By Kien Lee
Recently-released Swiss watch export numbers, which from January through June 2016, saw a drop of 11.9% in unit terms and 10.7% in value terms compared to the same period last year, point towards a slump that has been continuing over the last few years and does not look like it would turn the corner anytime soon.
Factors for the phenomenon include a slowdown in global growth depressing income and in particular discretionary spending, an anti-corruption drive in China which has seen bureaucrats avoid accepting eye-catching Swiss watches as gifts.
Terrorist attacks in European cities, along with a weakening Chinese Renminbi, alongside a strengthening Japanese Yen, means China tourists are spending less in the major tourist destinations like Paris and Tokyo. Hong Kong, which used to be a strong source of sales, has seen tourist numbers from mainland China fall, in part due to the Chinese traveling to other destinations near and far, and also due to the brimming-below-the-surface discriminatory attitude native Hong Kongers have towards their mainland cousins. It was only a matter of time that the Chinese took their business elsewhere.
Of course, there were also new entrants such as Apple's iWatch, creating tremendous pressure on the traditional watch industry. According to Strategy Analytics, a retail data firm, in the fourth quarter of 2015, 8.1 million smartwatches shipped worldwide, while the Swiss shipped 7.9 million watch units.
To add to this, the Swiss franc which soared in value in January 2015 after the Swiss National Bank abandoned its cap against the euro, has seen Swiss watchmakers' revenues take an additional hit when converted back from global currencies.
This is clearly a perfect storm that no CEO could have fore-told. And pessimism amongst watch executives remains high as revealed in a Deloitte study published just last month.
"According to the vast majority of watch executives surveyed, the downward trend in the Swiss watch industry will continue over the next 12 months," the annual study by the consulting firm revealed.
So what does the founder of MB&F, an independent watch brand think about all this?
These are clearly times of austerity in the watch industry, how has the global slowdown in retail sales affected your company's rollout strategy?
In 2013, we took the crucial decision that MB&F would not grow and capped yearly production at 280 to 290 "Machines" a year. Of course our creativity was not limited, so even though we have no advertising budget, the brand continued to grow in awareness and following. The result was that in 2015, our 10th anniversary year, sell-through at our retail partners was way higher than our production.
So instead of producing more – the logical step – to meet demand, we cut 1/3 of our retailers and bought their pieces back to be able to deliver the 2/3rd remaining. And this year we have already sold 280 pieces to retailers by the end of January. This meant we had to postpone some new planned creations (including HM7) to the next year .
Our plan is simple: create, create, create… and always craft less pieces than demand.
What general trends do you see across the board for your peers in the industry? What do you think will, or has to change?
I really do not know. I can imagine that many brands will try to come out with more affordable pieces, and more than ever, each brand which has an "icon" will concentrate most of its efforts on working on that piece, not stepping out of the boundaries.
It seems to me that our industry is living as much an economical crisis as a creative crisis.
The industry needs to reconnect with their clients not by creating more affordable pieces but more emotion-generating pieces. This is the moment to be way more creative and risk-taking than before – not retreating behind closed doors.
When you founded your company, you were a rebel. How do you stay a rebel as the company finds more success?
I have never been a rebel, in as such as I was not against my industry. I just wanted to craft my own ideas, which were clearly outside the realm of what seemed acceptable.
The only expectations we need to exceed are our own and as creativity is a powerful drug, we keep on seeking more powerful stimuli.
That is what keeps me going.
And how would you describe the MB&F customer? Are they rebels as well?
MB&F customers are very self-asserted individuals who are at ease with their choices and don't care what others think of them. They are not trend followers, they do not need status symbols. They are centered and courageous.
All the MB&F owners I have met ferociously defend their individuality!
A lot of your new timepieces go to repeat customers. How did you manage to build such strong brand loyalty? And for those who are new onboard, have you figured out what their tipping point was?
It seems to me that 50% of the reasons which lead to getting into MB&F are actually the reasons we exist and the values we defend, and 50% are the creations themselves.
The WHY is as, if not more, important than the WHAT.
And IF you like an HM6 Space Pirate or an HM8 Can-Am, chances are you are not debating between that and a Patek or a Lange.
Our creations are so polarizing that those who love them, tend to accompany us on our creative adventure.
Some stop because this model or that model isn't their cup of tea, but we never lose touch [with them].