BUSINESS MONTRES WORLDWIDE (free access)
« At what level on the Richter’s scale is the watchmaking earthquake ? »

We know since this morning that the year 2016 is ending as it began - lamentably - for the statistics of watch exports. It was only the November exports, but there is no doubt that December will be in the logic of November, which logically should be in the logic of October, a fall of 16.4%. The expected decline in 2016 is likely to be around 14-15% [we will not have the full 2016 results until January 24, well after the SIHH]. Around 15%: a figure less brutal than the fall of the first months of 2009, but even more worrying because there is no longer anywhere on this planet, a reservoir of growth. It is - as we have often written here - the collapse gently sloping, nothing more to hold back in this slip...

Readers will probably remember early in 2016 when the watchmaking official denied absolutely any "horological crisis" [a taboo word, which one refused to pronounce, if not with verbal quotation marks]. And when everything was going very well, Madame la Marquise [famous French song].

Twelve months later, it was the grimace soup, the warnings issued by the groups that lost half their profits and the demoralization of the troops made anxious by the dismissals in the workshops as in the staffs. Remember that François Thiébaud (Tissot), president of the Swiss exhibitors at Baselworld, proclaimed in March that the recovery was safe and certain for April, if not for spring. The most pessimistic evokes then a benign economic crisis, just a bad time to pass ...

Twelve months too late, twelve months lost? It is obvious: until 2016, the brands continued to overproduce and overstock their networks, without forgetting to raise prices, in the mad hope of a recovery, instead of calming the game and proceed adjustments. Rather than reflecting on the reformatting of collections and the overwhelming revision of communication, everyone has gone on a prolonged holiday, with the illusion of a certain recovery in the fall, if not the irrational belief in a restocking by the retailers by the end of the year. Of course, there was no question of it. There, the most realistic people began to talk about a structural crisis, the parrot media spreading from the outset to the length of the column on the "crisis", the evil Chinese fighting against corruption, the strong franc, the terrible children of Generation Y, terrorists of the caliphate and even the tragic - inevitably tragic - election of Donald Trump.

There is no question, however, of asking whether the watchmakers would not have a very small share of responsibility in all this and if, by chance, the connected watches would not play a role in this debacle [that is the question that since it was decreed, somewhere in the control tower of Bienne and Swatch Group, that these connected watches were a commercial bide and that their sales did not affect the sales of Swiss watches: parrots immediately repeated these elements of language ]...

Twelve months wasted? At least twelve months, because it must be remembered that Business Montres began to sound the alarm at the end of 2012, when it seemed obvious to us that a fantastic and catastrophic storm was preparing, especially in China where Xi Jinping had just to come to power with a political line that we decode as fatal for watches and for Chinese tourist flows in the world. Under perfusing advertising, the media parrots ironically heavily on our pessimistic argument: always the same story of the idiot who looks at the finger when we show the Moon!

Secondly, it was not difficult to anticipate the coagulation of perils at the worst: the depression of the developed economies, hard hit by the financial crisis of 2008-2009 and which survived only the price of fabulous and toxic quantitative easings, The diplomatic inconsistency of the Atlantic camp against Vladimir Putin and the "sanctions" that brutally extinguished the Russian market, the conflagration of the Middle East destabilized by the American complacency and all the rest – in bulk , the societal mutation led by the millennials, the rise in power of Apple that would quickly exceed Rolex as the world's first watchmaker [taken for an editorial obsession, our alarms on connected watches were below reality]! Or the major defects of a horological industrial logistics incapable of regulating its production, prices and marketing. Let us pass modestly on our analyzes of the pathetic nullity of watchmaking managers kept in place ...

So much so that today we are talking about an existential crisis, not a more structural one, to situate the true stakes of this announced sinking, namely the very survival of the Swiss watch industry as we know it and as We like it [even if we took the public bet of a halving of volumes between 2014 and 2020: we'll be there soon!]. The weaknesses of the weakest houses are multiplying [somewhere between the morgue and the hibernation box], while operations of repurchase of the more "savage" brands are mounted behind the scenes. The big changeover of the chessboard is in progress and is accelerated by the "big replacement" - the one that sees the rich customers, who bought very expensive new watches more or less conceptual and ostentatious, fall back on the collection watches or on basic models made of steel, or even plastic, in the kind that avoids an attack on the street. The "rich" are no longer what they were!

The "poor" either, moreover! Here, the traditional customers of the shops turn to digital networks where they plead unknown brands that offer them watches that still exist only in the form of virtual images, sometimes up to 4.8 million of euros as recently demonstrated by the two lithuanian fellows of Filippo Loreti (Business Watches of December 14). It is a revolution in demand, while the mainstream watch offering has never been so smooth, dull and sadly formatted. The 18,500 cuffs equipped by Filippo Loreti will no longer be tempted by a Swiss watch before a few quarters. The same goes for the tens of thousands of other customers who have been taken on the socio-finance networks by brands that did not exist a year ago [the best example is the Code41 watch from the Swiss Goldgena project, which now graces the half -million Swiss francs subscribed by nearly a thousand contributors: Business Watches has already spoken at length]...

So what do we do ? Nothing, of course! We expect Geneva to be disastrous in terms of trade, and Baselworld, which will not be much more glorious [at the end of March, we had predicted 50 to 60 missing marks between 2016 and 2017: we will be beyond!]. We dream of the recovery, which the pythies of denial of reality feel shudder at the slightest twig cracking in the darkness - a recovery that is the opium of the people watchmakers managers. One modestly extinguishes the light without sending SOS when one sinks. The workshops were repainted so as not to be the first to lay off massively. One discreetly draws some iron curtains from shops without customers in exotic subsidiaries. We give up counting the cars that are missing in the car parks of the factories where we now find space ...

Above all, we do not change anything, merely playing musical chairs within the Richemont staffs [we take the clones to replace the originals]: Georges Kern will have super-hero super powers - and not one Simple chainsaw! - to clean the stables of Augias and re-launch the machine - if indeed he has the support of his big bad shareholder slack. No worries: everyone will take a long holiday at the end of the year, hoping that it will be better in 2017 and wondering at what level of magnitude we are on the Richter scale, which is not Moreover Richter. Future historians will tell us, but we had to pass the 8-point magnitude ("serious damage") mark in 2016 and we could surpass the 9 points ("wider devastation") next year. Then, it is the earthquake that announces the changes of geological era and something that is similar to the disappearance of the dinosaurs. Welcome to 2017: Morituri te salutant !

••• BUSINESS MONTRES, December 19th (in french)