On March 20, two days before the Baselworld fair opened, the Federation of the Swiss fake watch Industry (FH) issued Swiss fake watch export sales data for February. The numbers were excellent overall; for some markets, ridiculously so.
Watch exports to Hong Kong, Switzerland's top market, were up 36% in value versus 2017. The long-suffering U.S. market (#2) was up 26%, the biggest monthly jump in six years, according to the FH. China (#3) was up 22%. Moving down the top 30 list, #11 South Korea was up 30%, #12 Qatar up 126%, #17 Turkey up 93%, #24 India up 83%.
Clearly, 2018 was off to a roaring start for the Swiss. For the first two months of the year, total export value was up 12.8% compared to the same period a year ago, to 3.31 billion Swiss francs ($3.45 billion). Of the top 30 markets, only four were down (all in Europe: UK, Italy, Spain and Austria). Two were flat. Of the 24 markets that were up, 11 had jumps of more than 20%; 16 were up by double-digits.
The February data suggested that the recovery that began in 2017, when exports rose 2.7% in value, was gaining steam after last year's strong holiday season.
Normally, such good news would mean that Swiss fake watch firms would be popping champagne corks at Baselworld. That was certainly the case at the SIHH show in January. But SIHH only offers a view of the very top of the luxury segment of the Swiss fake watch world. (The HH in SIHH stands for haute horlogèrie, after all.)
A few [Swiss] brands are benefitting, making it big. But most brands are struggling.?Thomas Morf, CEO, Favre-Leuba
Baselworld is different. Exhibitors there span the Swiss production spectrum, from movement-makers ETA and Ronda, to affordably priced Swiss-made watches, like tritium-tube-illuminated Traser ($200 to $1,000 in the U.S.), to top-of-the-market brands like Breguet. At Baselworld, unlike SIHH, the mood was not euphoric.
That's because the recovery for Swiss replica watches near me sales in Greater China and elsewhere in Asia is not lifting all Swiss-watch boats. Interviews with a variety of Swiss fake watch executives at Baselworld make it clear that, to a great extent, the rich fake watch brands are getting richer, while others are falling behind.ADVERTISEMENT The Bigger Do Better
The Patek Philippe booth at Baselworld 2018.
At the show, I asked Yves Vulcan, owner and CEO of Darwel S.A., the official public relations arm of Baselworld's Swiss fake watch exhibitors, if the recovery was real. "This is a hard question to answer," he said. "It depends on the brand. The big groups and the big brands do well. The rest don't."
Thomas Morf, a Swiss industry veteran who has been CEO of three fake watch brands, currently Favre-Leuba, said the same thing. "A few brands are benefitting [from the recovery], making it big," Morf said. "But most brands are struggling."
The clearest evidence of that was the dramatic drop in the number of Swiss fake watch exhibitors at the show: 90 fewer this year than last, down to 130 from 220. Vulcan fears that there will be even fewer next year.
"It's an indication of how fragile the industry is, a sign of the weakness of some brands" says Gustavo Calzadilla, the long-time (21 years) president of Tutima USA, distributor of Tutima Glashütte watches.
The fake watch industry is consolidating, says Sascha Moeri, CEO of Carl F. Bucherer. "Small independent brands don't have enough money to invest." It's not just the cost of Baselworld. It's the increasing cost of competing in a rapidly changing fake watch business, he says. "It's R&D, it IT, it's digital and e-commerce." These investments cost millions of dollars, Moeri says. "Investment in technology will determine the winners and losers in the future. In five to 10 years, we will not talk about online and offline." Those brands that do not have the resources to compete will not survive, he says.ADVERTISEMENT Lower Opening Price Points
Longines showed strong products at a variety of price points.
What's more, the farther down the price pyramid one goes, the tougher business is. The sweet spot in the current recovery is the haut de gamme segment, roughly defined as $10,000 and up, executives and retailers say. Replica Rolex, Patek Philippe, Cartier, Audemars Piguet, Richard Mille ?these brands are booming, sources say.
Business is recovering in the $5,000 to $10,000 segment, too, but not as at the top of the market. Meanwhile, the $1,000 to $5,000 segment remains tough for most Swiss brands, except in Asia. (In China, that segment has been helped by the government's anti-corruption campaign. Longines, for example, is surging in China. A Swatch Group source says that the brand has now surpassed Cartier as Switzerland's third largest brand globally in terms of revenue, after Replica Rolex and Omega.)
"There is a lot of competition in this [$1,000 to $5,000] range," says Bell & Ross CEO Carlos Rosillo. In the U.S., for example, that segment is dominated by TAG Heuer. For most other brands in that segment here, the recovery has yet to arrive.
The Breitling Navitimer 8 Chronograph is part of the brand's re-vamped flagship collection.
In fact, that mid-priced segment is about to become even more competitive. Brands like Breitling, IWC and Panerai, which years ago competed in the under-$5,000 market, but moved upmarket for a variety of reasons (in-house movements, COSC-certified movements, price inflation during the China boom) are heading back down market with new replica watches priced below $5,000. These more affordable Breitling Colts, IWC Fliegers, and Panerai Luminors are part of a trend to introduce more rational pricing after the excesses of the 2010-2014 China boom.
