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Interview: 10 Questions For FHH’s Fabienne Lupo On The State Of The Watch Industry

Interview: 10 Questions For FHH's Fabienne Lupo On The State Of The Watch Industry ABTW Interviews

We recently had the chance to talk with Fabienne Lupo, Chairwoman and Managing Director of the Fondation de la Haute Horlogerie (FHH), the body that organizes the watch trade show SIHH. As SIHH 2017 has just concluded, this would be a good chance to evaluate the watch industry in the wake of a tumultuous 2016 and find out what Ms. Lupo prognosticates for the coming year. She says more ladies pieces, more affordably priced entry-level steel watches, and more vintage-inspired watches are going to be central to the industry’s survival. The releases at SIHH this year would seem to back this up with Cartier, Jaeger-LeCoultre, and even IWC among others putting an emphasis on marketing their ladies’ watches.

However, without addressing the gray market and the growing ease for buyer’s to make their purchases online, often at significantly reduced prices, the watch industry will likely continue to see new inventory sit while the gray market thrives. Ms. Lupo admits that the lack of transparency in the industry has adversely affected sales. Whether or not we get the degree of transparency needed for consumers to come back to buying new inventory direct from brands or distributors remains to be seen. Read the full interview below:

Interview: 10 Questions For FHH's Fabienne Lupo On The State Of The Watch Industry ABTW Interviews

Fondation de la Haute Horlogerie (FHH) Chairwoman and Managing Director Fabienne Lupo

Interview: 10 Questions For FHH's Fabienne Lupo On The State Of The Watch Industry ABTW Interviews

1. More than a few people in the high-end watch industry were excited about leaving 2016 behind. 2017 seems to be a year filled with new hope, but let’s do a quick post-mortem on 2016 before looking ahead. What facts or events do you feel defined 2016 for the watch industry, and what state do those facts or events now leave the industry in?

Undeniably the most memorable development of 2016 was the drop in watch exports by some 10% over the year. The consequence of this below-par performance was an accumulation of stock on the market and, as a result, a slowdown in watch production that translated to reductions in staff numbers. Going forward from this state of affairs, we now need to ask ourselves what were the causes of this reverse in fortunes: Economic? Structural? Not to gloss over the challenging global economic climate, which has been discussed extensively, but there’s more to it than that. Escalating prices, complications, production, sizes, and so on have caused this world of superlatives to peak sooner than anticipated. The maisons are now scaling their offerings to fit the current market climate.

Interview: 10 Questions For FHH's Fabienne Lupo On The State Of The Watch Industry ABTW Interviews

2. Problems will always exist. What are some of the solutions to problems that face the watch industry that you saw implemented in 2016 which proved very effective?

I think one of the responses to market problems in 2016 was buying back stock. These are very costly initiatives but have proved indispensable to improving the health of the markets. You’ll remember the alarm was sounded in 2015 by HK Watch, the organization that represents watch dealers in Hong Kong. That was the first I heard of such an initiative, and it really demonstrated the urgency of the situation. In financial terms, watchmakers had to sacrifice a part of their operating margins and instead focus on the welfare of their partners. Definitely a healthy strategy.

Interview: 10 Questions For FHH's Fabienne Lupo On The State Of The Watch Industry ABTW Interviews

3. People understandably get nervous or even panic when companies contract, need for staff decreases, and production slows. Another way of looking at such activity is as a fresh start or beginning of a new direction for a company. Since a fair number of companies have slowed their businesses in 2016, would you say that many are currently rethinking their traditional business models and planning for more modern approaches in the future? Tell me a bit about that, since I know you are so involved.

You can’t change the business model of an industry from one day to the next. At the most, you can update production tools to respond to the climate of the market. The new directions to be explored are marketing, communications, and retail, and I believe watchmakers are more conscious of these areas since the decline in the growth curve of recent years. They will be looking at the emergence of online shopping, social networks, a new consumer profile and their purchasing habits, attainable luxury, and wearable electronics in the form of smart watches. In other words, the watchmaking industry – highly innovative in its products but strongly rooted in tradition – has been presented with a new problem. And it’s certainly not an easy one to figure out.

