Friday, August 23, 2019

Deja Vu All Over Again

Am I the only one who remembers the 70s and 80s?  

With the latest results from the FH, I am more and more convinced that maybe myself and a handful of other people are the only ones who do.  Right now according to the FH and some of the reporting from some very fine (sincerely) and respected writers in the industry it would be easy to keep sipping the Kool Aid and assume that everything is fine.

Shamelessly borrowed from the world-wide info web
Sometimes it is easy to go for and accept the simple answer without really looking in depth at what is hiding just below the surface.  So allow me to yank this particular band aid off.

To quote that other great commentator on the watch industry, Lily Tomlin -

Things are going to get a lot worse before they get worse

FACT 1 - Exports do not equal sell through.
Anecdotal evidence from several sources that I tend to put a lot of faith in report that the sell-through in Hong Kong has plunged in some stores by 80% over the past 8 weeks. Now the easy argument would be that this is the reason for the downturn in exports. But if you look at the graph from the FH over the past YEAR, you will note that the export numbers have consistently been trending DEEP SOUTH. That's right pals and gals, long before the protests started in Hong Kong. Now recent events have firmly planted the accelerator to the floor. So sorry great watch authority from Outlet X, you're not looking at the whole picture.

This is real boys and girls, and it will have a massive impact on future shipments over the next 6 to 12 months.
FACT 2 - The fewer watches you manufacture, the fewer you can sell (whether through authorized outlets or our old friend the grey market).
Based on the Swiss Federal Institute of Statistics and the Swiss Watch Federation the Swiss Watch Industry exported in 2014 28,582,190 MILLION watches. Now add to this quantity what was sold in the Swiss domestic market (which is estimated to 1.4 Million) and we're at around 30 million. 

Now for the Pepsi Challenge -
Shamelessly borrowed from the world-wide info web
Let's compare this to the current reporting of the Swiss Watch Federation. We are projecting to be slightly over 1/3 less in terms of manufacturing. 
Now, before you assemble a care package for your favorite CEO who treats you to that tasting menu each year during your visit... oh wait, that's right! You are NEVER going to be feted at one of these press carnivals.  Sorry...

At any rate, the CEO is covered, it's cheaper for the brand to keep paying him or her to do nothing. The sales manager and heads of pr and marketing will not have to start driving used cars or shopping at the Salvation Army. But let's talk about the people actually making those watches in (most typically) assembly houses, and some who work for the big brands. Believe me, those folks will get the axe long before brand x cancels their America's Cup partnership, their Wine Country press junket, or their brand ambassador from the Marvel Universe. You might not hear too much about these people in terms of the Swiss employment statistics. Why? Well also curious to relate, a lot of the people who assemble your watch in Switzerland are not, by actual definition, Swiss. Italian and French citizens cross the borders every day to work for Swiss companies making Swiss watches. It's not to say that they don't count, but in terms of Swiss employment figures, let's just say it tends to skew the graph plot.

As one Swiss insider stated, "the tissue is melting away!" But according to the Swiss Watch Federation, and the reporting of some tail waggers out there, things are even better now than ever before because, wait for it, the export value is increasing! 

Now I am 51 years old, and in fairness, I was not exactly engaged in the watch business at 11 years of age. But I do make a point of trying to understand the past and how it has influenced where we are now, and I also try to pay attention to where we're heading.

FACT 3 - And the one reality that should have the management at the SWATCH group up late nights and shitting themselves? Low priced Swiss watches where the big volumes are in production and (it stands to reason) sales are dramatically dropping again. While Hublot Big Bangs and Vacheron Constantin Overseas are sexy, they are not exactly owned and worn by the masses. And the Swiss watch industry is, well, industrial - meaning it involves thousands of people with thousands of jobs making (ideally) millions of watches. But just like 40 years ago there have been, and continue to be, warning signs that are being ignored.

Think about this basically, we‘re talking about millions of pieces that are not manufactured and assembled anymore. This inevitably leads to thousands of jobs lost already and thousands more that will be lost in the near future.
The shit's about to get even realer.

No comments:

Post a Comment