Georges Kern, CEO Breitling, presents 2020 Novelties
Breitling’s CEO Georges Kern says “studies show people still want boutiques and the experience and the interaction. We are not robots”.

Even before the coronavirus outbreak began to weigh on the global economy, the luxury watch industry was struggling. Last year, the Federation of the Swiss Watch Industry (FHS) reported growth of just 2.4 per cent, a modest increase that masked a steep decline in volumes (down by 13.1 per cent year on year) and a drop in exports in the past quarter.

Then came Covid-19 and in March, the closure of watch factories and their global retail network. The sector, which is reliant on store sales — only 5 per cent of new watch sales are online — has been hit hard.

“We experienced a complete stop of production and deliveries,” says François-Henry Bennahmias, chief executive of Audemars Piguet, which last year reported record revenues of SFr1.25bn ($1.28bn). “Let’s say we sell 40,000 watches a year, which means around 3,200 a month or 120 watches a day. Until the end of March we’ve managed to keep that number to 80 to 90 a day. But April has been a completely different story. Now we are facing the real challenge.”

The FHS March statistics show that exports are down 21.9 per cent by value and 43.1 per cent by volume. It says worse will come when April’s figures are reported this month. Exports have dried up and Baselworld and Watches & Wonders, the year’s two big Swiss watch fairs scheduled for the end of April, were cancelled.

“The industry expectation is that the personal luxury goods market will decline by an estimated 30 per cent this financial year,” says Luca Solca, an analyst at Bernstein, the research firm.

For brands, the problems are mounting. “We haven’t done a budget because it doesn’t make sense,” says Georges Kern, Breitling chief executive. Breitling revenues were up more than 20 per cent year-on-year to the end of March, Mr Kern says, but he declined to make predictions for the rest of the year.

“Before the crisis, we were on for a double-digit increase this year,” says Rolf Studer, co-chief executive of Oris. “Now maybe it will be minus 30 or minus 40 per cent. A good result would be minus 20 per cent.”

Alongside the problems of how to manufacture, distribute and sell watches, the pandemic poses a new and perhaps bigger question for brands. “This phenomenon has had a huge impact on society,” says Mr Kern. “Now we’re asking, ‘How meaningful is a brand? What is its purpose?’ Excessive, show-off luxury will go through a tough time and luxury will become much more casual.”

Mr Studer agrees. “This crisis is accelerating a move from exclusive to inclusive luxury,” he says. “The hedonistic form of luxury will look even older after the crisis than it does now. The average price of an exported Swiss watch rose 28 per cent over two years to the end of 2019. It’s crazy.”


Some brands and retailers have used different means to keep in touch with consumers during the global lockdown. Most have turned to digital channels, particularly social media. Instagram Live events such as Omega’s SpeedyTuesday Live and Zenith’s On Air have given consumers direct access to brand executives and partners like never before.

The Fondation de la Haute Horlogerie, the organisers of the Watches & Wonders fair, sought to recreate its event online with a publicly accessible website featuring details of releases from 17 exhibiting brands. It said that in the first four days it had 44,000 unique visitors from 169 countries.

At the same time, Cartier launched a website to showcase its new designs, while in mid-April, Breitling streamed a presentation fronted by Mr Kern. “We had huge visibility from it,” he says. “In the hundreds of thousands. Our server imploded and we had to move to YouTube.”

Others have created campaigns inspired by the crisis. Oris introduced its Local Heroes initiative to recognise the efforts of front-line workers and volunteers. Mr Studer said Oris would give away 50 watches and that it had received more than 1,000 nominations from around the world. “Luxury watches are less relevant than they were,” he says. “Now is not really a time to sell watches, it’s a time to look after your community. This was about doing the right thing.”

The high-end independent H Moser & Cie, which makes about 1,500 watches a year, is producing timepieces for charity partners, who buy the watches to sell at auction and keep any profit. “In a normal year, we would do one or two of these projects, but now we’re working on 10 or 15, producing batches of 20 to 50 watches each time,” says Edouard Meylan, the company chief executive.

