As the watch industry gathers in Geneva for the 25th annual Salon International de la Haute Horlogerie, executives wondered whether the continued appreciation of the Swiss franc would pose a real threat to the country’s watchmakers.
Federation of the Swiss Watch Industry president Jean-Daniel Pasche says the group was “quite surprised” by the Swiss National Bank’s Jan. 15 decision to remove its three-year cap on the franc, which caused the currency to hit record levels against the euro.
“We are very anxious about the consequences in the Swiss watch industry,” Pasche tells JCK. “We fear negative effects on our exports.”
The rise of the Swiss franc was a prime topic at SIHH, though watchmakers cautioned they would wait until the currency settled before making any price moves. While there were unconfirmed rumors of retailers canceling orders, most felt that all Swiss manufacturers were in the same boat.
“We will survive because all of the competitors are Swiss franc–based,” says Daniel Riedo, CEO of Jaeger-LeCoultre. “The problem is the same for everybody.”
Like many manufacturers, Riedo is taking a wait-and-see approach.
“It’s more of a problem of how to stabilize, how to fix the differences between the three continents—the three main zones of distribution,” he says. “We will wait for [this week’s] announcement of the central bank and what happens with its strategy. Then there will probably be a week or two of speculation in terms of currency exchange. And after that we will decide which steps to take.”
We likely won’t see price increases in the United States, predicts longtime industry consultant Steven Kaiser.
“I would advocate not doing it,” says the president of New York City–based Kaiser Time. “You can’t raise prices in a soft market. With the way sell-through has been, the resistance in all parts of the market, I don’t think raising prices is a recipe for success.”
Of course, this will mean the watchmakers will take a margin hit, but “if you don’t sell, you don’t get any margin,” he adds.
“Compared to other parts of the world, the U.S. is pretty good,” he says. “Europe is a basket case, China is still okay but slowing. This is where the business is. This is the best market on the globe. Which doesn’t mean it’s a good market.”
Other markets are a different story. Bloomberg is reporting that Rolex and Patek Philippe are considering raising prices in Japan. Expectations that prices will rise in Asia has led to increased demand for certain timepiece brands in Singapore.
Rolexes “flew off the shelves over the weekend after the Swiss franc’s appreciation last Thursday sent Singapore watch enthusiasts on a buying spree before retailers adjusted their price tags,” said Straits Times.
Additional reporting by Victoria Gomelsky.