Interview: 10 Questions For FHH's Fabienne Lupo On The State Of The Watch Industry ABTW Interviews

4. The FHH has access to a lot of interesting data, a lot of which you make public. From your vantage point with the data that you see, what are some areas related to the haute horology watch market to be optimistic about, and what are some areas for worry or that need attention, and that you feel that the industry has not yet addressed.

I think we can remain optimistic if we look at the capacity of watchmaking maisons to adapt to changing markets. Of course, the process isn’t always painless, as demonstrated by the quartz crisis, and to a lesser extent the subprime mortgage crisis. But the maisons are set to bounce back because, for the most part, they have an advantage: their positioning in the luxury industry, an industry that tends to show admirable resilience. Saying that, the task won’t be easy for watchmakers. They now need to figure out how to attract and form a new customer base from a younger, more fickle audience whose values are not necessarily the same as those of previous generations.

Interview: 10 Questions For FHH's Fabienne Lupo On The State Of The Watch Industry ABTW Interviews

5. I like to think of high-end watches as objects of celebration. People consume art and jewelry when they have something to be happy about. Given that 2016 was marked with a lot of global pessimism, it is understandable that the watch industry did not experience its most impressive year. With that said, are there areas of great optimism that you feel aren’t being spoken about enough?

Personally, I’m very happy with the current position of ladies’ watches in the watchmaking sector. I don’t necessarily mean jewelry watches but mechanical watches designed and produced for women. The maisons have been focusing on female clientèle for many years now. Growth potential in this segment of the market will necessarily remain unchecked compared to men’s timepieces. All in all, we cannot but be happy with these efforts.

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Comments

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  • Interesting interview Ariel. Thanks. What was attendance like this year? Up? Down?

  • SuperStrapper

    Interesting article, especiall the supposed push towards consumer education. Greater/deeper user understanding generally correlates with price compression.

    Also, great photo:

    https://uploads.disquscdn.com/images/8b33b4072c15affe5846eadb1d5c43d139b1826834135ae0344cb885ef5d6d09.jpg

  • Beefalope

    “They now need to figure out how to attract and form a new customer base from a younger, more fickle audience whose values are not necessarily the same as those of previous generations.”

    Bingo.

    Younger people are growing up at a time when technology is expected to be versatile and rich in features. Watches simply don’t do very much, and people growing up in a world where technology does so much are more likely to see watches as superfluous.

    • BNABOD

      Totally agree. I just came back from Japan where fancy watch stores at least in Osaka are very common and i can tell you that I did not see a single “young” person in any of the stores whether it being at Seiko or at Lange or at Yodobashi or Bic. The young were at a couple places the electronics section and coffee shops.

    • awildermode

      One would think that the ‘hipsters’ would jump all over this “retro way” of time keeping.

      • Beefalope

        A valid point, and I’ve actually seen some of them wearing vintage watches. But buying affordable vintage watches — and there are tons of them — does nothing for today’s industry.

      • R Khalifa

        a lot of hipsterdom is just about the look, and very little concern for the actual content. tons of “hipster” brands selling faux-vintage cheapo quartzes on instagram/kickstarter and you’ll see them on wrists around the Bay Area, too.

      • IG

        Hipsters wear “Daniel Wellington” quartz turds.

  • Dinkee, H. O.

    With Donald Trump as president of the United States, expect a large increase in middle class income and, indeed, a larger middle class. They will have money to spend and many will spend it on expensive mechanical wristwatches. The weenie days of Obama are gone. Donald Trump has saved the Swiss watch industry!

    • commentator bob

      Mechanical watches (especially anti-magnetic ones) are more likely to survive the EMP effects of a nuclear war, so I would definitely say that they are the way to go with the new administration.

    • Beefalope

      The fox was having breakfast on the way to Burundi when the magic rug ate a monster and the socks hanging on the green chile cloud blanketed the natives of Atlantis while Mick Jagger hid the luggage in the almond.

    • DanW94

      I think you mean he’ll save the Chinese watch industry, because he’ll probably resume production of those hideous, sweat shop made Trump branded quartz monstrosities…

      • The Deplorable Boogur T. Wang

        That would be US PRESIDENT TRUMP to you….hrumph!

