The bombshell dropped on a Sunday in late July. Nick Hayek, CEO of the Swatch Group, released a statement to German newspaper NZZ am Sonntag that it would be pulling out of the annual Baselworld watch and jewellery fair, reducing its presence by 19 brands and booths. The announcement didn’t come in a vacuum, as it happens: the trade show had already witnessed the loss of 850 exhibitors in the past two years, including watchmakers such as Hermès, Girard-Perregaux and Ulysse Nardin. These, along with a handful of independent watchmakers, decided to switch allegiance to competing fair, the Geneva-based Salon de la Haute Horlogerie (SIHH)—we’d call it musical chairs, except that nobody really wants to sit in Baselworld’s corner anymore.
While Baselworld still has the support of the remaining big four companies (Chopard, Rolex, Patek Philippe and the LVMH group) that take pride of place in hall one, Swatch Group was the only one to say goodbye to the management company’s inefficiency and perceived arrogance.
As Baselworld has shrunk in size and participant numbers, it seems to have passed on its strength potion to SIHH, which has expanded exponentially in recent years. To put it in perspective, the first SIHH was held in 1995 with five exhibitors as an ultra-exclusive affair. In the past three years, the fair has almost doubled in size, and now hosts 35 brands across a 55,000sqm area. This can be attributed to the fact that SIHH opened its doors to independent watchmakers in 2016 by setting up Carré de Horlogers. Like at Baselworld, they are given their own space, but with big differences. One, they are now inside the Palexpo hall, as opposed to being shunned like pariahs in a structure opposite the main hall, forcing visitors to walk outside regardless of the elements. Two, like the rest of the fair, there’s complimentary food and drinks (including champagne) served throughout the day for visitors and exhibitors alike. And lastly, the 1,500-odd global media that cover the fair are allocated time slots to discover the independent’s new novelties.
This whole debacle has raised three very significant questions: does the turmoil at the watch fairs indicate a suffering watch industry? Where the hell is Baselworld going wrong? And lastly, is SIHH’s strategy sustainable in the long-term?
To answer the first question: current export reports by Fondation de la Haute Horlogerie suggest a hard no. Following the significant market decline in 2015 and 2016, the watch industry picked up pace towards the end of 2017, with positive results showing in the first half of 2018, which saw a 10 per cent increase in Swiss watch exports.
Then why did the Swatch Group decide to pull out of the world’s biggest watch fair? The Swiss company, which owns brands such as Omega, Blancpain and Harry Winston, reported a 14.7 percent growth in the first half of 2018, buoyed by growth in Asia and America. The numbers are indicative of market recovery, but also point to massive cost=cutting exercises that the group has undertaken in the past year, and taking part in Baselworld is not cheap: reports suggest that the group spends approximately USD50 million to take part in the fair (including incidental costs). A huge investment, and while we don’t have figures about the returns gained, we can pinpoint a few other reasons why Baselworld has lost favour with its biggest customer.
In the statement to NZZ am Sonntag, Hayek said: “Today everything has become more transparent, fast-moving and instantaneous. Accordingly, a different rhythm and a different approach is needed. In this new context, annual watch fairs, as they exist today, no longer make much sense… The MCH Group, which organises Baselworld, is clearly more concerned with optimising and amortising its new building—which, incidentally, is largely financed by the watch industry during the fairs—than it is in having the courage to make real progress and to bring about true and profound changes.”
Ouch. So according to Hayek, even though the watch industry literally props the MCH Group like a Swiss atlas, the fair throws in almost nothing in reciprocity. Hotels charge three times their usual rates on the days of the fair and you have to book the room for the entire duration of Baselworld. Restaurants around the halls and around town hike up their prices, and I can vouch for the physical pain of shelling out CHF20 (about SGD27) for a bowl of mediocre, MSG-filled ramen just to assuage my cravings for home.
The fair offers no discounted rates on food or accommodation for its biggest customers, and to add salt to the wound, it provides absolutely shitty Wi-Fi. I have gotten better Wi-Fi signals in the Third World. And should the brands dare get their own routers for their booths, the fair charges them a fee.
Now I know what you’re thinking: hey, you’re a journalist. Don’t you need to post stuff instantly on Instagram etc? Yep—and this is what the organiser of Baselworld doesn’t get. Brands no longer need the platform of a fair to reach out to their suppliers, retailers and media, thanks to this little invention called the Internet. So why should a journalist or a retailer make the trek all the way to the city of Basel to see timepieces that are already blasted all over social media, and endure exorbitant prices of accommodation, food and SIM cards?
As of time of print, there has been no news about what strategy the Swatch Group will employ to launch its novelties to its partners, retailers and the media, but we can be sure that Hayek has done his calculations and it’ll be less than the alleged USD50 million—and without the loss in dignity of being treated like a third-class citizen.
On the other hand, SIHH reported a 20 percent growth in visitor numbers and 12 percent increase in media accreditations in 2018. Apart from the aforementioned free-flow of food and beverages, the Wi-Fi does not lag, and the fair also upped the technological ante by updating the press room and setting up a White Box, which serves as a mini studio.
While things seem to be looking up for SIHH, the fair has experienced its fair share of setbacks in 2018, as both Audemars Piguet and Richard Mille announced they’d be pulling out after the 2019 edition. Both cited insular reasons for their move, stating that their current business models warrant that they control their distribution channels and do not see the expenditure worthwhile just to meet a handful of retailers.
This leads us to the final question: will other brands follow suit and are we on the cusp of witnessing the death of the watch fair as we know it? The thing is, trade shows are a necessary evil. They’re pretty much the equivalent of bees—annoying as hell but useful. They band together companies from the same industry and give them instant access to a global network of retailers, suppliers and journalists—something that even the Internet can’t provide.
And while nobody in their right mind would say no if the Swatch Group or Audemars Piguet invited them to a godforsaken part of the world for the unveiling of their new collection, can we say the same for smaller brands with less gravitas?
Some brands might well be able to survive without the platform of a watch fair, but the majority need access to the network it provides. As Hayek put it succinctly, it’s not the concept to blame. The watch fair simply has to evolve to meet the current demands of today’s ultra-connected climate.