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What is really causing the delay in production of popular watches (especially when unpopular watches can be overproduced year after year)?

Last week, we at WatchPit highlighted how we regularly find surplus stock selling at 40-80% discounts, which is unsurprising in an industry that in our strong opinion is oversupplied and overpriced.
**This week in our essay below we breakdown the Cause-and-Effect of the ‘Severe Shortage’ in some brands’ offerings. Most of you would have heard of the impossibility of getting models such as Rolex Sports & Divers, Audemars Piguet’s Classic Royal Oak, Patek Philippe’s Nautilus, Vacheron Constantin’s Overseas, as well as selected popular models at brands such as small independent brands (Like Gronefeld) and more well-known brands like A.Lange Et Sohne and Zenith.**
How much of this is due to an overwhelming uptick in demand, and how much of it is due to disrupted supply lines, inability to recruit talented watchmakers, and inability to access component parts? We examine each in turn.
: “Switzerland produces just over 20 million watches per year, or just over 2% of global timepiece manufacturing. However, it commands more than a 50% share of the global watch industry in value terms, with turnover for all Swiss brands combined estimated at more than CHF50 billion ($53 billion) in retail sales value”
***DID YOU KNOW: Swiss Luxury Watch Brands rely heavily on subcontractors for parts and services?***
̳While many believe top luxury watch brands make most/all component parts inhouse, nothing can be further from the truth: only THREE watch brands are completely vertically integrated – Rolex, Seiko & Citizen. All other brands obtain parts & services from sub-contractors. For an idea, see this list on this blogger site: https://www.ablogtowatch.com/…/Atelier-Vaucher-Watch…
Many component parts are also sourced from China – and this is one of the best-kept-secrets the Swiss watch industry wants to keep from you to maintain the swiss-luxury-veneer (so long as 60% of parts & services are sourced from Switzerland, watches qualify for being ‘Swiss Made’):
“Are Swiss watchmakers facing a supply shortage? Brands are keeping silent as to a possible shortage of components from China, the main supplier of parts to the Swiss watch industry.”
“Increased importations: A closer look at importations of watches and watch parts to Switzerland shows a constant rise over the last two decades, from CHF 1.1 billion in 1990 to CHF 2.6 billion in 2010 then a further rise to CHF 3.8 billion in 2019, of which close to CHF 800 million from China. This makes China the main supplier for Swiss watch brands. “Of this amount, around CHF 200 million concerns finished watches,” comments Jean-Daniel Pasche, President of the Federation of the Swiss Watch Industry.
“Consequently, importations of Chinese components for Swiss watches represented between CHF 500 and 600 million last year. So far there have been no indications of any shortage, which is entirely plausible in view of stocks and lower consumption since the start of the coronavirus epidemic. Whether any brand would dare to openly deplore such a situation is a different matter. Consequently, we cannot completely exclude problems of supply in the coming weeks. It’s all a question of how long this health crisis lasts.”
***DID YOU KNOW: The conventional wisdom is ‘Swiss Watch Makers are well paid, yet hard to attract, recruit & retain’ is inaccurate?***
Can’t get the watch you want? Were you told there is currently a delay in production due to over-whelming demand? In our opinion, this belies the fact that the manpower side of the Swiss watchmaking industry has long-standing structural issues. After all, did you know:
– The average salary of a Swiss watchmaker is lower than the average Swiss worker’s salary?
“But the salaries earned by the industry’s employees are much more modest than the value of the timepieces they work to produce. In 2018, the average salary in the watchmaking industry was just over CHF5,400 per month; that’s CHF1,000 less than the average salary of the country’s workers.”
– In the period 2014-2017, the Swiss watchmaking industry has already suffered a contraction (see chart in article link), and grew for the first time in 2019.
– State aid was provided to the watchmaking industry during the COVID pandemic, but “Massive State aid has masked the true extent of the crisis suffered by the branch. Waves of layoffs and the demise of dozens of brands can be expected once short-time work and business loans have ended,” warned Grégory Pons, a French journalist based in Geneva who specializes in watchmaking.
So we are here at Watch Pit asks:
1) Could laid-off watchmakers not be re-hired (or are watch brands awaiting a better balance sheet before doing so?)
2) Is this Swiss watchmaking industry unable to attract watchmaking talent because salaries are not commensurate with the value of products they help create?
3) Are the delays in production caused by the poor management & retention of watchmakers and the reliance on out-sourced parts from international suppliers whose supply chain is now disrupted by the COVID pandemic (particularly China with strict COVID laws)?
To us, only by answering these questions properly will there be a more objective truth and clarity to these issues.
Photo Album on dumped, heavily discounted stock found globally: https://www.facebook.com/media/set/?vanity=thewatchpit…
Other reports on Swiss Watchmaking component parts affected by China’s supply chain disruption:
Made in China: Brands are happy to use Chinese components but not all admit it
One is SevenFriday. Daniel Niederer, its founder, spent 10 years distributing watches in Asia before establishing his own brand. He sells watches that are designed in Zurich and made in a factory in China. Other Swiss brands are also said to source their watch cases and dials from there.
“Where we have 100 watch factories in Switzerland, China has 1,000 doing the same,” says Mr Niederer. “Out of those 1,000, a small group is focusing on quality. They’re low-profile and everybody wants to work with them, because they produce fantastic quality. If you knock on their doors, they’ll turn you away because they’re full – with Swiss watch brands.”
By sourcing his “affordable luxury” watches in China, Mr Niederer has been able to keep his retail prices low. He makes no attempt to hide the origin of his watches, a transparent approach that consumers appear to endorse. In the year since its launch, SevenFriday has sold more than 12,000 watches.”
P.S. we are a Horological CounterCulture Investigative Media Company and have no commercial interests in such companies or sales below! We are only here to expose the industry for what it truly is – and yes we love (and will continue to love) watches too! The impact of excess supply and over-pricing are our core research subject areas and we aim to expose the truth in the quest to uphold consumer rights and corporate accountability.
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