Transcript
David (0:00)
Hello everyone. Bonjour tout le monde. It is David, the Real Time Show's resin provocateur, back at you with another article. It's been a long time since I last shared my thoughts with you back in the days of Watches and Wonders. And that's not because the watch industry hasn't seen numerous new releases since then. Rather, it's just that the dynamics of the watch industry are highlighted in that last article. Namely, the watch industry targeting a smaller and smaller and wealthier and wealthier segment of the buying population haven't really changed that much. But you know, there was one thought as I was putting that article together that got left on the figurative cutting room floor. There's one name in the watch industry that we hear all the time, but I don't think we quite give it as much credit as it's due precisely because it is so big and so well known. Enough with the suspense, let's just get right into it. The last piece I wrote for the Real Time show came hot on the heels of Watches and Wonders, and in that article I lamented a trend which seemed to have come to a head in Geneva. You know this theme well, because it's a recurring subject in my writing whereby the industry's novelties, with as always some exceptions, were targeted to an increasingly narrow, deep pocketed group of buyers. One of the thoughts that was left on the figurative cutting room floor when I published the Watches and Wonders review was that there was one company, or rather group, bucking that trend, but you have to look beyond the headlines to find it. Indeed, as I was trying to poke holes in my article by coming up with counter examples to my thesis that basically watches are for rich people now, most of the names were not present at the Tissot, Hamilton, Longines, Mido, Certina, yes, Nomos and Tudor and a few others had something for the laypeople who, let's remind ourselves in the crazy world of luxury watches are laypeople who still have several thousand dollars or euros or whatever kicking around. Exceptions aside, I kept having this recurring thought that the Swatch group, for all the ire it draws sometimes, is perhaps the best candidate to perhaps literally save the long term fortunes of the watch industry Again, today we pass Swatch boutiques more or less without thinking about them, unless you want a moonswatch, but more on that later. But people like you and me know just how significant that brand and its literally cheap and cheerful watches were. The 1970s and 80s marked a tumultuous period for the Swiss watch industry, which was under siege from affordable and highly accurate quartz watches produced primarily by Japanese companies. Traditional mechanical watchmakers faced an existential threat, and many historic brands teetered on the brink of collapse. Some of them even disappeared entirely. Enter Nicholas Hayek and Jean Claude Beauvaire. By introducing the swatch watch in 1983, Hayek provided a lifeline to the industry. The Swatch was not just a watch, it was a statement. Its innovative design, affordability and colorful, playful aesthetic captured the imagination of a new generation of watch buyers. Right around that time, Jean Claude Bivert was beginning his arc in the watch industry by buying the rights of the Blancpain name and eventually driving home the message that a watch was no longer merely a tool, but rather an object of desire. Swatch and Blancpain are two very different organizations, but the idea behind them was the same. The Japanese dominance of quartz was bound to fizzle, because when all you focus on are technical specifications, the race to the bottom begins. But when you focus on design and status, well, then you can differentiate yourself and with some sustained marketing, start counting revenues. And it's perhaps because of the similarities in philosophy that Blancpain ended up joining Swatch watches in the Swatch group. Two very different companies attacking an existential threat from both sides of the price spectrum and swinging the pendulum of the watch industry from selling essential tools for organizing your day to symbols of individualism and maybe even triumph at the game of life. You know the rest. The Swiss watch industry was revitalized, and in the ensuing decades, brands have doubled down on their strategy of marketing watches as a luxury item. With the rise of social media and the global pandemic, only turbocharging the resulting prices. Fast forward to today and the watch industry faces a different kind of challenge. Illustrated starkly by the releases of watches and wonder, luxury watch brands have increasingly distanced themselves from the aspirational consumer. Though secondary market prices for iconic names such as Rolex, Patek Philippe and Audemars piguet have softened, MSRPs for all the other big names continue to climb, in my opinion, even more so arbitrarily, when we're talking about already released models such as the Omega Seamasters 300M or the JLC Reverso. This has created an environment where owning a high end mechanical watch has become