Making Up for Lost Time

RAPAPORT... When Covid-19 hit Europe and the United States just over a year ago, the watch world took an immediate beating. Sales plummeted globally, and not long after that, Swiss manufacturing facilities had to close for several weeks or more, causing a loss of production. Luckily, a year later, the industry seems to have stabilized - thanks in part to customers having more disposable income that they didn't spend on dining out or travel. The latest numbers from the Federation of the Swiss Watch Industry are encouraging, all things considered. Initially, Switzerland saw a drop of about 24% in the value of its watch exports when the pandemic hit, but the rate of decline slowed in the late summer months and into fall. By December, exports for the month were down only 2.5% year on year, coming to CHF 1.72 billion ($1.93 billion). For 2020 as a whole, the sector's export value was 22% lower than the year before - in line with what Pascal Ravessoud, secretary-general of the Fondation de la Haute Horlogerie (FHH), had been expecting."When this began, I predicted that we would end the year around 20%," he says. "In March, we had this crazy drop in numbers that took everyone by surprise. It was like a minus 70. But that improved quickly. People had enough of this confined life and wanted to treat themselves." Production dilemmasOf course, the shutdown of manufacturing for many weeks led to lower production numbers for all brands, and some - especially smaller companies that had been facing challenges before the pandemic - may not be able to recover. Larger brands that are part of a conglomerate, however, or independents that can act quickly and adjust their strategic business plans, are expected to survive the setbacks. Patek Philippe is a case in point. Its production for 2020 was down almost 30% from 2019 due to the closures and the time it took to get up and running again with social distancing and sanitary measures, according to CEO Thierry Stern. However, the company has "a lot of reserve cash, and when we had to shut down for a month and a half...it was okay. I knew I had to decrease the quantity [of watches produced] for the year. The target was about 60,000 to 65,000 pieces. I couldn't do it losing that time, but I am still okay with what we produced." In fact, the brand unveiled one of its most complicated watches to date at the end of 2020: the Grande and Petite Sonnerie Minute Repeater Ref. 6301P. Many of the other large brands took the slowdown in stride as well, and intend to increase production levels in 2021. A good number of them also re-strategized their rollout plans. In the past, they would announce new watches at the trade shows in January or March, even though the items wouldn't actually be in stores until late summer or fall. Now, several companies have opted to introduce their new products closer to the store-release date."One of the big factors that helped business along during the summer and fall was the whole 'buy now, wear now' concept. Customers want the watches when they are announced, and the brands did a good job of getting them into the stores closer to the unveiling, rather than announcing them six months ahead of time," says David Hurley, executive vice president of retailer Watches of Switzerland Group USA. For instance, he notes, Tudor delivered its Black Bay Blue model under embargo so the product would already be in stores at the time of its announcement. "They executed it beautifully, and we had great sales." The digital dynamicThis shift in product and launches is just one example of how the watch industry has changed its way of doing business to benefit retailers and end-consumers. Another shift has been the industry's swift adoption of digital platforms. Watch brands and retailers that didn't already have a strong digital presence learned quickly how to optimize today's technology. Not only did they begin using Zoom for presentations and business meetings, but many of them also established e-commerce sites and started exploring the realm of virtual experiences."We set up a host of virtual appointments and even set up a payment program so [clients] didn't have to share a credit card [with us]," says Hurley. "We did lots of virtual events, some that weren't even watch events." In one instance, he relates, Watches of Switzerland teamed up with Japanese brand Grand Seiko and sent care packages out to preferred customers, containing fresh fish and everything they needed to make sushi. They then held a presentation with a top sushi chef to lead the adventure.Stephen Silver Fine Jewelry in California is another retailer that has embraced digital. "One of our goals for 2020, even before the pandemic, was to ramp up our digital presence, and we were already investing heavily on the digital side," says company president Jared Silver. "Social media played a big part in our communication with customers, and we will continue this interaction. With everyone confined to their houses for 10 months, they flocked to social media, and it gave us a new direct line of access to people who in the past were busy traveling for business." The company got creative with its digital outreach, according to Silver. In addition to arranging private virtual meetings for collectors to talk with brand CEOs and get sneak peeks at new watches, it developed a weekly newsletter and devised some outside-the-box promotions. "We sent out stimulus checks to our top customers, giving them credit to the store," he relates. "Depending on their history with the company, the customer got checks that ranged from $500 to $5,000. We had a lot of calls, and customers really loved the creativity. It generated nice revenues as well." Still, in-person visits remain on the horizon. "We know a certain part of the business went online and will probably stay online forever, but we also know that people are excited to get back into the store," Hurley says.Secondhand salesAnother realm where retailers and brands are seeing an uptick in interest and sales is pre-owned goods. In fact, Watches of Switzerland has invested heavily in this arena, purchasing Analog Shift, a site that specializes in procuring and selling secondhand timepieces. Similarly, Stephen Silver Fine Jewelry has been actively buying items from private collectors and working with brands to offer customers certified pre-owned watches. Following the incredible success of watches at auction in the past year, more and more retailers are finding pre-owned to be lucrative. In many cases, a strong secondhand-watch selection can contribute as much as 20% of a store's business. This is a trend that most watch pundits say will continue as people who have grown tired of their timepieces decide to sell them, and as others seek watches from desirable brands without the hefty price tag.Exhibition alternatives Unfortunately, with the new strains of the virus and the slow progress of vaccinations around the world, most watch exhibitions for 2021 have been postponed or are going digital again. This is a huge disappointment for the industry as a whole, as many believe digital can only go so far in the luxury world. People want to see and touch watches, to interact with the designers, the watchmakers and the CEOs, and get immersed in the brand cultures. The lack of such interaction is one of the drawbacks to digital shows, but another is that some of the brands have not quite figured out yet how to pare down their presentations. Attention spans are short, especially now, and companies are realizing they need to get creative in how they showcase their new wares.One conglomerate that struck a good balance was LVMH at its virtual Watch Week event on January 25, the first watch show of the year (last January, it held the event live in Dubai). The CEOs of Hublot, Bulgari and Zenith gave opening presentations of about 30 minutes each, featuring a virtual walk-through of their factories. The video effects were lively enough to keep people interested, though there was still no opportunity to go hands-on with the watches. Meanwhile, Watches & Wonders Geneva in early April will be fully digital for the second year in a row. "It was the only way to manage given the pandemic," says Ravessoud, whose organization runs the luxury show in the Swiss city. "I don't see how we can travel yet, and I don't see how other shows will happen, either, in the first half of the year, even with the vaccine coming."The product presentations for that show will begin on April 7. As for the recently postponed HourUniverse watch fair - formerly Baselworld - no new dates have been officially set as of press time, but organizers have said it will be "a few months" later than its original April schedule. In America, the JCK Las Vegas jewelry show, which usually occurs in May/June, has already announced plans to move to August. By then, the hope is that the virus will be under control and travel can resume safely.Despite the drawbacks, virtual shows are a necessity. "People have had enough of this confined life, and if they want to pretend to have a normal life, they'll go to the shows digitally. It's the way it has to happen," says Ravessoud. In post-pandemic times, he adds, we will see live exhibitions return, most likely alongside digital launches. "I don't believe in a world that is black and white, where we can't have a mix of both."This article was first published in the March 2021 issue of Rapaport Magazine.Image: MB&F Horological Machine No. 9 Sapphire Vision.