March 26, 2014 9:05 pm

Chanel and other fashion brands have big impact on watch industry

a watchmaker at work in Chanel’s factory in Switzerland

Precision: a watchmaker at work in Chanel’s factory in Switzerland

Fashion, Coco Chanel once said, is “not something that exists in dresses only”. Couture houses have often taken her at her word, expanding their offerings beyond the items that made them famous.

Chanel was one of the first fashion brands to move into watches, introducing its Première range in 1987. Others, ranging from Hugo Boss to Calvin Klein, have followed suit.

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To underline its commitment to horlogerie, in 1993 Chanel bought Châtelain, a watch assembly plant in La Chaux-de-Fonds, the heart of the Swiss watch industry. Since 2011 the company has increased the number of staff at its Swiss site from about 270 to 350. And it opened a factory in 2012 that more than doubled the floor space from 8,000m sq m to 18,000 sq m.

In recent years the notoriously secretive brand has admitted journalists to the plant, a sleek oblong complex on a windy incline just outside La Chaux-de-Fonds – a town also populated by workshops for other watchmakers, such as Breitling, TAG Heuer and Patek Philippe.

Nicolas Beau, the privately owned brand’s international director of watches, says the greater openness is in part a response to a growing desire among customers to understand the provenance of the watches.

“Especially at the high end, customers want to know where their watches have been made. We felt it was important for people to know that their watches are made in Switzerland to the highest standards,” he says. “Our manufacture is a very important part of what we do.”

Chanel does not disclose figures about how many watches it makes, or what the division’s sales and profits are. Analysts’ estimates range from 25,000 to 30,000 units a year, with revenues between SFr100m ($114m) and SFr120m, but most concede this is a rough guess.

However, Mr Beau says the impact on the watch industry of Chanel and other arrivals from the world of fashion has been bigger than such relatively small figures might suggest – total Swiss watch exports were worth SFr21.8bn last year.

“I think we have helped create a new market,” he says. “There was a time when women’s watches were just men’s made smaller. Now, there is an understanding that you need to design watches specifically for women.”

Laurence Nicolas, chief executive of Dior’s timepieces and jewellery business, makes a similar point. “We are very small. We don’t want to be arrogant, we are a drop in a big masculine market. But I think we have changed the habits of the industry by being feminine,” she says.

In terms of market share, the impact of the new arrivals will be felt at the lower echelons of watchmaking. “Chanel has had huge success and it is able to sell watches for between SFr3,000 and SFr5,000 on average, but apart from them, most of the other fashion brands’ watches have typically sold for between SFr200 and SFr500,” says Stéphane Linder, who took over as chief executive at TAG Heuer last summer.

Analysts largely agree. “They are a bit of a threat, but not to the high end,” says René Weber, an analyst at Vontobel, the Swiss private bank.

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