  • Epictime

    Thanks Ariel. Excited to see more and new women’s offerings as this market seems to be neglected. I am always struggling to find a watch gift for my wife. This would be a great time for a young woman to start in the industry as women are so underrepresented. Perhaps I am wrong.
    I think Ms. Lupo understandably has a very European perspective and her primary goal is to help the Swiss and German watch industries. The pressures and challenges these maisons are facing have created opportunities for alternative modes of sales and openings for non European watchmakers. This is tough and disruptive for Ms Lupo’s constituency but good for the global mechanical watch consumer. I recently purchased a Ball watch online (after reading the Ball for BMW ABTW article); by preordering I received about a 40% discount off list and was able to put my son’s birthday on the limited edition numbered watch and was able to further customize by getting rid of the BMW logo. My son loves the watch. The only negative was it took 4 1/2 months to arrive because of “stringent quality control and production issues”! I would not recommend purchasing this way if time is of the essence. I have 2 more Ball watches on order as gifts (nice looking at good prices).
    The struggles of the European watch company have also created opportunities for the non European producers. I preordered a watch from the New Zealand watch company Magrette a few months ago (hope it arrives since an investigative trip to New Zealand seems unlikely). I also just purchased my first limited edition Grand Seiko High Beat automatic watch which is beautifully finished and at a price point that is significantly less than I would expect to pay for an equivalent European made watch. It took me about 3 yrs to get past my anti-Japanese watch prejudice and am glad I finally did. Can’t wait to get a Grand Seiko spring drive limited edition which is really an innovative concept. The Seiko Presage line comes in at a great price point so would consider that as well.
    My comments above regarding non traditional ways of purchasing watches and some of these being non European is only to point out that disruptions to an industry can be a good thing particularly for the consumer. It depends how the Swiss and German’s respond. I think they have an incredible product and when my wife’s 20th anniversary rolls around later this year I will most likely be shopping for a Patek or Lange.

  • Beefalope

    On the one hand, I understand the need to have educated salespeople selling watches. I’ve been consistently surprised at how little the people who sell watches actually know about what they’re selling. Still, I think this issue is overblown, and is more of annoyance than a barrier to buying from authorized dealers.

    The genuine barrier is price at authorized dealers. Regardless of whether the salesperson I’m dealing with is knowledgeable or ignorant, there’s no way I’m going to spend an extra several hundred — and certainly not an extra several thousand — on a watch because the salesperson is knowledgeable or likeable. In other industries, we’re seeing a closing gap between store prices and online prices. Even Best Buy will now match Amazon pricing and pricing from other legitimate online retailers. This sort of thing is more commonly an expectation.

    Watch AD’s are not even close to doing anything like this, and clearly their sales have suffered as a result.

    • Timestandsstill

      I’ve personally found that some AD’s will match or come reasonably close to the more legitimate online grey market prices…..it doesn’t hurt to ask and it helps if you have cultivated a relationship with the AD. Obviously not all AD’s are willing to do this but the ones who want to survive will increasingly do so.

  • cg

    There seems to be an undercurrent of
    unsaid doom and gloom… Things are not well in these new (younger) markets are they? I was surprised at the comment that now they will have a “public” day where they will let the great unwashed undeserving rabble in to ooh and awe over their wares. One of the many issues of poor attitude towards potential customers… “exclusivity” has no meaning to a youth market that would wear ? products and expect myriad features.

    • At BaselWorld, there is press day (the day before the public opening of the show) but otherwise all of the show is open to the public. I’ve had friends contemplate going but they lose interest when I tell them:
      1) It’s really a trade show for the watch industry
      2) You can’t even walk right into the booths without an appointment
      3) Appointments are most often made before the show starts
      4) You won’t get an appointment unless you are press or a retailer/distributor (a real buyer).
      5) As a rule, you can buy watches at the show

      • cg

        “as a rule”? Well it seems like alot of restrictions and regulation to actually discourage the public. Appointments, the “trade” only, specific days… all add up to a marketing agenda that is totally out of touch with it’s public. Sad to say, but “shows” like that do more to subvert the market than bolster it. The energy seems to be not towards those that have and want to spend ?but towards fauning dealers and distributors. The world has changed. More and more middlemen in the transaction are being left out. That is a good thing! I’m sure you can attest to that given you control your wn product. I, as a consumer also enjoy the direct relationship with the manufacturer.

