The Anthony Bonja Fortress watch has a look to match its name. With a thick steel casing held together by six hefty screws and a weighty leather strap, it’s the kind of timepiece you would want on your wrist when facing down an angry bear or a brutish boss. It exudes an aura of solid self-confidence in a way only $5,000 concentrated in four square centimeters of stainless steel can. But inside, there is an entirely different matter at hand — or in this case, on hand.
As a mechanical watch, the Fortress is powered by a system of gears and springs so delicate and so precise that their dimensions and alignment must be measured to the micrometer. It’s this balance of aesthetic sophistication and technical precision that makes a luxury watch, but Anthony Bonja, like the dozens of Middle Eastern brands offering luxury watch lines, is only responsible for half of the equation.
The company is a jeweler, not a watchmaker. The mechanical aspects of its watches — called the “movements” or “ébauches” — are purchased outside of the region, the fruit of a niche market of specialized producers.
“To the best of my knowledge, all manufacturing of movements used by Arab luxury watch brands occurs outside of the Middle East,” said Susan Maroua, public relations manager at Tabbah Jewelry. “This structure isn’t unique to the Middle East either — it’s the norm for most of the industry.” Companies that produce their own in-house movements — like Rolex, Zenith and Jaeger LaCoultre — and sell to other private groups “are exceptions,” according to Maroua.
Step by step
The majority of the watch making industry is structured ‘horizontally,’ according to the Fédération de l’Industrie Horlogère Suisse (FH) — the association of Swiss watch makers — meaning that any given watch passes through several companies or technicians, each of whom is responsible for a different step in its development, before it reaches the showroom.
“As a luxury jewelry line, we work in participation with a number of specialists to produce our watches,” explained Stephan de Palmas, regional director for Van Cleef & Arpels in the Middle East. “Our company will develop a concept and send its specifications to one of the manufacturers we work with – Jaeger LaCoultre, for example – which will produce and send us the disassembled movement. The movement is then sent to another specialized technician who adds complications [mechanics that run off the movement] that will, say, cause a couple to meet and kiss on a tiny bridge every twelfth hour, or show the cycles of the moon.”
“Finally, when the watch’s mechanical aspects are fully assembled, it returns to our workshops to be decorated and jeweled, and from there goes to our retailers to be sold,” he said.
Regional markets
On the receiving end, Middle Eastern states are among the top importers of luxury watch movements globally. According to the FH, the United Arab Emirates is the 9th largest importer in the world, with Saudi Arabia, Lebanon and Bahrain not far behind. Taken on a per-capita basis, the Middle East accounts for nearly as many watch sales as some of the world’s largest markets in Japan, Europe or the United States, and the region’s segment seems to be growing.
Middle Eastern markets, along with heavyweights China and India, played a major role in pulling the luxury watch industry out of its 2009 slump, and international retailers are increasing their regional foothold as a result.
“Dior is up this year 6 percent,” said Jacob Hrayki, regional manager for Dior. “I believe retailers are in a more confident position this year, investing better in their stocks and mainly in their strategic brands.”
FH estimates that Swiss watchmakers exported some 2.1 million watches and 35,000 movements, worth a combined $1 billion, to the Middle East in 2009. That constituted a decrease of 22 percent from 2008 sales, which is a testament to the difficulty the industry faced that year. However, sales have picked up sharply in the first months of 2010, with regional sales of Swiss watches and movements increasing by nearly 40 percent in January and February.
As Swiss as cheese with holes in it
Although Japan, Russia and Germany produce and export a portion of the markets’ movements for use in luxury watches, Switzerland is still the industry’s silverback gorilla.
The alpine state exported $12.3 billion worth of watch related products in 2009, while its closest competitor, Hong Kong, achieved sales of only $5.6 billion.
Much of the country’s own industry is dominated by a single company, ETA SA, a wholly owned subsidiary of The Swatch Group, which supplies the movements used by the majority of mid-range luxury watch brands made in the Middle East.
However, that partnership is slated to end in the very near future. In 2003 ETA announced that it would end all sales of movements to makers not allied with the Swatch group by 2006, prompting a panic among smaller makers and driving sales as makers rushed to build up their reserves in anticipation of the closure.
“There was no innovation, no new development, and when I pushed them to start new production, everybody started shouting,” Nicolas Hayek, the chief executive officer of Swatch, said at the time. “I said I was not going to deliver any more of my movements unless they try to do their own production. Otherwise the Swiss watch industry… will go down.”
Following protests by smaller makers, the company was investigated by the Swiss Competition Commission and found guilty of abusing its dominant market position.
During the settlement period, ETA agreed to push its export closure date back to the end of 2010 while engaging in a slower “phasing out” of its movements from the market. By the end of this year, however, Middle Eastern jewelers along with other makers around the world will need to look for new sources to furnish their machinations.
The alpine state exported $12.3 billion worth of watch related products in 2009, while its closest competition, Hong Kong, achieved sales of only $5.6 billion