an unattainable dream for many enthusiasts. And yet, if you pay attention to what I think are the most interesting recent releases, you see the narrative forming around the Swatch group again stepping up to bring new people into the hobby and swinging the pendulum of the watch industry back a little closer to where it was several decades ago. The Swatch Group's diverse portfolio is uniquely positioned to bridge this gap. Brands such as Longines, Hamilton and Certina are renowned for their rich heritage, and when you combine that with the economies of scale the Swatch Group provides, you end up with absolute banger. Crucially, unlike luxury groups such as LVMH and Richemont, the Swatch Group has conscientiously segmented its brands by price tier, not just among the high end, but really from the low to the high end. And recently the value from some of these brands has been substantial. Off the top of my head you have the smash hit PRX line from Tissot, which has quickly adapted to customer feedback by offering different sizes and colors since the original SKUs were released. Then you have basically the entire Longines Spirit line. Of course you have the Hamilton Khaki Field line, there's the recently released Mido Ocean Star 39, and then you have the Certina DS Super PH1000 meter, especially in the absolutely gorgeous new STC variation. Perfect for this summer and every summer for the rest of your lifetime. I'm sure I'm even forgetting many other similar watches, but with every single one you get all the qualities that come to mind when we think about why we like watches in the first place. These are objects that will last a lifetime with proper care, that come from a rich lineage, that are fairly priced for what they offer, and then you can buy today, no questions asked. And as a bonus, you won't get mugged for wearing any of these, and you won't have to associate yourself with any of the douchery surrounding a Rolex or an ap. And yes, I said douchery. I've been critical in the past of the Swatch Group's higher end brands and how they manage their portfolios. But at the more entry level end, I don't see anything other than an organization firing on all cylinders whose goal is to sell as many watches as possible. Imagine that Sylvain d'lat, the CEO of Tissot, said as much himself recently when he announced that his target was to have the brand sell 5 million watches a year, a large number when you think the Rolex is estimated to sell about a million. And then you have the famous moonswatch. I'm shocked that this was greenlit in the first place, but even if sales potential was a key argument in moving the project forward, I'd like to think that someone, maybe even multiple people somewhere in the Swatch Group offices or the Omega and or Swatch factories were telling themselves, you know what? For everyone that wants a piece of the magic, but whose life doesn't let them have it quite yet, this is for them. It's corny, but the Moonswatch isn't so different from the gorgeous Certina, a piece of watch industry magic and desire made available to everyone by perhaps the only group with the IP and capabilities to make it happen. And that's of course the Swatch Group. I completely understand how we could take the Swatch Group for granted and how each of its releases could be met with a collective shrug. But make no mistake, to me, they are the most important game in town. Rolex, AP and Patek may be the companies forming today's Zeitgeist, but the organization that's priming watch buyers to keep buying those storied brands pieces in 20 or 30 years, well, that's the Swatch Group. There's one missing piece of the puzzle here for the Swatch Group and that's what I call the handoff between brands. Just Tissot and Longines and its higher end brands such as Omega and then even higher up than that, Blancpain and Breguet. Whereas the bread and butter names seem to know exactly what they are and who they cater to and aren't afraid to be really aggressive when offering value for money, their luxury focused counterparts seem to have gotten quite lazy. I know it's controversial, but I've said this before. There's only one strategy it seems like keep prices high and raise them if you can. And repeat. If the Swatch Group could just get their intentions and strategies right for these names, Omega especially, they would have the ideal pipeline set up with which to grow the next generation of watch loving consumers. For now, anyone starting to get into watches will top out at a Longines and then have a long, long way up to find their next piece. But you know what? Is that really so bad? I don't think so. And if you'll excuse me now, I'm off to go drool over that Sertina again. And that is it for today's article. I've shared my thoughts. Now it's your turn. As always, we have several ways for you to get in touch with us. You can use Instagram. My handle is D a V A u c H e R Rob is at R o B N u D D S and Alon is at A L o n B e n J o S e P H. You can also get in touch with us via email. That's just our first names herealtime show.