EPFL (École Polytechnique Fédérale de Lausanne), the Rolex Learning Center, itself a sort of “interior landscape” with organic shapes built by another Japanese firm (the SANAA agency) greatly contributed to bringing the school a higher level of international recognition. The serpent is a symbol of regeneration. The future will show us the extent of its powers.

REPORT – A WEEK IN THE BAY AREA

28 | WATCH AFICIONADO

No “hotline” (yet) between Watch Valley and Silicon Valley Digital technology is disrupting the world of watches, and the tools of disruption are being created chiefly in the Bay Area. The Swiss watch industry, although revered by local entrepreneurs, nevertheless seems very remote from the tech industry. The time would seem right to finally establish a local presence to monitor the innovations taking place in Silicon Valley, especially as they are increasingly targeting the huge home market. We spent a week there to meet some of the key players. by

Serge Maillard

Shouldn’t the Swiss watch industry have established some kind of presence in Silicon Valley back in 2014?

This was to be a recurring topic throughout the week we spent in the San Francisco Bay Area. In the Swiss watch industry, we often hear that if you want to understand the true “spirit” of a brand, you have to visit a manufacture. This is equally true of the tech world, the world that is crafting the tools that are changing the way watches are now being made, sold and consumed.

A courtesy visit is long overdue.

While exploring the impressive premises of Swissnex (a Swiss global network promoting education,

research and innovation) on San Francisco’s Pier 17, we see representatives of iconic Swiss companies such as Nestlé, Swisscom and SBB. But not a single watch company or association is represented, even though the watch is undoubtedly one of the emblematic Swiss objects that is most impacted by the likes of Apple, Instagram and Google.

During our visit we also met Swiss star industrial designer Yves Behar, who has set up a sizeable office in San Francisco. The renowned specialist has already applied his talents to the rebranding of another iconic Swiss product, the Rivella soft drink, which has made a bold move to keep up with changing times. But the only watch companies he has worked with

so far are not from his native country: they’re American (Movado) or Japanese (Issey Miyake).

The Swiss watch industry, accustomed to unchallenged global domination, has observed the rise of a new category of watches powered

by Silicon Valley’s software with a mix of indifference, fear and denial (with a few notable exceptions such as TAG Heuer or Frédérique Constant). And with good reason.

The Swiss mechanical watch has experienced a boost in sales in the United States, while simultaneously, Apple has virtually single-handedly “created” the smartwatch segment, of which it now accounts for around half of global sales. As is so often the case, the revival of “vintage” goes hand-in-hand with technological disruption.

In fact, Silicon Valley is a place with a deep reverence for mechanical watches. We met Jared Silver, the retailer who sells the most exclusive timepieces from niche brands such as MB&F, Urwerk, De Bethune and Ressence to tech entrepreneurs. For him, business is going fantastically well. To give one example of the vitality of the local watch scene, a group of tech industry executives has recently launched a new watch collectors’ club, Collective, which has led to a collaboration with Zenith on the production of a limited-edition El Primero.

To a large extent, the two worlds seem to be able to coexist. But while local tech companies, as software specialists themselves, may be impressed by the centuries-old expertise in “hardware” acquired by traditional watch companies, the tools they are crafting and the wearables

The Swiss watch industry, accustomed to unchallenged global domination, has observed the rise of a new category of watches powered by Silicon Valley’s software with a mix of indifference, fear and denial. they have been imagining for the last five years are a new part of the world of wristwatches, and they are introducing a considerable amount of disruption. They are changing the watch industry in (as yet) unimaginable ways. To monitor these tools is also to begin to understand their potential impact. And with that in mind, some kind of presence on the ground seems essential. We hope this report will show why.

DAY 1

“TECH ENTREPRENEURS ARE NATURALLY DRAWN TO THE NEW GENERATION OF WATCH ENTREPRENEURS”

Jared Silver, Silicon Valley jeweller Who better than Jared Silver to study the profile of Silicon Valley buyers, the very people who are defining our new purchasing habits? His boutique is located in the famous Rosewood Hotel, where most of the key deals of the tech industry have gone down (as seen in the HBO series “Silicon Valley”).

In 2014, the second-generation jeweller began representing a range of exclusive high-end independent brands, catering to a wealthy tech clientele. “Our average unit sale is almost 12 times the national average,” he says. “But mostly, we try to identify watch brands that match our ethos as a company.”

Among them we find MB&F, Ressence, Urwerk and Richard Mille. “Most of our customers are entrepreneurs themselves so they

REPORT – A WEEK IN THE BAY AREA

are naturally attracted to stories of entrepreneurship, like that of Max Büsser or Richard Mille, who seem like-minded. At the same time, what they are producing is mechanical artwork, which is very different from the products of the Valley.”

