NEW YORK — The skyrocketing cost of precious metals and stones has forced many watch and jewelry makers to ratchet up their prices by about 10 to 15 percent over the last year, but that hasn’t quelled the desire for their newest creations.
At the Baselworld Watch & Jewelry Show that ended its eight-day run in Basel, Switzerland, April 6, and at the Salon International de la Haute Horlogerie from April 3 to 9 in Geneva, many vendors said they were coming off a stellar year, experiencing double-digits sales gains.
Driven by developing foreign markets, as well as by an increased desire among women for high-end timepieces and jewelry, they were forecasting similar growth for the coming year as they unveiled fresh assortments to retailers that included what many said were more luxurious items: a necklace finished with a rare, 60-carat, pear-shape diamond pendant at Chopard; a Harry Winston $1.16 million dress watch swaddled in 72 carats of diamonds, which was already sold, and a skeleton minute repeater in platinum at Vacheron Constantin that takes 2,500 hours to create and will be produced in a limited edition of only 15, for $507,000 each.
“The cost of metals and diamonds is a real problem,” said Stephen Urquhart, president of Omega SA, a company of the Swatch Group. “But it seems the higher things go, the more people want them. Everything that is useful is becoming cheaper. When it comes to everything that nobody really needs, the prices are only going up.”
Gold prices soared to their highest levels in more than 25 years last week, topping out at $600 an ounce. Silver hit a 23-year high, reaching $12.87 an ounce. Platinum also broke records, rising to $1,097 an ounce. Stones are experiencing similar increases, even though diamond producers are stepping up to prevent inflation in the category.
While commodities such as gold, silver and platinum are being snapped up as an investment and fluctuate based on consumer confidence, increased demand for watches and jewelry, especially in emerging markets like Asia, India, the United Arab Emirates and other countries in the Middle East, have added to the surge.
“China represents so much growth potential,” said Andrew J. Block, senior vice president of watch chain Tourneau, which held a news conference during Baselworld to announce a partnership between the company and Peace Mark (Holdings) Ltd.
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The partnership will lead to Tourneau’s expansion for the first time outside the U.S. and 30 new luxury stores under its name in China, as well as in Hong Kong, Macau and Taiwan, within the next five years.
Chanel is also targeting growth in developing markets, and plans to open three boutiques dedicated only to its fine jewelry and watches — in Dubai, Moscow and Japan — by the end of this year, said Philippe Mougenot, Chanel’s president of high jewelry and watches. The brand has 32 such boutiques worldwide, the bulk of them in the U.S. and Japan.
David Yurman, founder, designer and chairman of the New York jewelry firm, said the business’s destiny is to grow, and Europe and Asia are the first areas it is exploring with that goal in mind. “In Hong Kong, [mainland] China, Shanghai and Dubai,” Yurman said, “the people are so forward-thinking. They get [the product] right away.”
Michel Nieto, chief executive officer of Baume & Mercier, said penetrating the Chinese market was an ambition for the brand last year.
“We are just rocketing there,” he said. “It’s more because we are new. We will look to the Middle East next. But where we are still seeing so much excitement is in America. In the past three years, we have grown more than 100 percent in the U.S., and we hope to continue over the next two years to grow another 50 percent.”
In February, the Federation of the Swiss Watch Industry said the value of Swiss watch exports in 2005 increased 10.9 percent to a record 12.3 billion Swiss francs, or $9.5 billion. China represented the biggest amount of growth, going up 25.7 percent to 351.3 million Swiss francs, or $271 million. Thailand followed, with a 22 percent increase to 251.7 million Swiss francs, or $194 million. The U.S. had only a 4.5 percent increase, but came out as the top destination for Swiss watches, consuming 2.1 billion Swiss francs, or $1.62 billion worth of timepieces.
“In the U.S., fashion watches were taking up a part of the market share, but now that’s over,” said Nieto. “Fashion watches are going down and luxury watches are going up. People, and especially women, are looking for real watches from true watchmakers.” Nieto added that next year the brand will launch a line of only women’s styles.
Daniel Lalonde, president and ceo in North America of LVMH Watch & Jewelry, said its Tag Heuer brand had mid-30 percent growth in the U.S. this year, driven partly by the booming women’s business.
“Overall, the watch industry was in decline,” said Lalonde. “Sell-in [to retailers] was high, but sell-out was not strong. But we see enormous potential, and part of that potential is with the women’s market. We tripled our business in the women’s watch market. In 2004, our breakdown was 20 percent of business in women’s watches and 80 percent in men’s watches. Last year, that breakdown was more like 40 percent women’s and 60 percent men’s. We think the change is because the self-purchase female customer is increasing.”
Tag Heuer is among the typically masculine luxury watch brands at Baselworld and SIHH that are ramping up their concentration on the women’s market.
Tag Heuer, which dedicates 50 percent of its U.S. advertising budget to reaching the women’s market with its campaigns featuring Uma Thurman and Maria Sharapova, launched a new version of its Formula 1 at Baselworld with diamonds at the bezel and in a selection of tone-on-tone colors, such as brown, gray and maroon, inspired by the fall 2006 runway shows.
