Though it often seems like Swiss watchmaking is a cottage industry, with watchmakers in workshops that have white smoke wisping out of a chimney high up in the mountains, it is in reality a global business like most others. The majority of the industry, in fact, is corporate and publicly held.
Of the 10 biggest Swiss watch brands by sales, only three are privately held. One is Rolex, a vast corporate entity owned by a charitable foundation, and the other two are Patek Philippe and Audemars Piguet, both family-owned.
Both Patek Philippe and Audemars Piguet have become the industry’s top performers in recent years, thanks in no small part to a tight distribution network and consistent marketing. An explanation for that discipline might be the stability of management, with owners being the same, a privilege of a family-owned enterprise without shareholders looking over your shoulder.
So, while many of their publicly traded rivals have been under cost pressure in recent years, leading to layoffs, management changes and lots of entry-level products, Patek Philippe and Audemars Piguet are settling in for the long haul.
Three years ago, Patek Philippe announced an extension of over a million square feet costing 500 million Swiss francs (S$700 million) to its factory in Geneva’s Plan-les-Ouates suburb, scheduled to be completed this year. The suburb is nicknamed Plans-les-Watch, for the number of watch factories in the area.
Audemars Piguet, on the other hand, made waves recently for sharp cuts to its retail network. Announced several years ago by its chief executive, the shedding of retailers started only late last year, with several more taken out of circulation at the recent SIHH 2018 watch fair.
Simultaneously, it also revealed at the fair that it would begin a trial run of selling pre-owned watches at its Swiss boutiques, which will take in used Audemars Piguet watches in trade-ins for new models. Similarly, Richard Mille, another privately held, albeit much smaller, watch brand is said to be going into the secondary market much like Audemars Piguet.
“AUDEMARS PIGUET REVEALED THAT IT WOULD BEGIN A TRIAL RUN OF SELLING PRE-OWNED WATCHES AT ITS SWISS BOUTIQUES.”
Both of the moves by Audemars Piguet are presumably geared towards controlling the supply chain and prices, both on the retail and secondary market, with the end goal of elevating the brand’s prestige to the sort that Louis Vuitton and Hermes enjoy, which is to say zero discounts and an exclusive boutique network.
It is hard to imagine a publicly traded watchmaker attempting the same; coughing up half a billion francs when business is down is the last thing a hired hand can contemplate when his options are underwater.
The recent crisis in luxury watchmaking has spurred brands to respond in different ways, some better than others. The result will be a greater disparity between the winners and losers, as those with shrewd strategies pull away from the pack. And privately held watchmakers will probably make up a disproportionate share of the first-to-the-finish-line.
Read more of Su Jia Xian’s incisive commentary at his website, WatchesbySJX.com.