vitalsigns
6708
+1
Classic case of over-expansion. As Alkiro said above, trees do not grow to the sky.
Many marginal buyers left the market (economic recession, smart watches, ever-increasing prices).
A subset of the pool of enthusiast repeat buyers stepped back (same as above, plus there is a limit to the number of watches even enthusiasts will buy before taking stock of what a reasonable collection looks like and what will actually get some wrist time...and the insane price increases didn't help).
Watch producers, through higher production and higher prices, assumed the trend would continue unabated, but when a trend like this reverses there is a lot of pain, because the companies have scaled up for higher production volumes and high prices. It's challenging to fix, because many of those costs (new manufacturing facilities, etc.) are fixed, and even variable costs such as labor are akin to a fixed cost since certain labor in the watchmaking industry is so highly skilled (multi-year apprenticeships, etc.)....you can't just engage in layoffs like other industries and bounce back with new hiring when the industry rebounds.
Lots more to talk about here....
Cheers,
John
Sobering news from Richemont
WSJ reports the company announced a 51% fall in fiscal first-half profits. ( I assume over last year) Who knows how long or big this downfall in the watch market will turn out to be. The company has eliminated the post of CEO. The problem is, however, sys...
Any chance we would see a drop in watch prices
Thanks for sharing - there are some worrying trends with a decline in sales in most regions, I keep thinking: Has the industry not priced itself out of reality? And wouldn't it be better off dropping prices and selling more as a result? I suspect we may s...
Lol. + one Alkiro....
nobody is forcing anyone to buy a luxury watch right?. Cheers Edward
I totally agree....
and the reality is: "if you can not afford it the other guy can" Best regards Edward
IMHO, the turning point of the watch industry came from the Chinese anti corruption law and the reduction of world growth economy... especially in the emerging countries (BRICS) where many watch brands had concentrated their efforts over the last years
The main problem for the industry now is to readjust (resize) the production tools (over production, number of employees...) in front of a decreasing demand. And this problem is not easy to solve after huge investments. Best wishes Alkiro
I realize that , the mistake was....
that smartly run business, will always have the capacity to expand/contract. Greed is my best bet. Cheers Edward
We will follow that very closely ;-)
Have a nice afternoon (evening here) Edward. Best wishes Alkiro
Related article
Ariel Adams has just published an interesting article on ablogtowatch. Discussing the imminent downfall of the watch industry, unless things change....
The death of the industry is exaggerated
At the end of the day there are simply too many pieces out there. If Ferrari had the tools to make 1 million cars a year, there would be a crisis there as well. The industry is simply hit its limit and needs to lower production and lower headcount and res...
+1
Classic case of over-expansion. As Alkiro said above, trees do not grow to the sky. Many marginal buyers left the market (economic recession, smart watches, ever-increasing prices). A subset of the pool of enthusiast repeat buyers stepped back (same as ab...
I love this conversation vitalsigns....
There are people with five year university degrees, masters degrees and Phd whom are working as a waiters/servers or other common jobs and you are saying they can not layoff a watch maker ? Why not? Are you worshipping them? This is little bit much in my ...
Of course I didn't say they *can't* full stop...it was a comparison, in general, to other industries; if it gets bad enough, they surely will.
But it puts the watch companies in a tougher position as they will continue to suffer losses to retain this skilled labor as long as reasonably possible. The point is, it makes the luxury watch recession more acute.
Watchmaker is not a very common job
Pretty easy to train a high school graduate, or a PhD, to become a waiter in a few days if not hours. Someone finishing a high end watch? A bit harder i think=) So if you fire these people and they arent working, when demand does come back (and these are ...
Yes, very interesting points alphabeta81, especially....
that it is easy to train a PhD to became waiter after several years of getting the degree , in that sense the watchmaker can be a plumber full time and play with watches on weekends to keep his skills sharp when recalled back to work. don't you think? Ple...
How much does R&D weigh in the overall expenses? [nt]
And what percentage for marketing? We all know that R&D are only an empty words, because watchmaking has stopped innovating decades ago, when the maison had realised that they could have sold slogan instead of quality. Be serious, luxury doesn't mean bein...
The collector market
I am more interested in the collector market. I think there is a correlation between new and old, so this months auctions will be interesting to take the temperature of how the other part of the watch market is feeling right now. Not to mention this ugly ...
High end will do fine.
Its us common folk who are being hurt by all this with our collections of fine watches, but not ultra rare pieces, as we see them worth so little on the secondary resale market. Serious financial losses are common on once salable pieces.
I agree with you, but
even the top end takes a pause when things look dicey. And there are some nice watches in the lower end of the market in these auctions. As a friend of mine in the business observed, you'd be surprised how the potential buyers thin out at $xxx,000 (he ask...
The hypocrisy within the industry is beyond limits ...
Let's recall the 2007 crisis, when the bubble burst was predicted. What did the crisis do? Some companies put their people on short time and received compensatin from the government, others fired some of their employees, but still they increased the consu...
Well put
Consumer prices kept increasing for the same product, all with the justification that "this is a luxury item" -- the same product with little change to the product, but higher prices --- that game can only last so long and when it ends, the only ones to b...
That hypocrisy is even exacerbated by higher prices in combination with production streamlining...
which further contributes to increasing profits. As an example I'd like to sharethe following image of two handwound movements made by the same manufacturer, just being separated by a few decades: This juxtapostion clearly illustrates the economisation wh...
Glad you pointed that out.
These companies are still making a lot of money; just not as much. Despite the downturn in sales the last three years, the figures are in the top 5-6 years ever for sales.