        • Yeah, well for better or worse these things are trade shows intended for retailers/distributor to order stock for the coming years. Plus the press.

          Not to say that having watch fairs where the public could actually be encouraged to show up and buy watches would be a bad idea. But currently at fairs there are new items (some of which are not functional) that are only just entering production, so brands don’t have stuff to sell to the public. Small independent brands are an exception where you might be able to buy a watch on the spot, but this is rare.

          I introduced ABTW’s Max to the nice people at Alexander Shorokhof last year and Max and I went back the next day and he bought a Babylonia II from them. But again, this is rare as even A.S. was not really set up to process payments, etc. But they are super friendly and accommodating and did the deal based on the trust I have with them from previous years.

          But consumer focused fairs might be the coming thing.

          https://uploads.disquscdn.com/images/d7868fc152f11ba1d131ceb5bad3e6e6d022351e16c8cf79ce3d8db38a624851.jpg

        • Timestandsstill

          Firstly, these are trade shows (in Switzerland) for press and buyers, not consumer fairs as Mark points out. Middlemen aren’t too much a part of them and someone has to see the watches first and place orders at a wholesale level before they can be sold to anyone else, including the grey market. An obvious exception of course are the companies who are increasingly selling direct online. Also noted by Mark, many of these pieces are not yet even finished production models. The same thing applies to the Consumer Electronics Show annually in Las Vegas and many other “trade only” venues.

  • Buy and Sold

    The fact that the watch industry has declined in a period of economic growth indicates that tastes have changed.

    Is it the trend to technology?
    Should watchmakers do more blending of smart technology into their watches. These can be the gateways to the pure pieces.

    Is it the trend to online shopping?
    With the trend towards value how do watches protect their brands? They can limit the supply to ADs only, the way Sinn does with Watchbuys, or sell direct only like Guinand. But for the larger brands selling worldwide at high end stores these channels can’t be changed easily. 1.They could match online pricing or see those retail channels continue to decline. I think this is a trend that can only be reversed by price. 2. Maybe they could come out with some Limited Editions only available online at a fixed high margin price, but with display models in retail outlets. Leverage their channels to maintain their margins.

    Is it the trend towards being brand blind?
    Watchbuyers look at Chinese tourbillons, kickstarter dive watches, and come to realize that paying for a brand just makes you look like a chump. Does this mean all watchmakers have to become Timex? No, but it probably means they need to restructure their costs so that they can deliver better value.

    If I had to invest in watch companies it would be Hamilton, Grand Seiko and Greubel Forsey. I think they are making the changes needed to meet today’s market. Greubel Forsey has taken the route that is not open to everyone because the market where value is not a factor is a very small one.

    • commentator bob

      Hamilton is just one part of the massive Swatch group. But I think Swatch is doing very smart things with Sistem51, with Hamilton, Tissot, Longines, etc.

      • Sheez Gagoo

        The System 51 is a nonworking cheap piece of plastic with rough edges build by robots in the cheapest way possible sold for a ridiculous price. Just works a a symbol for the current state of the industry.

  • Word Merchant

    I’m lapsing into tired cliche with no shame, but the watch industry’s right in the middle of a perfect storm:

    1. The generations below us just aren’t interested in watches – they have phones, technology everywhere. Funnily enough I don’t think they’re interested in technology either – just you try hiring a decent graduate programmer; they’re just interested in using technology as a airbrushed tool. They don’t want to build the future; they want to buy it, and it needs to be shiny. Apple understands this very well, it fits in with their ethos. This is why the Apple Watch exists.

    2. The Swiss watch industry has access to the the most advanced technology and materials yet, but has no real idea on how to apply any of it to anything new. The paucity of new ideas is staggering; grafting more tourbillons into watches is mechanically clever for sure, but hardly game changing.

