Pessimism of Swiss watchmakers climbs, report finds

Pessimism of Swiss watchmakers climbs, report finds

According to a recent survey by Deloitte, 41 percent of Swiss watch executives surveyed are pessimistic about the economic outlook for the industry, compared to only 14 percent who are optimistic.

Zurich, Switzerland–The watch market has been struggling of late, and it appears the sentiment now is strongly felt by Swiss watchmakers.

According to Deloitte’s Swiss Watch Industry Study, 41 percent of Swiss watch executives surveyed are pessimistic about the economic outlook for the industry, compared to only 14 percent who are optimistic. This is the worst result since the firm started the study in 2012.

Watch executives also indicate they believe that the downward trend in overall sales in the first half of 2015 likely will continue over the next 12 months.

Deloitte reported that 69 percent of Swiss watch executives see the strong Swiss franc as a significant issue for their businesses. After the Swiss National Bank removed the currency cap on the euro in January, the Swiss franc appreciated in value by 15 percent to 20 percent.

Concern also comes from a weaker foreign demand, especially in Hong Kong and China, with more than half of executives in the Swiss watch industry indicating that they think it could pose a challenge for the business over the next year.

Additionally, 25 percent of watch executives in the survey now consider smartwatches to be a competitive threat, compared with only 11 percent in 2014. More than one in three of respondents also said that they became more aware of the challenges coming from this product category after Apple released its own version of a smartwatch, the Apple Watch.

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Still, Deloitte notes the smartwatch market is still young and there remains still a window of opportunity for Swiss watchmakers to develop their own offerings, with increasing evidence at this year’s Baselworld that more of the traditional Swiss watch brands targeted by smartwatches (generally priced below $1,500) are starting to react as well.

“The willingness and ability of Swiss brands to offer smartwatches at Swiss-quality standards and with long battery life could potentially pay off as a successful competitive strategy,” the report said.

Not to mention the proportion of consumers intending to buy a smartwatch is greater than the amount of people who plan on buying a classical wristwatch, meaning that smartwatches have the potential to be highly successful and likely will dominate the low-end segment for watches, giving Swiss watch brands even more reason to find their own alternatives as well as increase focus on luxury watches, Deloitte said.

The report also said that watch companies are reacting to the challenges of the market with a number of measures, the biggest of which is cutting costs. One-half of respondents said they were implementing this measure to counteract the value of the Swiss franc, though Deloitte notes that this is a strategy that not all brands can adopt, particularly the lower-priced market segment.

Another top strategy for many of these brands is the introduction of new products. Sixty five percent of the watch executives surveyed consider this their top priority, up 10 percentage points from last year.

An increasing number also will give more emphasis to online sales channels within the next 12 months. Thirty-eight percent of respondents said that they consider e-commerce on their own site as the most important sales channel in the future.

Fewer, however, will be giving most of their marketing efforts to authorized dealers in the next year, and there also has been a slight reduction in the emphasis on opening new mono-brand or flagship stores.

Marketing campaigns will continue to focus on digital media, with social media leading as the most important channel this year.

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