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ARIEL’S ESSAYS: Swiss watchmakers could benefit long term from Covid-19 crisis

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Over the last few, weeks one thing has become patently obvious to me – the practical effects of the COVID-19 disease pandemic will fundamentally change how the Swiss watch industry operates in a number of ways, writes aBlogtoWatch founder and editor Ariel Adams. That fact is scary because it necessitates breaking down existing notions about business while establishing new, untried practices. That said, more and more of the watch industry brand managers I am speaking to are notably optimistic at what these destructive, disruptive, and transformative times have in store for us. This is both during and especially after the pandemic period is over.

Before we discuss the positive ways that the watch industry will change as a result of the coronavirus pandemic, let’s first examine, on a practical level, what the pandemic is doing to you if you are a watch brand. First and foremost, it is halting in-store retail sales because the world’s shopping system is shut down. That means retailers, who in many ways are still the cornerstone of sales for watch brands, are delivering no business for the near future. This is damaging not only because of the loss of consumer sales, but also because of the loss of retailer orders, the money from which was used for operations and to fund expensive product-production runs.

Next, COVID-19 is affecting the watch industry from a supply chain standpoint. Luxury European watch brands have for a long time heavily relied on all manner of parts production from the Far East or simply outside of Switzerland. COVID-19 has not only slowed or halted production of countless items across China and the world; it has also slowed distribution and shipping channels, as well. No longer can luxury watch brands reliably order or expect to receive necessary parts from a large variety of foreign suppliers.

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COVID-19 is also having dramatic effects on the way many traditional luxury European firms (including luxury brands) are able to conduct the human side of their businesses. Most of these companies attempt to engender a culture of consensus and communal decision-making. While there is top-down leadership in many ways, a lot of these companies are set up so that decision making is a slow arduous process that includes a great deal of in-person meeting time. In recent years, this has actually been to the detriment of brands whose already thinly numbered staffs were asked to constantly travel between offices, cities, and event countries for relatively rudimentary meetings and projects. This, again, is based on a historic cultural preference to conduct business and make decisions face-to-face. In a time of social distancing and grounded commercial airplanes, doing this has never been harder.

Finally, the recent shift in consumer behavior away from traditional retail and media to digital media and e-commerce has accelerated like a rocket due to COVID-19’s restrictions of socializing and public shopping. This means that the majority of watch brands that have been slow to gain sophistication and in-house expertise in the areas of digital marketing and online sales will now all be forced to take a crash course (and hopefully engage in lots of healthy experimentation) in this important business area. With so much riding on a watch brands connecting to consumers online, and then subsequently selling to them, watch brand focus and dollars will need to be much more heavily invested in this area.

Will Serious Online Business For Luxury Watch Brands Be A Reality?

In response to the disruptive effects of COVID-19, many people in the luxury Swiss watch industry are saying, “It’s about time.” The implication is that most of the watch brands would not modernize if not absolutely forced. Now, given an existential threat if they do not adapt, more watch brands than ever have opened up to new realities, new possibilities, and hopefully new ways of selling their products. One major and reasonable source of apprehension is that, even before COVID-19, no major traditional watchmaker has been able to replicate traditional in-person retail or wholesale success by selling watches one at a time online. This means that watch brands cannot simply take their operations online and hope to make enough money to survive. There is, apparently, an addictive quality to selling watches in volume at wholesale prices to retailers, who themselves then have the responsibility to sell them to the final customer.

Given the number of luxury watches that are sold online each day (OK, not during the pandemic), there is no doubt in many people’s minds that watch brands can probably do much of their business online – provided they are able to both create and attract demand for their products. The troubling thing is that no one has quite figured this out yet. This worries managers who wish to avoid risk by following what they feel are established business models. These managers will need to take up meditation or be removed because trial and error is what the future calls for, not necessarily traditional prudence.

I will add that no major traditional watch brand or sales entity has actually seriously invested in trying a model in which the majority of their demand creation comes from the Internet and is then fulfilled there. The newer Los Angeles-based watch brand MVMT was able to do it by heavily investing in social media marketing to sell inexpensive products to 20-somethings. The Movado Group was so interested by the notion that it purchased MVMT for $100,000,000.

The watch industry tends to idolize Rolex, which has been slow but serious when it comes to the Internet. Rolex has a secretive, systematized approach to rolling out projects and testing ideas. That means it isn’t always clear what they are testing or what they are trying. Rolex does not sell watches online but rather seeks to empower such transactions through its army of authorized dealers. Rolex goes so far as to provide them with social media content and offers robust back-end systems that seek to create consistent product presentation experiences, no matter the retailer. Rolex might enter some type of e-commerce in the future, but so far it has merely endorsed doing so for its authorized dealers. So, for all the wisdom a brand can glean from studying Rolex, it offers few hints when it comes to creating demand and sales for other brands trying to do business on the Internet.

What Rolex probably does have correct is its policy to empower retailers who wish to sell online to do so. Watch brands aren’t good at creating demand online and selling to consumers because they weren’t good at it to begin with in the real world. Brand-operated boutiques never perform as well as third-party watch stores, and on the Internet, such trends might also prove to be true. While there are certainly some watch brands that will do well selling directly to consumers, a post COVID-19 world will probably see online sales success when third-party retailers are empowered by brands to go out themselves and seriously invest in “market creation.”

Personal experience tells me that most watch brands are still a number of years away from properly managing online marketing and sales campaigns. Too few of their senior members understand these areas, and too few of their junior members have the authority to do anything about it. I also see brands too heavily relying on third-party advertising and marketing agencies, which often cost too much and perform too little, while not actually teaching a client watch brand enough about how to go and do the process themselves next time. Smart watch brands today will court interest from retailers who have the desire and expertise to engage in online market development. This also probably means that the existing frameworks watch brands have relied upon to work with third-party retailers will need to be torn up and re-written from scratch.