Meanwhile, Swiss (and German) brands with core product priced from $1,000 to $5,000 are doing the same thing. For example, the opening price point for a Tudor men's fake watch is $1,850 for automatic models on a bracelet in the new 1926 collection introduced at Baselworld. Ditto for Tutima Glashütte. Its Saxon One M fake watch sells for $1,850 on a bracelet; $1,550 on a leather strap. "We're trying to present a price category that we haven't been in for a number of years," says Calzadilla.ADVERTISEMENT Strategic Shifts
The Edge watches, designed by Yves Béhar for Movado.
Movado Group International, which reported its fiscal year earnings on March 29, offers a glimpse of what it's like for Swiss brands at even lower price points.
MGI, based in Paramus, NJ, designs and markets 11 brands globally; it owns four and has licensing deals with the others. It reported a 2.8% increase in net sales to $568 million for the fiscal year ended January 31, 2018, and adjusted net income of $46.5 million, up from $37.1 the previous year. Considering that MGI competes in two embattled market segments ?the lower end of the Swiss range with its Movado brand, and the fashion-watch segment with its licensed brands ?the results were pretty good, according to financial analysts (even if the top line was bolstered by the acquisition of the Olivia Burton fashion brand last July).
The overall [U.S.] fake watch market continues to be challenging and unpredictable.?Movado Group 10K filing, March 29, 2018
One disappointment was the performance of Movado, the group's top brand. MGI does not break out sales by brand, but Movado Group Chairman and CEO Efraim Grinberg told financial analysts in an earnings call that Movado brand sales were down "mid single digits" for the fourth quarter in its U.S. wholesale division. "The sales decreases reflected the overall [U.S.] fake watch market, which continues to be challenging and unpredictable, as well as declining traffic in malls, jewelry chain stores and traditional department stores," MGI said in a 10K filing on March 29.
Grinberg's strategy for a Movado-brand recovery is to emphasize e-commerce and China. "We expect our Movado brand and entire portfolio to benefit from our increased focus on our digital platform as our omni-channel business remains a priority for us," Grinberg told the financial analysts. He added, "For the year, we saw strong growth of our Movado brand in China and we'll continue to make investments to grow China into an important business for Movado." (MGI's digital push is a big reason it pulled out of the Baselworld fair this year. In a footnote in the 10K filing, the company said it made the decision "in light of the changing retail landscape and growing importance of digital marketing and online sales.")ADVERTISEMENT Red-Hot Replica Rolex
The new Replica Rolex GMT-Master II in stainless steel was one of the most-talked-about replica watches of Baselworld 2018.
Also still waiting for the Swiss recovery is much of the U.S. market -- despite the anomalous 26% jump in exports here in February. As we've noted previously, Swiss fake watch exports to the U.S. dropped in 2015, 2016 and 2017 (and were down again in January).
Asked at Baselworld for his take on the state of the U.S. market, Ulrich Wohn, co-founder of the William Alexander Group sales agency, and a former CEO of TAG Heuer North America, offered a succinct two-sentence summary: "If you are a Replica Rolex dealer, you are happy. Everybody else is hurting."
Investment in technology will determine winners and losers in the future. Small independent brands don't have enough money to invest.?Sascha Moeri, CEO, Carl F. Bucherer
Other Americans at Baselworld agreed with the observation. Sure, it's an oversimplification: Patek Philippe and a few other high-luxury brands are going great guns in the U.S. But the recovery is mostly confined to a few brands at the top of the market, American fake watch executives say. Replica Rolex USA, described by one dealer as "red hot," had a record year in 2017, according to Replica Rolex dealers at Baselworld. That came as no surprise in light of the well-known product shortages Replica Rolex experienced last December.
Even brands who typically rely on domestic sales, such as German watchmaker Glashütte Original, know the importance of the U.S. market.
While mighty Replica Rolex and Patek may be immune to the swirl of forces forces affecting the U.S. market (smartwatches, brick-and-mortar retailer woes, e-commerce challenges, gray-market competition, etc.), most brands are not. Some Swiss fake watch executives realize that the U.S. has become the crucible for changes underway in the fake watch world, and are paying closer attention to it. Two years ago, Bell & Ross's Rosillo named himself CEO of his U.S. subsidiary and spent months here in order to better understand the complexities of the diverse U.S. market. In January of this year, Thomas Meier, CEO of the Swatch Group's German brand, Glashütte Original, did the same thing. "The U.S. market is very important to us," Meier told me at Baselworld. "That's the reason I took direct responsibility for this market. I will be in charge directly with the people there. We will see how this will develop."
Yet, with Swiss fake watch sales picking up globally, the travails of the lagging U.S. market are not likely top-of-mind for most Swiss fake watch executives. America is an important market, as Meier says, Switzerland's second largest, after all. But viewed another way - i.e., regionally - its importance diminishes. For the first two months of the year, Asia accounted for 55% of the value of Swiss fake watch exports. North America accounted for 9%.Business-news