With the Swiss franc now hitting record levels against the
dollar, Switzerland-based watch manufacturers tell JCK they will have no choice but to raise prices.
The franc, traditionally viewed as a “reserve currency,” has
risen 25 percent since the beginning of 2011, according to ForexNewsNow.com,
with a 16 percent rise against the dollar in the last month, according
to The Daily Telegraph. On Aug. 3, the Swiss National Bank said
it considers the franc “massively over-valued,” and will take measures against
its continued rise.
Still, the franc’s strength has posed a real problem for
manufacturers, according to Steven
Kaiser, president of Kaiser Time, which consults watch brands.
“It’s going to require a lot of
creative solutions,” he says. “At some point, you can’t keep losing money. But
you can’t keep raising prices either.”
Even so, watch manufacturers—some of whom have already
raised prices—say they plan to pass along some of the added costs.
“We are anticipating a price increase come mid-September,”
says Stacie Orloff, president of Bell & Ross America, who says her company
hasn’t yet raised prices. “We haven’t
made any decisions other than we will be anticipating an increase of 5 to 10 percent.”
And she thinks she’s not alone.
“From what I hear, all my competitors have either risen
prices already, or are anticipating doing it again,” she says. “The franc is just
out of control.”
Jean-Claude Biver, CEO of watch brand Hublot, also plans a
price increase this December.
“We don’t raises prices at the same speed that the dollar is
weakening,” he says. “We prefer to suffer in margins rather than to suffer in
turnover. But there is always a point where you have to pass it on.”
Still, he notes that the franc’s rise doesn’t seem to have
dented his business.
“The impact is probably there, but we, and the rest of the
Swiss industry, are on track to have the best year in our history,” he says.
“So you can assume the impact is not as much as it could have been.”
“We are on the high-end, so we are somewhat protected,” he
continues. “If a watch retails for $21,900, and it goes up to $23,600, that is
a 10 percent difference. But the price sensitivity is not as dramatic as it
would be on the lower-end.”
Biver also feels the Swiss franc’s biggest increases are
behind it.
“I feel we are close to the summit,” he says. “It may still
go up another couple of percent, but there is a national consensus not to
defend the franc, and the Swiss bank is fighting this with all its power. The
Swiss franc is hurting not just the watch industry—it’s killing Switzerland.”
But for now, Hank B. Siegel, president of Lawrenceville,
N.J.–based Hamilton Jewelers, hopes that watch companies remain cautious.
“Most watch companies have had at least one if not two
price changes already in 2011,” Siegel says. “The first price increases weren’t a
challenge. But it will be an issue if prices rise any further.”
The place where it will have the most impact, he feels, is
on the middle-end and the so-called “aspirational” consumer.
“You have someone who has saved up for a $6,000 watch for a
year,” he says. “And now they are told that watch is $7,000. They may just say,
‘Forget it. I’m going on vacation.’ At what point does the customer say, I
just don’t see the value of this item?”
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