During the crisis, retailers said demand for the most exclusive products had not fallen away. “We’ve seen continuous and uninterrupted demand for Rolex and Patek Philippe,” says Brian Duffy, chief executive of the Watches of Switzerland Group, which has more than 120 stores across the UK and US.

Mr Duffy says that the group, which owns Goldsmiths and the US chain Mayors and last year reported total revenues of £773.5m, has once again started taking deposits on Rolex watches ahead of stores reopening in the future.

He also plans to increase the stores’ “by appointment” activity. In the long term, the industry faces a battle to return to pre-crisis levels, even when social distancing measures are lifted. Mr Duffy says the group’s senior executives have deferred their salaries during lockdown and will take only 75 per cent of what they are owed in back-payments when stores reopen.

LONDON, ENGLAND - MARCH 24: Commissioner of the Metropolitan Police Service Cressida Dick (L) walks past a closed Cartier store as she takes part in a police patrol on New Bond Street on March 24, 2020 in London, England. British Prime Minister, Boris Johnson, has announced strict lockdown measures urging people to stay at home and only leave the house for basic food shopping, exercise once a day and essential travel to and from work. The Coronavirus (COVID-19) pandemic has spread to at least 182 countries, claiming over 17,000 lives and infecting hundreds of thousands more. (Photo by Dan Kitwood/Getty Images)
The pandemic has forced most bricks-and-mortar shops to close © Getty

But Mr Solca of Bernstein says the problem is far larger. “The scale of the crisis is directly linked to China,” he says. “The Chinese accounted for close to 35 per cent of global luxury demand last year, of which 70 per cent was outside the mainland.” With tourism levels likely to remain low over the next 12 months, brands and retailers agree they will have to focus on local markets to stimulate sales.


For now, many brands are focusing their sales efforts on ecommerce. “Companies are reporting their digital sales are growing up to 50 per cent in the first quarter,” says Mr Solca.

For a brief period in April, Patek Philippe allowed some of its retail partners to sell its watches online for the first time.

Mr Duffy says he had planned to put Richemont brands Vacheron Constantin, Jaeger-LeCoultre and Panerai on to his existing ecommerce platforms later this year, but that date has been brought forward.

Grand Seiko has announced it would begin selling watches online in the UK this month.

At the end of April, Omega said it would extend its ecommerce platform across Europe. Previously it had only sold watches online in the US and UK. “Ecommerce sales have actually performed above average in both markets despite the challenges of distribution in the current climate,” says chief executive Raynald Aeschlimann, without citing figures.

Mr Studer says Oris’s eShop is outperforming, while Mr Duffy says the Watches of Switzerland Group’s ecommerce business is up by more than half compared with the same period last year. He adds, however, that online sales accounted for just 8 per cent of group revenues before the crisis. Mr Kern says lockdown and social distancing will stimulate long-term growth of online sales but only to a point. “It will increase to 10 to 15 per cent maximum,” he says. “Studies show people still want boutiques and the experience and the interaction. We are not robots.”

Mr Bennahmias of Audemars Piguet agrees. “I know collectors don’t want to deal with gloves and face masks,” he says. “But out of 40,000 watches we make, do I want to sell 10,000 online? No. The internet is a tool but not the end-game.” He says that during the lockdown he has delivered watches directly to his top customers. This enabled him to sell about 40 of the new [Re]master 01 special edition watches.

Despite the effect on the economy, brands and retailers profess optimism. “When you look at the Swiss watch industry and the crises they’ve faced, they’ve always emerged stronger,” says Mr Duffy. “This industry will fare much better than most because there’s no seasonality in the product.”

Mr Bennahmias says the luxury watch industry’s biggest asset is emotion. “As long as you’re touched by something that delivers an emotion,” he says, “whether it’s a product or a fancy restaurant — you are still going to spend that money.”

“People will come back because they are human and want to enjoy life,” says Mr Kern. “There will be a rebound in consumption. Hopefully it will be soon.”

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