Forced Digitization Will Be The Change Watch Brands Need

Much of what I just said above I’ve shared many times before when giving brands advice on how to modernize their operations. Apparently, my advice has been challenging for many to adopt. (I know, I always make people think and work hard.) Something gives me a great new hope that watch brands will soon be more receptive to such messages.

I’ve been told by more than one watch brand CEO (my special thanks to Mr. Jean-Christophe Babin of Bulgari for his insight) or manager that during COVID-19, the watch brand teams and offices around the world can no longer meet in person (as they inefficiently used to), but now hold much the same types of meetings online. And you know what? They love it. COVID-19’s forced travel restrictions and social isolation measures have compelled the people who run mechanical watch brands to far more heavily rely on modern technology to get business done. Do not underestimate the dramatic effect of all of this. A large group of people who barely used the Internet for anything interesting are now being forced to live their lives and do business online. This will naturally have the effect of turning these people into “digital natives” who may finally understand what digital marketing and e-commerce is really all about because they are not users.

From my vantage point as someone who has been working online since day one, it never occurred to me in all these years that watch brands had trouble understanding online marketing and e-commerce because they themselves didn’t highly rely on those tools as consumers. That will now all change. Given that everything you need must now be purchased online, even the most stubborn holdouts in rural Switzerland who make movement screws will now need to buy new socks on a dotcom.

After the pandemic is over, the greater efficiency of having meetings and collaborating online, as well as doing business online, will remain a new part of watch brand culture – especially for bigger brands. Needless travel will decrease and productivity overall will increase. The individual people working at watch brands will also, now more than ever, be digital consumers themselves. This, in turn, will give them personal understanding of how consumers learn about and subsequently buy things online. Such familiarity will inevitably lead to a renaissance of effective watch brand marketing – assuming the next few years sees the cash investment such a golden age requires.

New Respect For The Tradition Of Self-Reliance

I’m not Swiss, but I can tell you that from visiting the country enough times, Swiss people really pride themselves on the notion of self-reliance. Self-reliance is empowerment because it means you control your destiny and, as much as possible, you don’t need to ask permission from others when you want to do something. As you expand this concept, it very much shapes some of the more noble aspects of the Swiss lifestyle and the country’s unique form of governance.

That said, the Swiss watch industry has been very reliant on others over the last 15 years or so. Reliance on the Far East for example, has gotten the Swiss watch industry into trouble more than once. Today, reliance on too many outsiders for parts and labor has ground much of the Swiss watch industry to a halt during both tough economic times — and now, pandemic times.

The obvious solution to this problem is a return to more internal reliance on manufacturing within Switzerland. This is especially as the traditional luxury watch industry needs to protect what it does best more than ever. In this regard, one might successfully argue that in a highly competitive world, returning luxury watchmaking know-how back to Switzerland and the surrounding countries protects the legitimate viability of the entire industry in the future, when the luxury watch industry will still exist but will be much smaller than today, given the likely proliferation of smartwatches that will take up to 90% of available consumer wrist time.

I have packed much into these paragraphs, but in my opinion, the important takeaway message is that, in a world where luxury watch production volumes will likely need to decrease from the level of 5-10 years ago, and because the real value of the Swiss watchmaking tradition is know-how, that knowledge and the effort to produce much of each timepiece should return to Europe and the surrounding areas.

I will also mention that this is an opportunity for Asian watchmakers who previously made watches for Swiss brands. The better of these brands will continue — and turn into legitimate home-grown Chinese watchmakers that will sell both to Chinese consumers and to people around the world, given that China has, time and time again, proven it can make excellent timepieces, as well. Switzerland could stand to have just a bit more competition.

Even though the luxury watch industry of the future will possibly be smaller than that of recent years, it could very easily be just as dynamic and thus provide for the same international flair that makes today’s luxury watch products so compelling to diverse wearers around the globe.

A return to Swiss self-reliance (or let’s call it European self-reliance) in the context of producing European luxury timepieces is a very likely — if not natural — result of experiencing the isolation and productivity deprivation of a global pandemic. Doing so will not always be easy for brands, but it will be healthy — because it will have a positive effect on increasing the value of their products and because it will result in more of the manufacturing flexibility so urgently needed in the luxury watch industry of tomorrow.

As of this writing (early April 2020), according to most reports, the world will experience no less than one more month (possibly up to a few months) of economic shutdown in the most important markets. Big cities, the types of places where most luxury timepieces are normally sold, could have commercial restrictions for a number of months. It is also important to point out that you can’t just put billions of people in isolation with the Internet and expect them to return to old behavior when they are let out again. COVID-19 will mark a permanent shift by many consumers and workers when it comes to how they go about their days. In a lot of ways, this is good, because it allows for innovation across a host of categories. The point for watch brands is that traditional in-person retail will not bounce back to its former glory – even though it will continue to be an important part of the business. Digital-native consumers will be increasingly learning about, talking about, purchasing, and perhaps even selling luxury timepieces online. Outside of social experiences with other timepiece enthusiasts, there are now millions of watch consumers whose entire experience with learning about and buying watches is online – having never stepped into a traditional watch retail store. Watch brands will benefit from embracing a more digital way of working and doing business – even if it was forced upon them by a terrifying global flu pandemic.

About the author:

Los Angeles-based Ariel Adams is owner and editor-in-chief for aBlogtoWatch as well as a commentator and consultant to the watch industry.

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Ariel Adams

The author Ariel Adams