    3. The Swiss watch industry, in its deepest heart, truly believes it is in decline, and all the old grizzled CEOs have no idea what to do. Why else the descent into gaudiness, why else the endless celebrities and ambassadors – hawked like prostitutes, used without care or thought, why else the incessant price rises? The party’s about to impode, and the sense of desperation is palpable.

    I of course am way too old to offer any meaningful ways out of this. You probably are too. Sorry to be so blunt. I’m more than happy with my Rolexes, but our children want something very different.

    It’ll be exciting and depressing in equal measure to see where all this goes; watching younger people refuse to live by the laws and structures you’ve lived within is always unsettling.

    I truly hope the Swiss watch industry comes up with something young, new and good. I’m not holding my breath.

    • Yojimbo

      Don’t worry, you can bequest your Rolexes to me 🙂

      • bequeath?

        • Berndt Norten

          Give it time. Heck we ‘gift’ things now!

          • Yojimbo

            not if you’re the person drafting the estate plans home boy

          • Berndt Norten

            Word.

          • BILL

            Don’t you mean “Gift it time.”?
            🙂

        • Yojimbo

          Is the act of making a bequest, which is the gift you’re making. Definitely used the correct word right thurr.

        • Raymond Wilkie

          You only bequeath something when it;s been bequested…..wait,……..now i’m confused.

    • commentator bob

      “Funnily enough I don’t think they’re interested in technology either – just you try hiring a decent graduate programmer; they’re just interested in using technology as a airbrushed tool.”

      As someone that works in the tech industry I have observed that firsthand. But it is also true of the watch market. How many watch pontificators, bloviators and obsessives have so much as cracked the caseback on a Seiko5?

  • Raymond Wilkie

    Really good interview. It’s a difficult one for sure. I see the top end of the market staying quite stable with a particular pieces being produced in limited numbers, although they don’t sell as many pieces as they would like this generates a fair slice of their $ sales. The problems are the middle / lower end of the market ( auto and quartz ), you only have to walk through a mall to see that this end of the market is completely saturated and needs to be reigned in a bit. No one likes to see retail shops close and jobs lost but the world is a changing.

  • Marius

    These amateurs have neither the wherewithal nor the intelligence to steer the industry in the right direction. The only person who has the balls to do what it takes is my mentor and good friend Archie Luxury — The Pontiff AC3. Only he could give this industry a fresh start. Santo Subito! Santo Subito! Santo Subito!
    https://uploads.disquscdn.com/images/a9bb39d3aa6f10315c164f25070946836562476275bc5fe657220dbdbea25c94.jpg

    • Raymond Wilkie

      Wipe this mans face off this blog.

      • Marius
        • Raymond Wilkie

          Now you’r winding me up.

          • Berndt Norten

            Wind Ray up, he can’t stop
            He’s wound up tight just like the clock
            That’s winding its second hand down

            Wind him up, he can’t stop
            He keeps on going ’round the clock
            He’s winding his second hand down

          • Raymond Wilkie

            As he reaches for his glass of wine
            Once he starts it’s hard to stop.

          • BILL

            Saga, baby! Hell yeah!
            How about this?:

            You’ve been
            Winding me up too long
            I’m over my head is it day or night
            Cause woman you ain’t so strong
            But you caught me by surprise
            Burned me with your eyes
            Cut me down to size

          • Raymond Wilkie

            He’s feelin’ it . : )

          • Berndt Norten

            Feelings.
            Nothing more than
            Feelings

          • Berndt Norten

            Are you feelin?
            Feelin that way too?
            Or am I just
            Am I just a tool watch?

            When the summer comes Ray’ll be there
            Standing in the light
            Once he’s worn Hublot and Rollie
            He should know wrong from right

    • commentator bob

      I bet Archie Luxury has cracked the caseback of a Seiko5. . . By sitting on it.

      • Dinkee, H. O.

        He’s a hard ass alright!

    • Dinkee, H. O.

      It was a close call between me and Archie Luxury to be President Trump’s Official Horologist. I only got it over him because the F-bombs just weren’t deemed suitable for press interviews, and he’s a dirty foreigner.

  • Yojimbo

    Q #2 was begging to be drilled down on and some of those others were an invitation for puff piece-worthy remarks which were duly acted upon by her.

