Who Saved Swiss Watchmaking After The Quartz Crisis?
It has been a while since my last blog post that chronicles my experiences in the Swiss watch industry during the 1990s. I apologize for the gap; the challenges of being a modern-day watch entrepreneur can send some curveballs, hence the delay. It is always curious to look back on various periods of life. The benefit of hindsight provides new perspectives on events that were just not evident when living those times, and it is that perspective that is my motivation for this blog. It also gives perspective on who saved Swiss watchmaking after the quartz crisis.
When we talk about older watches, I realized there is a tendency to refer to them by the decade in which the watch was released. We talk about a 1950s watch or a 1970s watch, but then there is a jump to the millennial’s considerable growth period. Do we speak about naughty watches? I certainly do not. But for me, it is what happened in the 1990s that impacted me the most, and I think it was a pivotal moment for the ultimate success of the Swiss watchmaking industry we see today. That period was the beginning of my journey in the watch industry. My day-to-day work prevented me from seeing the 1990s in the context of the previous decades. Writing this blog has turned into a journey of discovery for myself, allowing me to place many personal memories in the industry’s broader context.
Just A Transition Period?
The 1990s were much more than merely a transition period from the Swiss quartz crisis. The decade was not defined by specific watches or watch trends prevalent in previous decades; it was marked by structural changes in the market. Without these significant developments, it is unlikely that the industry’s huge expansion after the millennial would have been possible. After the decimation of the Swiss watch industry brought on by the quartz crisis, the Swiss industry began to re-structure. This was characterized by the reorganization of production, efforts put into standardization of many aspects, including development, manufacture, testing, and industry education. The industry that emerged from this period of change was the foundation for future success.
This period of restructuring was still focused on in the early 1990s. Through all the restructuring’s maelstrom, significant innovations, brands, and products started to emerge and began to positively impact the Swiss watch industry. The industry had a realization, whether consciously, subconsciously or just following the market trend, at the end of the 1980s that there was a need to create new competencies. Areas such as a global approach to sales, sharpening their brand image, creating thoughtful marketing initiatives, and finally bringing a new focus to mechanical movements took more prominence. First, let us look at the early years of the 1990s at what the industry looked like as it emerged from the trauma of the late 70ies and its restructuring during the period of the 1980s.
Doomed To Growth
At the time, Tissot was supposed to be a globally focussed brand and the leading mid-priced Swiss brand. The aspirations of the brand, with its global reach, were set very high. On top of this, it had to be achieved while transforming a loss-making business into a profitable one. The long-term targets set by the chairman, Nicolas Hayek, seemed preposterously high at that time. These sales targets were so high that I thought it would be impossible for a brand like Tissot to achieve them in the mid-price range. History teaches us that his visionary spirit was correct to set such challenging targets. Tissot almost managed to increase their unit sales six-fold and increase their average sales price at the same time in less than 20 years. That 20-year process took a generalist brand to satisfy too many people with a vanilla product and transformed it into a specialist watch brand in multiple subsectors.
There’s Always a Downside
As a brand manager at the time, my team was being challenged by these aggressive new targets to achieve and tidy up the legacy from the 1980s. During the 1980s, Tissot followed an eclectic brand strategy to cultivate a mixed brand image driven by satellite product lines, each with a strong identity. This was confused further with specific regional strategies that progressively drowned out the main Tissot brand image.
There were inevitably many products with such an eclectic strategy, and each range required a launch. A huge amount of effort was expended on creating and launching these products, all with the best intentions. The huge effort inflated expectations, and naturally, not every product launch succeeded, especially with such a mixed brand image and such significant regional variations. The net result was that Tissot had a large volume of stagnant inventory spread over many SKUs in the early 1990s.
Not Just Tissot
As time went by, it became clear that Tissot’s predicament was not unique. Many brands were laboring under excess stock spread over a vast array of SKUs. As I wrote this, I had a flashback to my initial interviews at Tissot. There were many questions, but they all focused on launching a new product line and simultaneously managing an overstock situation. I now fully comprehend the situation.
Big Data Handling In the 1990s
The primary focus was initially on reducing both the absolute amount of inventory and the number of SKUs. There was already a system in place to manage the product life cycle and inventory planning process. It contained the sales numbers, lifecycle status, stock, and forecast production requirements. The system generated a report once a week that was printed on Z-fold paper by a dot matrix printer – it was huge. There were almost 2000 SKUs between all the collections, and each SKU had 12 months of data displayed on the report. The report was long and heavy, but I would carry it home and study it on my daily commute on the train without fail.
We learned quickly – mostly through mistakes. For example, running sales promotions on the slow-moving stock in the markets where we had a country organization or independent distributors that sold to retailers was unsuccessful. The result was that the sales channels filled up with slow-moving stock, which then blocked the launch of new products. A far more targeted strategy had to be developed where SKUs were only sold into markets where the specific SKUs had demonstrated good performance.
Another successful stock reduction strategy was to launch second editions, limited editions, and product evolutions. The vast majority of the existing watch line parts were combined with new design elements such as new dial colors and then re-launched. Some of the more successful ideas we executed were creating paper and metal cut silhouettes in the WoodWatch, mosaic dials for the Rockwatch, and even re-worked steel cases when a simple dial change was not sufficient. Some of these launches were successful, and inevitably some failed. Others were successful in the short term as the distributors and wholesalers were enthusiastic about them but subsequently did not sell through, sat heavy in the sales channels, and blocked new product launches.
The Advantages Of A Not So Global Market
Classic watches at the lower price points with a non-specific design were successfully used for cross-branding projects such as jubilee watches or adapted for regional preferences.
As a last resort, many obsolete watches were merely sold off in specific countries or continents. Thankfully, in the early 1990s, the watch market was much less global. The watch markets of various countries developed at different speeds, and the expectations of the customer in each of these markets varied very widely. This meant it was still possible to sell-out or liquidate products in specific isolated regional markets at much lower average prices without impacting the selling prices in other markets worldwide.
If this was managed well, the risk was low that the watches would show up some month later in a department store in a prime market. At the time, geographically isolated markets such as Australia and New Zealand were ideal. These markets were just developing a taste for watches, but in general, the budgets that customers had were low in relation to global standards. This meant that price had a significant impact on sales volumes. Thankfully there was no internet, so these regional strategies were possible and did not negatively impact the brand’s global, strategic position.
A Necessary Step
Obviously, these reduction programs were not targeting growth, and they certainly did not help create a sharper brand image, but they did support the bottom line. The point is that this was a crucial step to developing a global sales approach. The next step was to create a new product strategy that helped to reposition the brands.
So Who Saved Swiss Watchmaking After The Quartz Crisis?
As you can see from my memories of the early 1990s, there was no one savior of the Swiss watch industry. It appears to me that there were many different avenues of change that came together to create the seeds of success. Many may blame the quartz crisis for the fall of Swiss watchmaking in the 1980s, but I see it as the catalyst of what was only inevitable. The hard truth that what had been acceptable was no longer sufficient and change was necessary. Those brands that understood this took the hard choices and forged a new path, based on their specific strengths, went on to great heights.
It was every single person who, as part of each brand, or perhaps even left the industry that ultimately contributed to finding a new model that has taken the world by storm.
Just as I admire those who struggled through this difficult phase for the Swiss watchmaking industry with me, the hope is that in times to come, there will be a little footnote to single-handed watches, and the names Stephen Mansfield and Daniel Blunschi will be on there somewhere. Join us on our journey, and don’t miss a single step by signing up for our newsletter below.