It’s that time of year where the Richemont-hosted Salon International de la Haute Horlogerie (SIHH) is over and onto Baselworld (primarily a Swatch-oriented event). SIHH featured some pretty neat watches, especially tourbillons, and a lot of watches made with non-traditional materials. Yet, what was offered seemed unattainable; a celebration of the unattainable in a year that consumers are spending less on watches and sales are cratering.
SIHH is known for being ritzier than Baselworld, but in a year of hard-hit sales and people complaining of overpricing, it almost came across as a “let them eat cake” moment. It is no secret that sales have been struggling for many companies, with many customers opting for cheaper stainless steel versions of watches. SIHH like any other media event was an opportunity to craft a company’s image and message. While many beautiful watches were presented, we hope Baselworld has a different collection of offerings. From a business perspective, here’s what Watch Ponder hopes to see:
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Beautiful tourbillons, but focus on the realistically affordable watches.
Would you rather: Sell one watch once and make $500,000 or sell 500,000 watches makes $2 on each sale? The simple answer is that the latter will make you $1,000,000 and the former will only make you $500,000. This is the basic principle of inventory turnover — you can afford to make less profit per sale as long as you can sell large volumes. With that, I have a question — how many people are actually going to buy a $1,000,000 Tourbillion? I ask this question because the coverage of the SIHH show was dominated by expensive watches, many of which included some kind of tourbillion.
This is not unique to this year’s show. The one thing different to this year is the trend in watch sales: watch sales have been on a downward spiral for at least the previous 18 months. Consumers are moving towards paying less for the “expensive” watches, not paying MORE or buying more expensive premium watches. The Federation of the Swiss Watch Industry (aka the FH) records figures monthly. In the category they report for watches >3,000 Swiss Francs, the average value of those watches went up every year until 2016, when they fell by 4% — i.e. people are paying less for expensive watches. This methodology has nothing to do with HOW MANY watches were sold as it strictly averages the value of watches sold in this price category. It simply means people are spending less on watches.
Very few people will ever spend more than $20,000 on a watch (<.01%), but even fewer will ever spend more than $150,000, much fewer $500,000 on a watch. I have no doubt these companies will sell their $500,000 watches to someone, but the problem I see is that SIHH and Baselworld are great opportunities to highlight new products that have a chance of capturing the imagination of the average buying consumer leading them to buy the product. Yet, the headlines from SIHH were almost exclusively about ultra luxury watches. Of Hodinkee’s initial 22 Headliner watches they covered, 9 were tourbillons. What will the headlines of Baselworld be?
The goal of this approach is that the company will be seen as premium watchmakers and while the average consumer will never be able to afford the $40,000+ watch, they will settle for something much cheaper made by the company. However, let’s take a lesson from Apple’s history. They introduced the gold Apple Watch Edition smartwatch for $10,000+ and ultimately didn’t care if it sold because it signaled that the Apple Watch was a premium product. The problem was that the consumer didn’t see the Apple Watch this way. The consumer primarily bought the sports version of the Apple Watch which was actually the opposite end of the spectrum. Consumers weren’t even attempting to move up the value chain to the next best model after the expensive version. Instead, they wanted the cheaper sports version. As a result, Apple abandoned the premium gold version for the Apple Watch 2 and shifted to a sports watch focus with the Nike partnership and giving the watch more sports durability.
One of the main people/companies that I think understands this is Jean Claude Biver of TAG Heuer, who consistently has lived the message at TAG Heuer (read the article on his role in creating Watch Icons). He consistently has said the customer must feel like they are getting twice the value of what they are paying. TAG Heuer released some nice watches, but nothing extravagant. They continue to provide accessible watches with a quality that has been quickly increasing over the years. Their watches that seem to continue to demonstrate the value principle.
Give us something Original.
I won’t repeat my whole last article series on design and innovation, but the crux of the argument is this — the watches that have defined watch history and preferences were once a bold, hard shift to a new look or way of using the watch. Too many watches being released today are either:
a) Refreshes of existing watches that have been produced for the last 40 years with just slight modifications.
b) Copies of what other manufacturers are making with “me too” watches (i.e. how many more copies of the Rolex Submariner do we need?)
c) Watches that are safe! They are classic looking watches but almost indistinguishably different than competitors across multiple price points.
All we are asking is to consider giving us something new and bold and not just a refresh of the models or copies of other watches.
New materials are cool…for a year until everyone uses them.
I wrote more in-depth on this topic which you can read here. Bottom line, new material science is not enough to bring new consumers to the watch market and stem the decline in sales. Many of the watch manufacturers have spent a lot of their attention on new materials science to make watches seem more innovative or technology-forward. The problem is that these tactics don’t work. Most of the design community has already moved beyond tech and materials back to focusing on aesthetic design. This is especially critical in the watch world. Consider Rolex who introduced the ceramic bezel on a dive watch just a few short years ago. Today, almost every dive watch in most price points feature a ceramic bezel. New materials in watches aren’t able to hold their novelty long enough to become blockbusters or shift consumer preferences.
All we are asking is to give us something original, whether it’s lifetime warranties or bold new designs. Look to the micro brands — many of them are innovative and bold because they have nothing to lose. I have a lot of respect for the 2016 winners of the Watch Ponder Micro Brand Awards. They definitely don’t have all the answers, but these are five companies who are making bold moves and risky steps to provide something new in horology. Please, leave the tourbillons, leave the fancy-named materials and bring bold new designs. Design has shaped the watch industry multiples times before and can change it again.