Watchmakers move to be in sync with times

One more Baselworld exhibition is over. A show which started as a small booth way back in 1917 has now become this mega-showcase for a glamorous industry.

The show stats would make any organiser drool with envy – 122,000 visitors over eight days, 141,000 sq. metres of display space, exhibitors from 40 countries, and over 1,460 exhibitors.

All of this housed in an ultra-modern facility designed by Basel architects Herzog and de Meuren and which on most days was so full that one could scarcely move freely.

What really makes Baselworld special is the quality of the visitors who attend from right across the world. Not just the over 1,500 journalists who swarm in, but watch business owners, executives, the movers and shakers of the industry. This is truly a global event and anyone who matters is there.

This is one business where the dominance of one country is complete. Switzerland alone exported 29.2 million watches in 2012 with an export value of SF21.4 billion ($22.39 billion). The second ranked country, China, exported 662.59 million watches in 2012, for an export value of $5.1 billion.

The average export prices per watch tell the whole story, Switzerland — $739 per piece, China — $3 a piece. Is it small wonder then, that Switzerland is the centre of the watch world, and Basel its most important showcase?

There was much newness visible in the stands with each brand showing new introductions (invariably leading to scores of people going from display to display taking pictures of what will soon be copied and sold around the world…).

The increasing crossover between fashion and watches was noticeable as was represented in products from Dior and Hermes. One also saw a willingness to look at newer materials and technologies like solar power and ceramics which are becoming increasingly mainstream.

Rose gold has popped up in the collections of all the major brands quite strongly. Keep in mind that 94 per cent of the watches exported by value from Switzerland are gold watches.

It is perhaps natural therefore that there is such a great difference between the rollcall of names with history, tradition and style which straddle the ground floor of Hall No 1 like titans — Patek Philippe, Zenith, Blancpain, Rolex, Breguet , Omega, Chopard, Hermes, et al. And the others who then find their place in the international halls, or country pavilions, further and further from the honour list based on their standing.

To be able to break into this hallowed group is the impossible dream that all other brands are chasing.

A recent survey conducted by German thinktank 2b.ahead indicates to me that this breakthrough will to be even more difficult in the years ahead. The study predicts that the long accepted pyramid structure of the market (a small luxury top, a slightly larger economy mid-section and a large mass base) is going to change dramatically.

The survey indicates that buying decisions are getting more and more influenced by online and mobile recommendations on price and quality. In the premium segment however, it found that shoppers do not follow the electronic information route, but rather base their decisions on products and brands.

This would change the shape of the sales pyramid creating a slightly heavier luxury segment with an expanded top and a much larger mass base. The economy segment on the other hand will be squeezed down the middle like a tube of toothpaste.

This is something that retailers have been feeling in this part of the world for some time, perhaps more pronounced during the slowdown years of 2008-10. Demand for the luxury end of the market remained fairly inelastic while sales at the bottom end continued quite nicely putting severe pressure on the middle segment.

That this trend is going to be even more pronounced as a result of the increasing use of electronic media as a source of recommendations is something that brand owners, retailers and the media will need to start getting used to.

The writer is a business and retail consultant with Tridayle Consult FZE.