Hermes tells the Swiss not to feed on luxury watches

Photographer: Michele Limina / Bloomberg

Swiss watchmakers continue to produce too many watches despite production cuts following a slowdown in sales caused by Covid, according to the chief Hermes International Horology Unit.

Brands, including Hermes, Rolex and Audemars Piguet, temporarily stopped production last year amid the pandemic, which helped ease some of the oversupply. However, some manufacturers fail to address the issue, said Laurent Dordet, executive director of the Hermes watch unit, in an interview.

After Switzerland exported more than 1 billion watches in the last four decades, luxury watchmakers are struggling with the paradox that they have to sell more, but make their products even more exclusive. Some Swiss watchmakers reward sales managers too much because they have pushed too many products on the market, according to the head of the Hermes watch.

“It remains a key disease of that business, at least for some brands,” said Dordet. “It may be less now, but as long as you have traders stimulated by key performance indicators, you will have over-stock in the market.”

A lot of websites with used watches have appeared as consumers cut out their collections and increase interest in vintage pieces. In the meantime Apple Inc. it now produces more than twice as many watches as exports from Switzerland, eroding the demand for state-of-the-art watches.

Read more: Patek President Philippe tells the Swiss watch industry to slow down

Swiss watch exports fell by 22% in 2020, as tourism stopped and Covid-19 disappointed the social opportunities in which large spenders were able to present their latest purchases. Demand is increasingly focused on the biggest brands: Rolex, Patek Philippe, Audemars Piguet, Cartier and Omega, according to Dordet.

“It’s difficult if you’re not among the five leaders,” he said. “The watch industry is very polarizing. We will have more and more winners and losers. ”

Hermes Watches had a 2% gain last year, beating all its main rivals in luxury watches, according to Bank Vontobel analyst Rene Weber. Meanwhile, sales fell 40% to The eponymous Swatch Group AG label, which sells for $ 50 or less, estimates the analyst.

Last year, RJ Watches, a small independent brand known for its Pac-Man and Spider-Man tracks, went bankrupt.

The healthiest segment was the most expensive end. While Hermes costs an average of about $ 6,000, some price tags exceed $ 800,000.

“For us, there is absolutely no overproduction of watches, no waste at the end of the year,” Dordet said. Hermes limits distribution through third parties and therefore has better control over sales, he added. “The advantage is that it’s more profitable and you have less inventory.”