Mechanicals Tell More Than Time

Watch-savvy consumers seek chronographs and diver watches, multitime zone applications, perpetual calendars and even moon-phase functions.

By Michael Thompson, Senior New York editor -- JCK Online, 10/1/1996 2:00:00 AM

Fine mechanical timepieces continue to capture the imagination of U.S. consumers. The number of gold, silver and platinum automatic (self-winding) mechanical watches imported into the U.S. last year jumped more than 16% to 28,000. This increase came even though the average retail price rose to $3,593 and overall watch imports fell 9%.

These numbers indicate a strong market already, and the news may be getting even better. The audience for such timepieces seems to be widening, say many retailers.

The collectors who helped to boost U.S. interest in fine mechanical watches in the late 1980s have continued spending into the 1990s. Now they're joined by consumers interested in these high-end watches for their technical wizardry or as status symbols.

Advertising in general-interest and male-targeted media have heightened the prestige of automatics, particularly multifunction models. Also fueling interest is the evolution of watches as fashionable accessories, particularly automatic watches.

"There are fewer accessories for men," says Peter Bigler, head of U.S. distribution for Ulysse Nardin Swiss luxury watches. "The watch, some leather goods and the pen are the items that serve this purpose." When he arrived in the U.S. about 12 years ago, Bigler says, he was amazed that so many high-income executives wore "cheap plastic digital watches."

Bigler's company, along with a number of new higher-end brands and the support of jewelers with strong watch departments, have been working to change that. "I think we are now at a stage in the U.S. where consumers are interested in the intrinsic value of what they buy," he says. "Buyers are aware that they can purchase something that is less expensive and will not last long or that they can buy quality that retains value."

Retailers say today's sophisticated consumers clearly see the value in automatic or handwound, handcrafted watches, many of them with multifunction capabilities. "There is a new type of buyer for this kind of watch," says Paul White, director of the watch division at Reis-Nichols, a retailer in Indianapolis. "These are typically young men, maybe 35 to 45 years old, who read magazines, are earning more discretionary income now and who have probably had some experience with a fine watch in the past."

Many may already own a Rolex - the best-selling mechanical in the U.S. - passed down through the family. "That's one way watch owners are introduced to what we call a timeless timepiece, one that can be passed from generation to generation," he says. Others are simply conversant in fine watch brands, may own some and want to have another one.

This customer base - including those who received automatics as gifts, new aficionados and those in search of battery-free operation - is growing, say retailers. In response, more top retailers are adding fine watch lines.

TIME ON OUR HANDS

By Marcus Gibson

Swatch is testing a unique watch-telephone in a joint venture with German electronics giant Siemens.

Sweltering in the 95°#-80# heat of Atlanta, Ga., where his company was the official timekeeper of the 1996 Olympic Games, Swatch CEO Nicolas Hayek said the watch/phone would be available in 1999 at the earliest.

Hayek refused to name Siemens as his partner, fearing that other companies might copy the idea. Oblivious to Swatch's expectations of confidentiality, however, Siemens had already unveiled a design study of the watch/phone two weeks earlier at an innovation exposition outside of Milan, Italy.

The watch/phone combines Swatch's micromechanical expertise with Siemens' telecommunication skills, said Hayek. The key feature is a receiver that slots out from behind the watch and hooks onto the user's ear. A separate tiny microphone is pinned to the user's shirt. The user has to be within a third of a mile of a car or home base station, according to Siemens.

The watch/phone is expected to be the first of several electronic items to be produced under the Swatch name by a 50-50 joint venture the companies established in Switzerland, according to Siemens. Other products will include pagers and smart cards (debit cards that users "fill" with a certain amount of cash from bank accounts as needed).

Analysts view the move into electronics as a promising strategy to improve profitability for Swatch's parent, SMH. The parent company suffered declines of 1% in sales and 20% in profits last year. The new strategy could revolutionize Swatch from a low-margin, high-volume business dealing in fashion watches into a high-margin, high-volume enterprise focusing on watches fitted with electronic gadgetry.

Business and creativity:Asked to comment on the future of the joint venture, Hayek declined. "I don't make business decisions," he said with a growl. "I'm in the creativity business."

Hayek, 67, is known for rescuing the Swiss watch industry in 1980 - then under dire threat from quartz watches made in Japan - by combining the two biggest Swiss watch companies and inventing Swatch.

Hayek was the first chief executive officer to defeat Far Eastern competition in a major European sector and became the original corporate restructuralist. He has overseen a constant stream of successful collector and niche items, including luminescent watches that glow underwater for scuba divers, watches that play musical tunes on the hour and dials featuring the work of famous artists. The 200 millionth Swatch came off the production line this summer. The company also makes the Access electronic range, which allows skiers to program their watches and "access" lifts and other facilities on mountain slopes in Europe and North America.

But there's been growing concern that Swatch has never penetrated the U.S. and Asian markets as completely as Europe. And the ever-strengthening Swiss franc is squeezing profits everywhere (it has risen 35% against the lire in Italy, one of Swatch's bigger markets, for example).

That's why analysts were pleased to learn that Swatch intends to capitalize on its world brand status to persuade consumers the humble watch can become the ideal vehicle for all sorts of well-designed electronic functions. And who knows. By the next Olympic Games, winning athletes in Sydney, Australia, may be able to call their families on their Swatch watch/phones the minute they cross the finishing line.

(Marcus Gibson is a journalist based in London.)