But what about the mechanical vs. connected conversation, in the heart of Silicon Valley? “What I see is a very polarised market,” says Jared Silver. “I see people who stick to the Apple Watch because they like the functionality. But they will always see it as a disposable item.

And they also have timepieces that they like to collect. Actually, people started to become more interested in watches in general just as smartwatches started to ramp up. But if you’re a brand producing watches under 1,000 dollars, you are ripe for disruption. Why spend 1,000 dollars on a quartz timepiece when you can spend 400 dollars on a smartwatch and get all the functions?”

The jeweller continues: “We are insulated from that disruption because we specialise in high-end and unique timepieces. Our customers are typically extremely well educated, sophisticated in the sense

that they are very in tune with culture, arts, trends and society, and when they look at a piece of jewellery, they want to be different. They want to stand out. Most of my customers, by the time they come to us, already own multiple Pateks, Vacherons and vintage timepieces.”

What is the lifestyle of Silver’s customers? “Very casual. That’s why brands like Ressence, Urwerk, Richard Mille and MB&F are doing so well. You can absolutely wear these striking timepieces with a T-shirt and jeans.

The watch culture is very strong here, and we are really just scratching the surface of it as a retailer.”

DAY 2

“I WOULD LIKE TO BUILD A BRIDGE BETWEEN SWISS WATCHES AND SILICON VALLEY”

Yves Behar, Swiss designer and founder of Fuseproject in San Francisco When we enter the offices of Fuseproject in San Francisco’s Design District, it becomes clear that the company’s work goes well beyond “design” in the strict sense.

The employees work in a giant open

space on projects that may include the complete rebranding and strategic redefinition of a client’s business. The list of customers of the company founded by Swiss-born star designer Yves Behar is long, ranging from Nike to L’Oreal, from Louis Vuitton to Prada, Samsung and Herman Miller. The man himself is a blend of casual outdoor lover and busy design conceptualiser, with an Owen Wilson- esque look. He has worked for a long list of European fashion houses, and knows better than anyone that the relationship with tech guys is not always a smooth road. These are two different worlds. “As a designer, I work with technology but also with craft,” he says. “In many ways, what prevents the Swiss watch industry from connecting with Silicon Valley is the challenge of access to technologies, as this ecosystem is very costly. And on the other hand, Silicon Valley doesn’t see craftsmanship as the huge opportunity that it is; there is a lack of imagination in this sense.”

Yves Behar believes that designers can create bridges between these two worlds. “This is how I see my role. The watch itself can be re-imagined as an object. But we also need to tackle new approaches when it comes to how a timepiece is introduced and bought by customers. What’s really good here at fuseproject is the way we design the product, the experience and retail as an ecosystem. You have to bring all the pieces together. The new generation of consumers has been raised with Apple and Nike, brands that are really consistent in the way they present themselves.”

WATCH AFICIONADO | 29

“Today, we admire the disruption of the past. But there is still plenty to do in terms of customisation, distribution and new ways of engaging with people.”

Yves Behar sees the phase of digital disruption that is changing the face of the watch world as “the opportunity of a lifetime, in an industry that has very much stayed the same for the last 40 years.”

He would like to see bolder statements in terms of shapes, expressions and materials coming from Switzerland in order to connect to a younger generation. “When I grew up in Switzerland, watchmakers were trying new things, like the Swatch. If I compare the 1960s or 1970s and now, there was a sense of risk-taking that is missing today.

A Swiss watch is now essentially an accessory for people who have eve-

rything. Today, we admire the disruption of the past... But there is still plenty to do in terms of customisation, distribution and new ways of engaging with people.”

So far, the paradox facing Yves Behar is that beyond wearables, the only traditional timepieces he has created were for an American and a Japanese brand: the con temporary version of the famed Museum for Movado and a highly innovative and whimsical display for an Issey Miyake watch. Before leaving, the designer takes his smartphone out of his pocket and shows us an image that has intrigued him for a while: an Audemars Piguet from the early 20th century whose design fascinates him. “I would like to know more about this model, but I haven’t found any information so far.”

We’re guessing that Yves Behar, a bridge-builder between two industries, will soon be fielding calls from Swiss watchmakers. “I want to do more watches,” he says. “I think the wrist is the ideal place for a functional object. And it’s one of the most exciting industries because it knows how to make things and how to make them work for a long time, >

REPORT – A WEEK IN THE BAY AREA

30 | WATCH AFICIONADO

how to create inner and outer beauty. Very few traditional industries have managed to continue doing that. But I’m always asking the question: what are the next possibilities?”

