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Apple Watch bands. Photo: David Paul Morris/Bloomberg
Apple Watch bands. Photo: David Paul Morris/Bloomberg

Annual report

2015 was a very good year for several types of watches. What will 2016 look like?

What a perplexing year 2015 was for the world watch industry. What has been most perplexing has been the lack of closure on the two main challenges that loomed over it 12 months ago.

Last year in January, everyone in the Swiss watch industry seemed worried about the slowing China market on the one hand and the impending smartwatch revolution on the other. Both problems were, in a sense, problems of “known unknowns".

Yes, China was a massive consumer of watches. And a slowdown would hit Swiss brands very hard. But nobody was sure how much the market would slow down, which price segments this would affect and how much a wave of anti-corruption reform in China would make things worse. More than once last year I had conversations with brand managers that were highly counter-intuitive. Some of these managers, who worked with lesser-known brands, saw the crackdown on graft in China as an opportunity.

“Now people can’t walk around with Rolexes or Cartiers," one guy told me, “because everyone will think they have been making money on the side. Good chance for less famous brands to get a bigger bite of the China pie."

Later this year, I will try to pursue that “story angle" and see how it worked. Stay tuned.

Meanwhile, did China slow down? The latest data by the Federation of the Swiss Watch Industry (FHS) suggests that exports to Hong Kong in November were down 27.9% compared to 2014. This is catastrophic news and reflects weakness in China, which is the biggest source of offtake from Hong Kong.

But the China market itself, which is much smaller than Hong Kong and the seventh largest for Swiss exports behind the US, Italy, UK and Germany, expanded by 17.1%.

How perplexing. What is really happening in China? I suspect the answer is a complex mix of growth in some price segments and contraction in others.

Don’t forget to throw into that mix that other great known unknown of 2015: the debut of the Apple Watch.

How successful, really, was the Apple Watch in 2015? No doubt Apple sold millions of watches after the launch. But were these sales strong enough to materially affect Swiss watch exports?

One clue could be in data released by the FHS on the price bands of exports: “There were no positive developments in any of the main price ranges, either in value or volume terms. The most marked declines affected the 200-500 francs segment (export price) and watches costing more than 3,000 francs."

You could argue that these price bands more or less correlate with the prices of the Apple Watch’s entry-level Sports and high-end Edition models. Though, I must add, it is dangerous to do this without data on sales that Apple is unlikely to reveal.

All of which makes for grim reading if you are a fan of mechanical watches. There is little doubt that 2015 has ended on a sour note for the business. This despite the fact that, as this column has harped on over and over again, 2015 was a very good year for several types of watches. Elegant, minimal watches and women’s watches all had an excellent year as far as consumers are concerned.

What will 2016 look like?

From a consumer’s perspective, I think we are poised to see it become even more of a buyer’s market. Prices are going to drop and great deals are around the corner. Pressure from China and Apple, perhaps, will make it a very good year for people who have the means to splurge.

And for brands? Things look difficult. The post-Lehman bump in business has all but vanished. Swiss brands are getting lashed by several storms. Some of them will sink. Which means the market will retreat to tried and tested classic brands that promise reliability, continuity and, most importantly, value.

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