Luxury wristwatches are a status symbol in a region where material goods are the best indicator of a person’s wealth. Covered with gems or multifunctional features, watches tend to tell the story of their owner.
From pocket watches to wristwatches with multiple complications, mechanical timepieces have been revamped one century to the next. In the 1970s they faced a crisis, as quartz watches became fashionable. “During this period, it was the Middle East that partly saved IWC, due to special orders some important people used to place with us,” said renowned IWC designer Kurt Klaus. IWC has worked for over 30 years in the Middle East, initially perceived as a niche market where the company supplied royal families in Dubai and Oman.
Today, wristwatch makers are taking a keen interest in the region, perceived as a lucrative market because of its recent oil riches. “The Middle East is an important region for brands where diamond and gold watch sales account for a big share of the market. Arab clients tend to appreciate flashy watches with gold plating and stones, while this is not usually the case in Europe,” said Mher Atamian of Atamian Ets. There is still room for growth, however. According to Gianfranco D’Attis, brand manager at IWC, today only 5-10% of the company’s turnover is generated in the Middle East. “I would say we sell less than 5,000 pieces every year in the region,” he added.
Time in the Emirates
Roland Streule, regional brand manager of Rado, stressed that the wristwatch industry, especially high-end products, were doing well, particularly in the Middle East. “The UAE is the biggest importer of Swiss-made watches in the region, followed by Saudi Arabia,” he recently told Gulf News. Visitors to Dubai form a large segment of the market for wrist watches in the UAE. “There’s a big floating population in Dubai and they are big buyers of Swiss watches,” Streule said.
For IWC the UAE market is also the strongest in the region, due to the massive tourism influx in the emirate every year. “It is followed by Turkey and then Lebanon, where people are attracted to the brand’s classy understatement and chic,” D’Attis added.
In the Middle East the popularity of brands varies from one country to another. Among IWC’s line-up, the most popular collection is the Portuguese line, which represents a 50% share of the company’s commercial turnover. “The second best line is the Pilot which accounts for 20 to 25%. Such figures are replicated, however, all over the world as these two lines represent about 75% of our yearly turnover,” D’Attis explained.
Atamian said that his company, which carries brands both targeting the middle and high-end segment of the population, has experienced larger growth levels in the latter. “Our high-end leading brands are Breguet, Blancpain, IWC, Jaeger-LeCoultre and Ulysse Nardin. In the category between $1,500 and $5,000, TAG Heuer leads the way while Baume & Mercier, Longines and Hamilton have seen significant improvements. Our best-selling brands in the medium segment would be Tissot, CK, D&G and Ferre,” he said.
IWC developer Kurt Klaus believes that future watch trends lie in larger timepieces. “The fashion started initially with the Portuguese and is still going strong. Nonetheless, the smaller Portuguese design is also quite popular with high-powered women,” he pointed out.
In order to promote their designs more efficiently, companies have developed extensive distribution networks. Atamian has boutiques located in major cities in Lebanon and Syria. As for IWC, the recent trend adopted by the company has been to curb the number of points of sales. “We are investing a lot in our distribution network, as we want to grow in terms of image while making it more exclusive. We have thus reduced the number of boutiques from 1,200 to 800,” D’Attis stated.
The company is also relying on powerful marketing campaigns as well as entertainment events such as the recent watch making class that was held in Lebanon during the month of November. “IWC is a wholesale brand that reaches out to a special clientele, something that can be achieved only through strategic local partnerships,” D’Attis said.
Many challenges await wristwatch makers in the Middle East. One is the emergence of multifunctional devices, a 21st century staple. Various watch analysts have doubts as to whether the wristwatch industry can survive the cell phone and the iPod war — except maybe for segments including technology watches that are equipped with GPS and other gadgets, cheap watches and luxurious masterpieces.
On the other hand, Atamian said, gadgets such as cell phones and iPods will have no effect on watch sales as a piece is no longer perceived to be a device that only shows time. “It has become a jewelry piece or a fashion accessory that is a necessity on every wrist.”
The manager believes that the grey market remains the biggest problem for distributors. “Unauthorized watch dealers import and sell watches at prices below suggested market prices. These dealers do not have high overheads, such as customs duties or VAT, while their shops are located in relatively moderate areas with low rents. They can thus afford to sell their products with minimal profit margins. Often, clients are not aware that watches sold on the grey market will not always be covered by the guarantee if they are damaged. Also, some of the watches sold on the grey market are in fact second-hand items, renovated and sold as new,” he said.
According to Streule, “it was difficult to quantify how much damage fake products were doing to the sales of original products. It is possible that those who buy fake products can’t afford to buy the original so it is not a loss.” Today, the biggest source of fake watches is China. “We are working everywhere with the local authorities to combat fake products and in the recent past we have confiscated several thousand watches in the Far East, including China,” Streule said.
A further challenge awaiting wristwatch makers and distributors alike is the adverse economic condition and rampant recession that have darkened forecasts around the world. Atamian explained that the sales in the high-end segment almost doubled from previous levels, but the recent worldwide problems will definitely have an effect, it just “remains to be seen by how much.”
In order to mitigate the effects of the recession, IWC is focusing more on emerging markets including India and Turkey where the economic pressure will be less significant. For D’Attis, luxury products will certainly suffer from the recession, as more people become unnerved by gloomy prospects for the future. “Nonetheless, I believe that this will have a greater impact on lower end segments, essentially timepieces that fall in the $5,000 bracket, while higher end products remain less affected. People who can afford watches priced between $7,000 and $20,000 will not stop buying luxury items,” he said.