Despite extremely tough market conditions, luxury watch firms have been putting on a brave face at a prestige watch trade fair in Geneva this week.
The opening of the Salon International de la Haute Horlogerie (SIHH) on Monday coincided with a grim forecast by the Geneva-based firm Richemont for expensive jewellery, watches and accessories.
Twelve of the 17 brands on display in Geneva belong to the luxury goods giant.
But in spite of a downturn in watch sales and an expected drop in attendance, the tone at the trade fair was combative.
"Neither the economic climate nor the more wintery climate have dampened our determination to make the SIHH fair THE City of Fine Watchmaking," said the fair's managing director, Fabienne Lupo, on Monday.
"It's obvious that the watch industry is experiencing a slowdown, but there is optimism – retailers are buying and business activity is satisfactory," Jean-Christophe Sabatier, Baume & Mercier's international marketing and communication director, told swissinfo.
And to anyone watching the hive of activity from the salon's chic lounges and bars as Gucci-clad buyers discussed the latest Cartier or Montblanc models, everything seemed to be ticking along nicely in the world of luxury.
But given the uncertainties ahead, the organisers have been forced to tighten their belts: no more huge evening events and a back-to-basics approach.
"While these may be chilly times in more ways than one, they allow us to concentrate on authenticity, cultural heritage and expertise," said Lupo.
Compared with last year, attendance at the fair is expected to be 15 per cent down.
"We expect a 50 per cent drop for North America and around 45 per cent fewer people from Japan," said the director. There will also be 25 per cent fewer visitors from Asia, but the other markets – Europe, Russia and Middle East – are present, she said.
Sharp sales drop
Last week Bernstein Research forecast a more than ten per cent drop in global luxury sales in 2009, more than their previous warning of a 5-7 per cent decline.
On Monday Richemont, owner of prestige brands such as Cartier and Montblanc, confirmed the downturn, saying it was experiencing the toughest market conditions in its 20-year history after sales fell by 12 per cent in the final quarter of 2008.
After four years in which the value of watch exports rose from SFr10 billion ($8.8 billion) to SFr16 billion, in 2008 they continued to rise month by month until November, when they dropped abruptly by 15.3 per cent. This was the first monthly fall in three-and-a-half years, according to the Federation of the Swiss Watch Industry.
Swiss watch exports will keep declining, with all market segments affected and small brands suffering the most, Jean-Daniel Pasche, the head of the Federation of the Swiss Watch Industry, told swissinfo.
"It's difficult to say to what extent the watch industry will be affected by the crisis – how deep. The first months of 2009 will be difficult; we hope it will be more positive in the second half of the year but we don't have any precise indications," he said.
Exports to Japan have so far been worst hit, and sales to that market and the US are said to be difficult. The strength of the Swiss franc could affect export growth. The US and Japan are the second and third- largest markets for Swiss watch exports.
"We are facing a crisis but we have to also remember that this comes after five years' major growth for the Swiss watch industry, so exports remain at high levels. We are optimistic that the major brands can traverse this crisis," he commented.
Less bling bling
But Bernard Fornas, chief executive of Cartier, told Reuters that predictions were difficult.
"This is one of the first crises where you don't see with some certainty where the end of the tunnel is," he said.
Fornas said Cartier had reduced working hours at its smallest factory in Switzerland.
Despite the bleak outlook, Cartier aims to gain market share, as consumers are more likely to favour strong brands during the economic downturn.
"Consumers' attitudes are changing during the crisis, and real, true luxury is back," he said.
A view shared by Sabatier: "We'll see a return to true values, to something reasonable. There'll be less excess and bling bling."
This strategy was echoed by watchmaker Parmigiani, which claimed its modest approach, balanced investments and financial independence had allowed it to navigate safely through the rough waters.
"The crisis will clarify things and sort out the true luxury watch firms from the others," said Jean-Marc Jacto from Parmigiani.
The problem is that for three or four years orders have been out of synch with the market reality.
"Lots of people bought more watches than necessary to make sure they were actually delivered," he said. "The real problem is retailers being refused credit to finance their orders."
"2009 will be a year of consolidation," said Jacto.
swissinfo, Simon Bradley in Geneva
The 19th Salon International de la Haute Horlogerie (SIHH) is taking place from January 19-23, 2009. The SIHH remains a private fair for professionals from around the world.
The brands presenting their new models at the are: A.Lange & Söhne, Alfred Dunhill, Audemars Piguet, Baume & Mercier, Cartier, Girard-Perregaux, IWC, Jaeger-LeCoultre, JeanRichard, Montblanc, Officine Panerai, Parmigiani Fleurier, Piaget, Ralph Lauren Watch and Jewelry Co, Roger Dubuis, Vacheron Constantin and Van Cleef & Arpels.
The Federation of the Swiss Watch Industry is present for the first time at the salon with the latest version of its exhibition, "Think Time Think Swiss Excellence", never previously shown in Switzerland.
The salon also launched an international anti-counterfeiting campaign it is implementing in partnership with the Federation of the Swiss Watch Industry.
The world's biggest watch and jewellery fair – Baselworld – will take place in Basel from March 26 to April 2, 2009.