The buzz from Baselworld: Smartwatches and the Swiss franc take centre stage

by charlene_voisin | July 1, 2015 9:00 am

By Jacquie De Almeida

[1]
Baselworld 2015 opened with its usual fanfare, but the strength of the Swiss franc against currencies like the euro may have put a slight damper on things.

According to show organizers, about 150,000 people attended the fair, a drop of three per cent over last year’s figures. Traffic in Hall 1—which features powerhouse Swiss brands—appeared less busy than in previous years according to some, with many pointing to higher travel costs as the reason for the turnout. Others blamed economic conditions in places like Russia and Asia.

Now in its 43rd year, the fair comes just over two months after the Swiss National Bank removed its three-year cap on the Swiss franc. The surprise move saw the currency soar instantly by 30 per cent against the euro and hit a record high, causing shock and outrage among economists and business leaders. Swatch Group’s Nicholas Hayek described the aftermath as a ‘tsunami’ and a devastating blow for Swiss exporters and tourism.

Still, François Thiébaud, president of the Swiss Exhibitors’ Committee, predicted a strong year for the Swiss watch industry.

“[I’m] convinced this year will be a positive one for the industry because everyone has continued to innovate, not just with creating products, but also with intensifying communication with the media and buyers,” he said at the end of the eight-day fair.

It’s too soon to tell what effect the Swiss franc will have on export figures for the remainder of the year. According to the Federation of the Swiss Watch Industry (FH), Swiss watch exports for January showed an increase of 3.7 per cent, followed by a two per cent drop in February, which mirrored other export sectors. Even so, watch exports were up one per cent the first two months of 2015.

Sean Polan, national sales director for Axessimo International, which distributes Maurice Lacroix and Davidoff, is anticipating the Swiss franc saga will have a definite effect on sales, which when coupled with Canada’s own currencies woes, may make for some trying times.

“I think things will be a little more difficult over the next two to three years,” says Polan.

“People will be more careful in terms of what they buy and their spending budget won’t be as high. At some point, you have no choice but to increase prices, which a lot of brands have done already this year. With our Canadian dollar being weak, it’s costing us more money to buy product, even though our pricing has not increased with the brands we distribute.”

Virginie Riot-Billet, vice-president of Gc International, says that based on retailer feedback on its latest models, things look optimistic for 2015.

“This reception bodes well for the rest of the year and we feel confident the market is still buoyant for Swiss watches as long as they provide some point of difference in their look and offer a good quality/price ratio,” she explained, adding that offering lower price points will also helping to cushion sticker shock at the retail level.

Trend news from the aisles included a return to more reasonably sized cases, an about-face from previous years where oversized watches were the norm. Designs also leaned toward vintage, while open work or skeletonized dials allowing a peek at movements were also popular. If you scanned the collections of many brands, watches featuring blue dials or blue leather straps were sure to be among this year’s offering.

But without a doubt, the talk in the halls centred on the smartwatch showdown between Switzerland and Silicon Valley, as each aims to infiltrate the other’s domain by highlighting their own strengths and the other’s weaknesses. With a record number of 4300 journalists attending this year, many speculated the world’s press converged on Basel eager to report on a wave of smartwatches introduced at the show from Swiss brands, including Frederique Constant and Tag Heuer.

Sian Williams, president of Bulova Corp., says smartwatches were definitely the subject of discussion at the show and in the company’s booth in particular, with clients asking if the brand would be designing a wearable of its own.

“They’re certainly asking us, and since we’re owned by Citizen, we’ve been told we can have a smartwatch in 18 months if we need one,” she said. “But we’re not ready to jump on it just yet. It’s not our position to chase it at the moment.”

Polan says he believes smartwatches are a temporary threat to the traditional watch sector, particularly when it comes to Apple’s 18-karat gold model, which starts at $10,000 US.

“People spend that kind of money on a watch that, in time, becomes an heirloom piece and passed down,” he adds.

Michael Budge, general manager of Rodania Canada, agrees smartwatches will be popular among younger demographics looking to satisfy their craving for something cool, but adds that at an entry-level price point of $519 Cdn for the 42-mm model, it may be too expensive a purchase.

Given how the Swiss watch industry has tried to play down the smartwatch phenomena over the last few years, Budge says he was surprised to see so many wearables at Baselworld.

“I think companies are just trying to get every part of the market,” he adds. “Although many people may not like it, it’s our reality.”

On the home front, Budge says business is better in some parts of Canada than others. In places like Alberta, which has been hit hard by collapsing oil prices, luxury spending isn’t at the top of the list of priorities among consumers.

“It’s definitely a struggle,” Budge says. “Jewellers are not buying and if they are, it’s very little. It is certainly tough this year in provinces other than Quebec. A lot of jewellers are kind of stuck with last year’s inventory and they’re not going to buy more until they get rid of what they have.

I think it really depends on the economy of the location you’re talking about. Northern Quebec is doing really well, but there are a lot of contracts and a lot of money up there.”

Budge says Swiss brands offering mid- to lower-range price points—particularly under $1000—should feel less of an impact where the Swiss franc is concerned.

“If people have a little less money to spend, customers will look for brands they can afford,” he adds.

Chris Iliopoulos, owner of Sothil in Montreal, which distributes U-Boat and Welder, says exchange rates are impacting pricing models, leaving brands to determine how to either absorb the additional expense or lessen the impact at the retail level to remain competitive. Distribution companies like Sothil that purchase product in U.S. dollars are really feeling the impact of a weak Canadian dollar. He says one solution proposed by his suppliers is to pay for inventory in a currency that has a better exchange rate against the Canadian dollar.

“If I increase my prices by 25 per cent, people won’t buy my product because it’s too much of a jump,” he says.

The Canadian jewellery landscape may be in for a tough year, but with CJ Expos Toronto and Edmonton and Expo Prestige coming up in August, exhibitors will be putting their best foot forward with product to help woo consumers to stores.

Source URL: https://www.jewellerybusiness.com/features/the-buzz-from-baselworld-smartwatches-and-the-swiss-franc-take-centre-stage/

---