    IMHO I grade this interview as follows:

    https://uploads.disquscdn.com/images/0f99b6447b05a84b63e8a28232949f4dba9fc778d7bcecc220af3ecd6cefe0e3.png

    • Marius

      The questions and answers can be described with just one word — PLATITUDES.

  • Raymond Wilkie

    What’s with all the cell phones ( pic 4 ) they ;look a bit like Vertu.

  • Sheez Gagoo

    Is there any reason for the FdlHH to exist? Their whitebook: fail. Their inteviws: Not worth reading it. Just a kind of marketing vehicle for Richemont that doesn’t make any sense.

  • The Deplorable Boogur T. Wang

    Softball interview with industry bot.
    IMO, very ho-hum.

    • Word Merchant

      Yes, Q11 should be: “so, Honoured Madam Watchmeister, before we close, is there anything else you’d like to say to your grateful public?”

    • SuperStrapper

      I don’t understand why the interview was too ‘soft’. What was she/FHH supposed to get pinned to the wall for? Did I miss something, and we are waiting for a Trey Gowdy style inquiry?

      • The Deplorable Boogur T. Wang

        Why was it “too soft”? – Good question.
        As she is in a position as the “face” of the brands for this show she should be able to address the current controversy about the state of the watch-world in a forth right and clear manner. Her handlers know their are many questions on the minds of the Fondation de la Haute Horlogerie (FHH) members and attendees.
        Reading her comments, as I was not there in person to gauge her body language and facial mannerisms, one sees rote answers designed to deflect from the real issues the industry is facing.
        In that way – she did her job well; but to those interested in seeing if the industry actually understands what the ‘real world’ sees – it is unclear from her responses.
        As I said, IMO, she is just an industry-bot in what we see in this “interview.”

        Perhaps seeing someone in her position addressing these questions is a ‘good thing.’

        Frankly, from her ‘canned replies’ it looks more like ‘Lipstick on a Pig’ is what’s happening.
        Just my opinion.

        • SuperStrapper

          I must have missed the part of the article where she was challenged on all of these current industry controversies and danced around it poorly. It appeared to me this was designed to have a lighter tone from the beginning. I really don’t see the point in throwing either interviewer or interviewee under the bus, but that’s just me.

          I also didn’t turn off The Notebook in disgust because they didn’t add a scene involving a truck-mouned m249 SAW cutting down insurgents on a raid, even though it would have made it such a better movie.

          • The Deplorable Boogur T. Wang

            I try my best to only deal with specifics and reality.

            Although, I will admit, sometimes theorizing on hyperbolic potential absurdities can be mentally entertaining .
            The lure of the “what ifs” and “could have beens.”

  • IG

    Ms. Lupo loves this maison word…

    • The Deplorable Boogur T. Wang

      But of course, she wishes to project, how you say, Le Femme Francais!

      • IG

        Oh là là…

      • Marius

        You mean La Femme Française.

  • pina06355 .

    What’s never talked about and never understood is that most of us that support the sales of mechanical watches are repeat buyers. We know what we want and are well versed in buying. I buy the company when l buy a watch, how am l going to be treated in after sales service for example (I own 2 IWC’s). I’m done with Omega, they totally are horrible in after sales service. (Speedmaster Pro Overhauled in NJ) the cost of a replacement rubber strap, $400 on a Planet Ocean Chrono? Omega among other companies are focused on sales of new owners and they are not aware of their poor actions or poor promotions of supporting the buyer 10 yrs from now. Except for IWC and Rolex (my own personal experience ).

    I find that the industry is in “sales only” mode and it is bad for us who want loyalty from the brand. It’s not going to happen. Omega among many others should not be charging a customer $400 for a replacement strap and $1000 overhauls. They are obviously kicking you for buying their product in the first place. And now surprise!!!!!! The sales of watches over $5k is a disappointment hmmm wonder why?

    • commentator bob

      I paid $500 for an Omega overhaul (also NJ) and was pretty happy with them. Constant website updates, full testing reports, returned the old parts in small plastic bags. A chronograph is generally going to cost more.

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