Business Cycles in The Watch Industry
Switzerland is known for its premium and luxury watch brands. If you take the top 10 watch brands in the world, all of the them would be from SwitzerlandRolex, Omega, Tag Heuer, Breguet, Rado, Tissot, Longines, Patek Philippe, Breitling and so on.
Swiss watches are handcrafted with precision. The high prices they charged were due to the accuracy of these fine pieces of machinery.
A huge change impacted the watch industry in the 1970’s. Japanese companies, Seiko and Citizen, launched quartz watches at very affordable prices. As the accuracy of these electronic watches was very high, customers stopped buying Swiss watches. Most of the Swiss watch companies went bankrupt as a result.
Nicolas Hayek was a Lebanese born Swiss businessman. He believed that the Swiss were pioneers in the watch industry and could fight the Japanese. He started to make quartz movements in Switzerland. This was used to make a smart, slim watch called SWATCH. Hayek marketed Swatch as watches for different occasions. He promoted the concept of multiple watch ownership. This became a huge success and Swatch became a worldwide brand. Hayek believed in Swiss watch brands. He started taking over various companies that were loss-making and created the SWATCH group. Today the group owns watch brands like Breguet, Omega, Rado, Tissot, Longines, Calvin Klein, Mido, Hamilton and Certina.
Hayek knew that accuracy was no more an attraction. So, he started positioning the watches as works of art. A high-quality watch is so complicated that only a highly skilled watchmaker can put together hundreds of small components into that small cavity inside the watch case. High-end customers appreciate this and are ready to pay thousands of dollars for these premium brands.
Today, another revolution is approaching the watch industry. Smart watches, pioneered by Apple, are adding a new dimension to the competition to traditional watches.
In 2019, the Swiss watch industry sold 21.1 million watches, a 13% decline from the 2018 figures. Meanwhile, Apple sold 30.7 million units a 36% jump from its 2018 figures. Apple watches may not last for generations, but users get addicted to it.
One needs to wait and see whether Swiss watches are able to manage this new onslaught.
Kharpal, A. (6 Feb 2020) Apple Watch outsold the entire Swiss watch industry in 2019. Retrieved from:https://www.cnbc.com/
Fox, M. (29 Jun 2010) Nicolas Hayek Dies at 82; His Swatch Saved an Industry. Retrieved from:https://www.nytimes.com/