Hermes tells Swiss to stop feeding oversupply of luxury watch

Photographer: Michele Limina / Bloomberg

Swiss watchmakers continue to produce too many watches despite production cuts following a Covid-induced drop in sales, according to the head of Hermes International Horology Unit.

Brands such as Hermes, Rolex and Audemars Piguet temporarily halted production last year amid the pandemic, which helped ease the huge supply a bit. However, some producers do not solve the problem, said in an interview Laurent Dordet, CEO of the Hermes surveillance unit.

After Switzerland has exported more than a billion watches in the last four decades, luxury watchmakers are struggling with the paradox that they need to sell more and make their products even more exclusive. According to the Hermes watchmaker, some Swiss watchmakers are over-rewarding sales managers for throwing too many products into the market.

“This is still a key disease of this business, at least with some brands,” Dordet said. “It may be less now, but as long as you have business people encouraged by key performance indicators, you’ll have excess resources in the market.”

A number of websites offering second hand watches have emerged as consumers trim 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 all over Switzerland, eroding demand for low-end watches.

Read more: Patek Philippe’s president tells the Swiss watch industry to slow down

Swiss watch exports fell 22% in 2020, when tourism came to a standstill and the Covid-19 stifled the social occasions when large consumers could show off their latest purchases. According to Dordet, demand is increasingly focused on the big brands: Rolex, Patek Philippe, Audemars Piguet, Cartier and Omega.

“It’s hard 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 ”.

Last year, Hermes Watches earned 2% revenue, beating all of its major rivals in luxury watches, according to Bank Vontobel analyst Rene Weber. Meanwhile, sales fell 40% The eponymous Swatch Group AG label, which sells for less than $ 50, calculates the analyst.

Last year, RJ Watches, a small independent brand known for pieces with Pac-Man and Spider-Man, filed for bankruptcy.

The healthiest segment has been the most expensive end. Although the cost of Hermes averages about $ 6,000, some price tags exceed $ 800,000.

“For us, there is absolutely no overproduction of watches, or 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.”