Swiss watch industry counts on growth
Deloitte releases its second Swiss watch industry study
Deloitte in Switzerland has analysed the Swiss watch industry, highlighting its key challenges and opportunities for the future. More than 50 watch executives participated in the Deloitte study, 65% expressing a positive outlook for the Swiss watch industry in the next 12 months.
After extraordinary growth, Swiss watch exports have entered a period of slightly lower growth rates. However fundamental growth drivers of the Swiss watch industry including: buoyant demand from emerging markets, new customers from more mature markets such as North America and the demand from tourists visiting Switzerland and other European countries remain intact. These challenges and opportunities are detailed in the second Deloitte Swiss watch industry study.
Watch executives are optimistic
The general outlook of the Swiss watch executives is optimistic: 65% of the survey respondents have a positive outlook for their industry for the next 12 months. Last year, only 49% of respondents were looking optimistic for the future. As Karine Szegedi, Deloitte Consumer Business Partner in Geneva, explains: “Though the Chinese market is viewed less enthusiastically, executives expect overall sales to hold up well, thanks to demand from markets such as North America and from tourists visiting Switzerland and other European countries.” External business risks such as the strong Swiss Franc have declined markedly in the eyes of watch executives compared to 2012. Only 34% of the executives still perceive this as the highest risk, compared to 70% last year. The biggest perceived risk now is the shortage of skilled labour. The watch companies are moving to alleviate this issue, mainly by developing and/or increasing in-house training and apprenticeships, and in some cases through acquiring suppliers.
Innovation is a priority
More than 90% of the watch executives in the survey plan a strong focus on innovation via the introduction of new products and increased R&D over the next 12 months. Only a third of the respondents consider a potentially disruptive product category such as smartwatches as a threat – and only for watches below CHF 500.
Howard da Silva, Industry Leader Consumer Business at Deloitte: “For the watch industry innovation is key throughout the business: Be it in product development, marketing, distribution or use of social media. Mono brand stores, group flagship stores and e-boutiques are rapidly rising in importance. Online business opportunities are crucial for future success: As our study shows, up to 88% of our respondents consider social media today as important for the watch industry.”
M&A activity set to continue
Vertical integration is expected to continue. Almost four out of five of the watch executives surveyed believe that the drivers for acquisitions of suppliers by brands are still in place. Alleviating sourcing problems in parts and insufficient labour supply are likely to increase, following the “Swissness” bill approval and ongoing negotiations with COMCO.
Horizontal integration, which enables brands or groups to increase their brand portfolio, has also been back on the agenda this year. 41% of all watch executives surveyed believe it is likely to continue.
About the Deloitte Swiss Watch Industry Study
The Deloitte Swiss Watch Industry Study 2013 is the second study of its kind and based on personal interviews with executives and a survey. The survey was conducted in June and July 2013. A total of 53 watch executives participated. 28 participants work for component manufacturers, 17 for a brand and 8 for companies across the value chain. Half of participant’s companies sell watches at a retail price of over CHF 5’000, the other half below.
About Deloitte in Switzerland
Deloitte is a leading accounting and consulting company in Switzerland and provides industry-specific services in the areas of audit, tax, consulting and corporate finance. With approximately 1,100 employees at six locations in Basel, Berne, Geneva, Lausanne, Lugano and Zurich (headquarters), Deloitte serves companies and institutions of all legal forms and sizes in all industry sectors. Deloitte AG is a subsidiary of Deloitte LLP, the UK member firm of Deloitte Touche Tohmatsu Limited (DTTL). DTTL member firms comprise of approximately 200,000 employees in more than 150 countries around the world.
Zurich, 10 September 2013
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