“We think when it comes to women’s luxury watches, it has to be driven by design,” said Lalonde, adding that the growing women’s business for mechanical and other complicated timepieces will likely remain a niche market. “For example, 45 percent of our women’s business is for watches with diamonds. The watch advertised through Uma Thurman [the Link Chrono] that has diamonds and goes for around $3,495 is selling better than the less expensive version without diamonds. We know a woman can easily spend $1,000 for a handbag. Our job is to make them buy a luxury watch, as well.”
Blancpain launched its new brand, Blancpain Women, at Baselworld.
“We have always had women’s watches, but Blancpain is quite a masculine brand,” said Marc A. Hayek, president and ceo of Blancpain, a company of the Swatch Group. “It’s about mechanical movements and complications. I don’t think today, however, that excludes us from the women’s market. But it’s a challenge because we need to stop and ask ourselves what is the difference between a man and a woman buying a watch. Women are interested in the technical part of the watch, but they have a great interest in aesthetics.”
Blancpain Women bows with eight self-winding models, selling between $8,500 and $17,000, and including the Chronographe Flyback Camélia in white, pink or black with a guilloche dial, croc strap, date and small second hands, and the Ultraplate Lotus accented with over 225 rubies and a flower at the face’s center.
Parmigiani Fleurier, a 10-year-old Swiss watch brand that exhibited at SIHH, unveiled its first ladies’ collection of about 10 pieces revolving around its rectangular Kalpa silhouette in stainless steel, silver and gold. Most styles are accented with diamonds. “We are known for mechanical watches and complications,” said Michelle Veyna, the brand’s president in North America. “But as you create a brand, obviously, you need to do women’s.”
Prices for the line range from $5,600 for a stainless steel quartz style with pavé diamonds at the six o’clock and 12 o’clock positions to $321,000 for a Kalpa in allover pink diamonds.
Candy Udell, president of London Jewelers, a fine jewelry and watch retail chain with five locations, in Long Island in New York, said she sees a lot of growth potential in the women’s watch market.
“Right now, we do about 35 percent of our watch business in women’s watches, but that could change,” she said, adding that women also are buying larger-size men’s watches for themselves. “Women like to have multiple watches now.”
Patek Philippe has already expanded its brand into the women’s market, and Hank Edelman, its U.S. president, said he sees the momentum continuing. “Right now, there’s more potential for growth on the ladies’ side than on the men’s side,” he said. When it comes to growth, however, he echoed what many brands admitted is a challenge for them: meeting demand.
“We always aim to upgrade our production, but at the level of workmanship that we are offering, any increases are limited to only a few more pieces,” Edelman said. “We can say for argument’s sake that we are experiencing growth of about 10 to 12 percent, but that doesn’t measure what it could have been could we have delivered what customers wanted. We turned away so many well-established retailers asking to have appointments to see our line, but we have to concentrate on our existing accounts, and if you look at the last five-year period, you will see that we have even reduced our accounts by 10 percent to better service our best ones.”
Patek Philippe produces 38,000 watches, up from 30,000 last year, a spokeswoman said.
Corum produces 20,000 watches a year and is not looking to grow that number. “It’s an industry issue, fulfilling demand,” said Stacie Orloff, Corum’s president. “But we’re never going to be a mass market brand.”
Hayek at Blancpain said its production quantity of 10,000 watches a year has not increased significantly, but the average price for one of the brand’s watches has gone up. For example, the women’s line will open about $2,000 higher than the men’s timepieces.
Nieto at Baume & Mercier said that predicting demand, not production, is the issue.
“My problem is not to produce what the brand needs, but to forecast what is going to sell,” Nieto said. “It takes five or six months to produce a watch. For example, our Riviera sold four times more than we expected it to, so we had a shortage of supply.”
This challenge could cause larger problems as the industry faces growth, considering the demands for high creativity that are inherent in haute horlogerie and fine jewelry, and the longer lead times and more high-cost, experienced labor necessary to support that creativity. Among fashion-forward trends for both women and men — diamonds, rose gold, larger watch sizes, darker colors such as chocolate brown, gray, plum and navy on timepiece faces — new metals and metal treatments emerged in watches and jewelry.
Hublot launched the limited-edition Mag Bang, a larger men’s watch with a 44.5-millimeter case designed from lightweight magnesium, and De Grisogono built on its Browny Brown collection of jewelry, featuring gold that is recolored through a special process.
Rosy Blue Fine launched a new concept for high-end jewelry with its titanium collection with diamonds for Vera Wang Fine Jewelry. The line fashions Vera Wang’s signature flowers from the lightweight metal that is treated to resist scratches, fingerprints and oxidation. It will appear in both a silver gray and black orchid color in earrings, rings and pendants ranging from $2,500 to $25,000.
“The collection has nothing to do with traditional jewelry,” said Yash Mehta, executive vice president of Rosy Blue. “Vera wanted to work in a metal where she could make a big piece, but not something that was so heavy. The challenge at these high price points is that you have to do something that’s fresh and creative, but classic, too.”
Baselworld registered 94,200 visitors from more than 100 countries, an increase of 5 percent over its previous year and a new record for the show. SIHH experienced at 11 percent uptick with 13,000 visitors.