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Baselworld set to open in a more positive climate than...

Baselworld set to open in a more positive climate than expected

Monday, 24 March 2014
By Quentin Simonet
Quentin Simonet

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4 min read

Although the strong Swiss franc, China or even Russia could cloud the picture.

An air of anxiety hung over watchmaking circles as the year began, exactly as it had in early 2013, an apprehension that lingered in the aisles of the Salon International de la Haute Horlogerie in Geneva in January. After last year’s lacklustre, not to say stagnant, growth, the industry was looking for signs, uncertain as to what the immediate future held. The situation, however, seems to have improved, with watch exports in January and February gaining 6.8% on the previous year. Enough to switch lights to green for the rest of the year.

Nick Hayek, at the head of the world’s biggest watch group, recently confirmed his forecast that the branch could gain 5% to 10% in 2014. “I’m confident,” he declared. “Watchmaking is in a strong position and continues to show its capacity for innovation.” This creativity will be put to the test during the ten days of Baselworld, the world’s biggest watch and jewellery fair which is about to open its 42nd edition with more than 1,400 exhibitors.

“Baselworld should launch in a serene and positive climate,” commented Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry (FH). With exports climbing 1.9% in 2013 to CHF 21.8 billion, Swiss watchmaking is again aiming high, and possibly looking to boost sales in volume terms which last year fell by 3.6% to 28.1 million. Switzerland exports roughly 25% fewer timepieces than in the early 1908s but the watches it does export are of a higher value. More will be revealed after the ten days of Baselworld which, according to Jean-Daniel Pasche, “remains an important indicator for the watchmaking sector.”

Three clouds on the horizon

This doesn’t preclude a scattering of clouds in the sky. Three to be exact. Not storm clouds but still with the potential to rain on the watchmaking parade. The first is the leap in the value of the Swiss franc against most other currencies, an increase with very real consequences. For February alone, the strong Swiss currency shaved CHF 50 million from Swatch Group accounts, for example. Last year, the currency effect cost the world’s number-one watchmaker CHF 171 million. This already colossal sum, equal to several times the turnover of many SMEs, could skyrocket to more than CHF 400 million according to estimates by the multinational’s chief executive Nick Hayek, announced at the recent presentation of the group’s results for 2013.

Current geopolitical tension in eastern Europe casts its shadow too. While Ukraine has never been a big market for Swiss watches, Russia is a different matter. In February, it ranked as the fifteenth destination for Swiss watch exports at CHF 45.6 million, up 28%. At this stage, no-one can predict whether sanctions taken against the Kremlin and those close to Vladimir Putin will have negative consequences on the branch, but a slowdown in exports cannot be excluded. In any event, Russians are unlikely to feel inclined to spend as the rouble plummets.

Third and last, China’s economy is still in a delicate position after a decade of fabulous growth, although FH statistics show that exports to the country did stabilise in January-February at +0.6% after dropping sharply last year. China remains the third market for Swiss watches behind Hong Kong and the United States.

An important rendezvous for small brands

Baselworld nonetheless remains a major date in the watch and jewellery calendar, despite repeated criticism about its length, and despite the cost of booths and the awkward timing of the event. All the leading brands, excluding those in the Richemont Group, unveil their latest products there. Fine Watchmaking is well-represented by the likes of Corum, Girard-Perregaux, Harry Winston, Hermès, Chanel and Chopard.

The world watch and jewellery show is hugely important in business terms. Patek Philippe, for example, has appointments with 90% of its retailers there, and orders taken during the ten days can account for up to 80% of the Geneva manufacture’s annual production. Similarly, the show’s organisers estimate that 80% of global turnover for watches and jewellery is sealed in Basel. No doubt a slight exaggeration but still a fair reflection of the weight of the event.

Baselworld also gives smaller brands a unique sounding board, allowing them to be heard above the major groups’ phenomenal marketing budgets. They are, after all, the lifeblood of the sector, given that the Swiss watch industry comprises a limited number of large and very large companies and a multitude of small and medium-sized firms: 93% of businesses in the sector employ fewer than 250 people, and 31% employ less than ten.

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