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What the Swiss watch industry thinks

The first Deloitte Swiss watch industry study

Zurich, 13 of November 2012

Deloitte, the professional services firm, conducted personal in-depth interviews and an online survey with 50 Swiss watch executives, analysing the Swiss watch industry and its business outlook.

The Swiss watch industry has been an extraordinary success-story: Exports were at a record high (19.3 billion CHF) in 2011 and at a monthly record (1.97 billion CHF) in July 2012. However there is a gathering sense of caution amongst Swiss watchmakers after September 2012, the total value of exports declined for the first time in 30 months. Deloitte has chosen this interesting time to conduct personal-in-depth interviews and an online survey with 50 Swiss executives to analyse the economic outlook of the watch industry.

Economic outlook – cautiously optimistic

The executives who responded look cautiously optimistic into the future, with 31% being optimistic for the business outlook for the next 12 months, but a growing concern about the progress of the global economy.As Jean-Francois Lagasse, Deloitte Partner in Corporate Finance, explains: “Worries about a possible growth slowdown in the main export markets are persistent with the executives. But the growth of the Chinese and other emerging markets is still high – and there are still untapped opportunities for the Swiss watch industry in many of these markets including China.” According to the survey respondents, Asia will keep its important position, 58% are expecting the strongest export growth in Asia in the next 12 months.

The high Swiss Franc

The high Swiss Franc is a challenge for the watch industry – especially for the smaller brands and the manufacturers – as there is no escape from the impact of an appreciating currency. Only some of the bigger brands have proven powerful enough to share exchange rate risks with distributors and consumers. However even for them a further strengthening of the Swiss Franc would represent a major challenge.  But Howard da Silva, Lead Partner Consumer Business at Deloitte, is optimistic for the future of the watch industry: “Though times are tough, the range and depth of the business strategies of the Swiss watch industry remain formidable. This industry has managed the ups and downs of fate and fortune for more than 400 years – and there are no signs of it ceasing to do so.”

Challenges in supply

With the strong growth, supply side risks deserve special attention: More than 30% of the executives consider the shortage of skilled labour as a significant risk to their company. Another risk is the availability of third party parts and movements. This can be influenced by government or regulatory decisions (such as the COMCO ruling to allow the Swatch Group to reduce output, or “Swiss made” legislation aimed at protecting the Swiss brand). The COMCO decision gets a mixed reception in our survey, while the “Swiss made” legislation is widely supported.

Almost all watch executives believe that verticalisation is a growing trend: To alleviate sourcing problems (in production and skilled labour), large groups and brands have focused on vertical integration. Almost two thirds of respondents expect the M&A levels to rise in the next 12 months – by formation of large supplier groups as well as acquisitions of larger producers by brands.

Trends in sales and marketing

Optimisation of sales channels is a priority for our survey participants, but many also recognise the rising potential of social media. Several respondents indicate plans for online distribution through e-boutiques. The big sales trend of recent years – mono-brand stores – is still going strong, with new openings planned around the world.

About the Deloitte Watch Industry Study

The Deloitte Swiss Watch Industry Study 2012 is based on personal interviews with executives and an online survey. The personal interviews were conducted from June to September 2012. The online survey was conducted in September 2012. A total of 50 watch executives participated, 52% of participants work for component manufacturers, 30% for a brand and 18% for companies across the value chain. Two thirds of participant’s companies sell watches at a retail price of more than 5’000 CHF, one third below.

About Deloitte in Switzerland

Deloitte is a leading accounting and consulting company in Switzerland and provides industry-specific services in the areas of audit, tax, consulting and corporate finance. With approximately 1,100 employees at six locations in Basel, Berne, Geneva, Lausanne, Lugano and Zurich (headquarters), Deloitte serves companies and institutions of all legal forms and sizes in all industry sectors. Deloitte AG is a subsidiary of Deloitte LLP, the UK member firm of Deloitte Touche Tohmatsu Limited (DTTL). DTTL member firms comprise of approximately 200,000 employees in more than 150 countries around the world.

 

Note to editors

In this press release references to Deloitte are references to Deloitte AG, a subsidiary of Deloitte LLP, which is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities. Please see www.deloitte.ch\about for a detailed description of the legal structure of DTT and its member firms.

Deloitte LLP and its subsidiaries are leading business advisers, providing audit, tax, consulting and corporate finance services through more than 12,000 exceptional people across the UK and Switzerland. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel.

Deloitte AG is recognised by the Federal Audit Oversight Authority and the Swiss Financial Market Supervisory Authority. The information contained in this press release is correct at the time of going to press.

Contacts

Name:
Marisa Steiner
Company:
PR & Communications
Job Title:
Phone:
+41 58 279 73 08
Email
masteiner@deloitte.ch

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