DAY 3

THE PIER, A FUTURE HUB FOR THE SWISS WATCH INDUSTRY?

At Swissnex San Francisco Switzerland has a strong presence in the heart of San Francisco. Its consulate, cultural centre and scientific centre occupy a whole pier (n°17) on the famous city’s waterfront. The most interesting of these for the watch industry is the scientific centre, known as Swissnex. It serves as a liaison office between Swiss companies and universities and the highly innovative ecosystem of Silicon Valley.

The Swiss railways, telecommunications and pharmaceutical companies have a local presence through an on-site representative. But one big piece of Switzerland is missing: the watch industry. And this is despite the fact that Silicon Valley’s embrace of wearable technologies is having a huge impact on Switzerland’s Watch Valley.

A paradigm change is occurring, which merits even greater scrutiny.

We are seeing the connected ecosystem investing increasingly in health devices. In early September, Apple announced the launch of

three medical studies in partnership with Harvard University, the University of Michigan, the World Health Organisation and the American Heart Association.

“With the Apple Heart Study, we found that we could positively impact medical research in ways that help patients today and that make contributions that will benefit future generations,” said Jeff Williams, Apple’s chief operating officer.

“Today’s announcement carries our commitment to health even further by engaging with participants on a larger scale than ever before.”

Last March, Stanford Medicine researchers presented their findings from the Apple Heart Study at the American College of Cardiology’s annual scientific session and expo.

The largest study of its kind ever, it enrolled over 400,000 participants from all 50 states over a span of eight months. Apple and Stanford created the study to evaluate the Apple Watch’s irregular rhythm notification, which occasionally checks the heart’s rhythm in the background and sends a notification if an irregular heart rhythm appears to be suggestive of atrial fibrillation (AFib).

Other producers such as French company Withings (part of Nokia) also generate large-scale health studies through their connected products. Withings recently announced a new B2B business division called Withings Med Pro, which encompasses a data collection solution as well as a remote patient monitoring platform designed for healthcare practitioners, hospitals, care facilities and clinical researchers.

This year, Apple recorded its highestever revenue in a September quarter, at $64 billion, while its wearables segment was up 54% year on year. “My view is there will be a day in the future that we look back, and Apple’s greatest contribution will be to people’s health,” said Apple CEO Tim Cook.

A breakthrough in health monitoring could make smartwatches essential everyday products. Insurance companies are already monitoring the situation closely (read the interview with Peter Stas on p. 24). Even if the mechanical watch remains in another universe, with different goals, it would seem worth monitoring these developments too. The place to do so is Silicon Valley. And Swissnex seems like a natural fit for the Swiss watch world.

DAY 4

TALKING WEARABLES AT GOOGLE

John Angelo, Watch Face Design Lead at Google “Smartwatch Designer” is a new kind of job, one that did not exist ten years ago. John Angelo is the man in charge of watch face design at Google. We were lucky enough to have the opportunity to visit the company’s campus in Mountain View and talk watches with Angelo.

To say that Google has been quite active on the smartwatch front this year would be an understatement.

In January, it acquired the Fossil Group’s entire wearables division for $40 million. And in November it bought out the world’s number two producer of connected devices (behind Apple), the American brand Fitbit, for $2.1 billion.

“We launched our operating system for wearables in 2014,” recalls John Angelo. “The idea was to create an open notification system. From the start we wanted to work with a large number of partners.” Wear OS currently drives smartwatches from tech brands such as Motorola, Samsung, Huawei and LG, as well as connected watches made by traditional watchmakers including TAG Heuer, Montblanc, Hublot, Casio, Movado and Louis Vuitton.

“There have also been moves within the company to bring in more fashion-minded people.

This should facilitate the dialogue with the Swiss watch industry.”

“My specialty is designing watch faces, tiles, and system interactions in collaboration with our partner brands,” says John Angelo. “We actually spend a lot of time with every single partner, digging through their archives and their history and coming up with the best solutions. One great thing about our team is that there are many mechanical watch enthusiasts, and they are eager to try to find the best combination between the utility of the connection and the design of the traditional Swiss watch. We want to find useful features that we can bring to the traditional watch world.”

The designer emphasises his admiration for watches that stand the test of time: “You can still wear a Swiss watch several decades after the initial conception. That’s a really big challenge for a designer in a tech

The special Zenith El Primero watch inspired by the design language of Silicon Valley.

company. Another major challenge is the power reserve and energy in the device. At Google, we have this concept of the ‘Joy of Missing Out’, a core purpose of which is to allow consumers to leave their phone on the side for a little bit.”

