Swiss watchmaking: luxury alone is not enough

Context

At a Glance

• Sales volumes have declined significantly.
• Luxury alone cannot sustain nearly 700 watch companies.
• Value for money is the primary criterion in 12 out of 13 markets.
• Country of origin is the primary criterion for 15%, down from 20% in 2022.

Key Facts

• Warning → Karine Szegedi, industry expert at Deloitte
• Source → interview published by the Neue Zürcher Zeitung (NZZ)
• Industrial base → nearly 700 watchmaking companies
• Neglected price range → between 1,000 and 3,000 francs
• Country of origin → primary criterion for 15% in 13 key markets
• Comparison → 20% in 2022
• Main criterion → price-performance ratio in 12 out of 13 markets
• Opportunities → India and the women’s market

The warning about the watchmaking industry

Nearly 700 watchmaking companies make up the watchmaking industry, which, according to Karine Szegedi, would risk not being sustained if Switzerland were to produce almost exclusively luxury watches. The industry expert at Deloitte sounded the alarm today in an interview published by the Neue Zürcher Zeitung (NZZ). The news was reported by Keystone-ATS.

The argument stems from the question: sales volumes have declined significantly and are unlikely to return to previous levels. The decline primarily affects suppliers of movements, dials, cases, and other components, who depend more on production volumes than the brands themselves. They require a certain level of plant utilization to maintain and develop machinery, skilled labor, and know-how.

The shift toward the high-end market, Szegedi notes, is understandable. Swiss wage levels, the strong franc, rising gold prices, and stringent production requirements make manufacturing costly. However, Switzerland possesses extensive expertise in complicated watches and specialized craftsmanship; international collectors are willing to pay a premium. Many manufacturers therefore focus on complicated watches with elaborate designs.

The Untapped Segment

According to the expert, this approach neglects the price range between 1,000 and 3,000 francs, where there are currently relatively few Swiss manufacturers. This is an important entry-level segment for mechanical watches. In less mature markets such as India or Mexico—and even in the United States—more Swiss offerings could boost sales.

Meanwhile, country of origin is cited as the most important purchasing criterion by 15% of respondents in 13 key markets, down from 20% in 2022. Value for money is the primary criterion in 12 of the 13 markets. Szegedi sees potential in India and in the women’s market: in the former, the free trade agreement between Bern and New Delhi helps the brands; in the latter, products and the shopping experience must be designed from the outset with female customers in mind.

Operational details

Pressure Along the Supply Chain

The problem isn’t limited to the brands that sell the finished watch. If volumes decline, suppliers must maintain their machinery, skilled workforce, and know-how at a level that ensures sufficient utilization. A higher final price does not automatically translate this need into a proportional profit for component manufacturers. The difference between a luxury good and the industrial labor required to produce it is at the heart of Szegedi’s warning.

“A manufacturer of high-precision screws doesn’t earn ten times as much just because its screws end up in a watch that costs ten times as much.”

For those living in Switzerland, the price scale helps explain why demand doesn’t react in the same way. Someone considering a purchase of 80,000 or 100,000 francs may still go ahead with it even when price takes on a different role. Those who have to save up for a watch costing 1,500 or 2,000 francs are much more sensitive to inflation and the rising cost of living. To display this information, use costo della vita in Svizzera; for a price expressed in francs, use comparatore CHF/EUR alongside it.

Brand, Origin, and New Buyers

The reduced importance attributed to the country of origin does not mean that “Swiss Made” has lost all value. According to Szegedi, it remains an important seal of quality, especially for more affordable watches. However, other countries have caught up in terms of quality and design. For premium products, consumer trust depends more on the brand name, to the extent that some manufacturers are consciously choosing not to use the “Swiss Made” designation.

The two emerging markets highlighted by the expert have distinct characteristics. In India, the free trade agreement makes sales more attractive, while large jewelry chains are investing in store infrastructure. The country, however, is not simply the next China. In the women’s market, on the other hand, demand cannot be captured by simply scaling down a men’s model: what’s needed is a product and a sales experience designed from the outset for female customers.

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Key points

A Practical Framework for Analyzing the Industry

The source provides a practical framework for analyzing the industry without confusing the product’s price with the strength of the industrial base. Anyone evaluating a purchase, a supplier, or a market can follow these steps.

1. Define the price range. Place the watch between 1,000 and 3,000 francs, or distinguish between a purchase of 1,500 or 2,000 francs and one of 80,000 or 100,000 francs. The comparison changes because the reaction to price, inflation, and the cost of living changes.

2. Check the price-to-performance ratio. The country of origin remains a mark of quality, especially for lower-priced models, but other countries have caught up in terms of design and quality. Therefore, it’s not enough to rely solely on the “Swiss Made” label.

3. Consider the industrial side. For a supplier, what matters are production volumes, machinery utilization, skilled labor, and know-how. Diversification into jewelry or medical technology is a path many are pursuing, but not everyone can follow it.

4. Evaluate India with caution. The low- and mid-range segments have potential; a Swiss watch can be a status symbol and a way to treat oneself. The agreement with Bern and investments by jewelry chains help, but India is not simply the next China.

5. Design for female customers. A women’s watch should not merely be a smaller version of a men’s model, a jewelry watch, or a quartz timepiece intended as a gift. Szegedi points to the product and the sales experience as the starting point.

This framework separates the purchasing decision from production capacity. It also helps avoid confusing a high price with the sustainability of the supply chain: these are related but not equivalent concepts. The framework described by Szegedi focuses on the tensions surrounding volume, purchasing power, and product presentation.

To relate the chosen price to your income, use calcolatore stipendio/imposte.

Source: swissinfo.ch