Contrary to popular belief, the smart device is not leaving the wrist to go elsewhere on the body, as Angelo explains. “Quite the opposite. One of our biggest priorities is health features like fitness and nutrition. The wrist is a convenient place for them.

Google has developed other wearable projects such as Google Glass, but they are not intended to replace the watch.”

Following the acquisition of Fossil’s technology and teams, as well as that of Fitbit, Google is launching an offensive on the smartwatch world. Many expect it to launch its own hardware too. “There have also been moves within the company to bring in more fashion-minded people. This should facilitate the dialogue with the Swiss watch industry,” says Angelo. “It’s a growing process, with a learning curve.”

DAY 5

THE WATCH ENTHUSIASTS’ CLUB OF SILICON VALLEY

Gabe Reilly, CO-FOUNDER of Collective The idea of Collective was launched at the end of 2018 in Silicon Valley by two watch enthusiasts working in the tech industry, Gabe Reilly and Asher Rapkin (we recommend you stream the latter’s keynote speech from SIHH 2019). They partnered with Rob Caplan, owner of reputed Bay Area-based Topper Fine Jewelers, to create not only a new forum for local horology aficionados – they have a private discussion group on Facebook – but also a 360° platform that goes from organising exclusive events for the group to creating one-off timepieces with watch brands.

They came to our attention when Zenith announced the launch of a “Collective” edition of its Chronomaster El Primero last October. So it seemed like a good idea to meet Gabe Reilly, to find out more about this fledgling club.

“The beating heart of our 50-strong group is made up of people who work here in the tech industry,” he told us. “Whether they are product designers, software engineers or copyright attorneys, they love watches for two main reasons. One is the romance of mechanical timekeeping.

The other element is a reverence for

the contemporary technological side of innovation in watchmaking, like the Spring Drive by Grand Seiko or the Defy by Zenith. Hence we love quartz too, unlike many whose default reaction is negative!”

“The club was largely born out of frustration,” he continues. “The passion of the community is growing but some watches are harder and harder to get. It’s not only about the ‘usual suspects’ – their shortages create a ripple effect for the industry as a whole. That can be really frustrating, because you feel you are being

The main idea of the first collaborative watch with Zenith was to create “a version of the El Primero that would be inspired by the design language of Silicon Valley.” left out: some people who jump the line get these watches and it seems unfair. By combining the power of 50 people, we can build the watches we want with the brands we like.”

The main idea of the first collaborative watch with Zenith was to create “a version of the El Primero that would be inspired by the design language of Silicon Valley.” Although the initial stage of the process was “very comfortable” in terms of the creative concept and design, things got more difficult when they moved to the prototyping stage, as Gabe Reilly explains. “The leap from software to hardware made us nervous, as it was new for us to commit to something that we couldn’t come back from. In our daily jobs in software, we can test fifteen versions of the same thing to see which one works best. We realised we had to make a leap of faith. But knowing the outer limits of your abilities is essential so we wouldn’t micro-manage the process.” The watch has already been unveiled and will be delivered in January 2020.

We couldn’t resist asking Gabe Reilly, a tech executive with a passion for timepieces, about his vision of the future of the watch industry. “Just like Kickstarter and other new tools of distribution, we are a part of a new way of buying watches – through a club. People love mechanical watches in Silicon Valley. At the same time, I would like to see more openness from the traditional watch community itself to smartwatches and connected watches – in the same way as we have a reverence for the Spring Drive, quartz, ceramics or any other innovation coming from the watch world. After all, if Hans Wilsdorf were alive today, with his innovative spirit, he might well have worked here in Silicon Valley!”

“The Wiki of Watches” GQ Magazine, November 2019

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| CHAIRMAN Philippe Maillard PUBLISHER Serge Maillard EDITOR-IN-CHIEF Pierre Maillard CONCEPTION & DESIGN Serge Maillard, Pierre Maillard, Alexis Sgouridis DIGITAL EDITOR Ashkhen Longet PUBLISHING / MARKETING / CIRCULATION Nathalie Glattfelder, Marianne Bechtel/Bab-Consulting, Jocelyne Bailly, Véronique Zorzi BUSINESS MANAGER Catherine Giloux MAGAZINES Europa Star Global | USA | China | Première (Switzerland) | Bulletin d’informations | Eurotec EUROPA STAR HBM SA Route des Acacias 25, CH-1227 Geneva - Switzerland, Tel +41 22 307 78 37, Fax +41 22 300 37 48, contact@europastar.com Copyright 2019 EUROPA STAR | All rights reserved. No part of this publication may be reproduced in any form without the written permission of Europa Star HBM SA Geneva.

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