With the global financial meltdown and Singapore in a technical recession, even the luxury watch business will not escape untouched, say industry insiders.

In his speech to the Swiss Business Federation in September, Swatch Group chairman Nicolas G. Hayek declared: “We are in the midst of the first crisis of this new century — a crisis which should by no means be underestimated!”

This is in stark contrast to the spectacular times that the luxury watch business has experienced in the last few years, which has seen major groups like Richemont, Swatch and LVMH, which represent some of the most prestigious watch brands in the world, reporting double-digit growth.

Singapore alone, according to the Federation of the Swiss Watch Industry FH, registered a 34 per cent growth in the value of Swiss watch imports this year (January to August), placing eighth in the ranking of the world’s largest markets for Swiss watches, ahead of the United Arab Emirates and the United Kingdom.

Additionally buoyed by new wealth in the emerging markets like India, China and Russia, the boom in the Swiss watch industry has resulted in the ballooning of new watch brands as well as rising watch values.

Limited edition timepieces from one of Switzerland’s revered haute horlogerie brands, be it subdued and understated like the above-pictured Audemars Piguet’s Jules Audemars perpetual calendar (retailing at around $1 million) or wildly iconic as an Urwerk 202 (retailing at over $100,000 to over $300,000), have become the de rigueur emblem of taste and success.

But even a business that has clients waiting for months or a year for the privilege of procuring an exclusive timepiece for a princely sum is not immune to the sheer breadth and magnitude of the present downturn.

Mr Ong Ban, industry veteran and chief executive officer of Sincere Watch, which recorded a revenue growth greater than 25 per cent this financial year, comments: “The present crisis is the worst in my time in this industry. Trying to match the spectacular results we have achieved so far will be challenging in these new circumstances, as a significant number of our clients come from the financial industry.”

And just last month, Sincere Watch itself was put up for sale by Hong Kong watch retailer Peace Mark, after the latter was placed under provisional liquidation for failing to service part of its debt.

Nevertheless, it’s not all gloom. For starters, demand for watches at the very high end is expected to remain strong, and Mr Ong believes waiting times for such watches are not likely to get shorter.

Besides, says Mr Oliviero Bottinelli, chief executive officer of Audemars Piguet  (Singapore), one of the oldest and most exclusive Swiss watch brands that sells just 27,000 watches a year: “I feel a cycle like this does a lot of good to the industry, as it forces the brands to see the reality. It creates an opportunity to restructure, refocus and consolidate at many different levels, something much more difficult to do when you live times of euphoria like we did in the last three to four years.”

From the opposite end of the watch trade, Mr Jonathan Tee of Passions Watch Exchange, which deals in pre-owned luxury watches, agrees.

“There are too many new watch brands that have mushroomed over the past five years. Perhaps this crisis will see some changes and only the strong ones with rich histories and strong finances will soldier through,” he says.

To understand the state of the watch business and how it will be affected by the present economic troubles, Mr Wei Koh, founder of Revolution magazine, cites Dr Franco Cologni, president of the Fondation de la Haute Horlogerie in Geneva: “The watch business has switched from a pyramid model in the past to an hourglass, with the mid-priced segment, say US$1,000 (S$1,485) to US$3,000, getting squeezed, while anything above US$10,000 is flying off the shelves!”

While belts will be tightened, and the slower growth forecasted for the emerging
economies is making industry captains cautious, the luxury watch business can take comfort in the strong demand relative to supply.

Mr Maxime Labey, managing director of Chopard Asia, says: “It is quite disturbing to see the current headlines day after day, but let’s not be hasty in jumping to conclusions devoid of proper analysis.

“It’s important to put things in perspective and not panic.”

After it emerged stronger than ever after surviving the quartz crisis of the 1970s, the Swiss watch industry today, which is at the pinnacle of the technical and artistic excellence that led some watch aficionados to term this the golden age of modern watchmaking, is in better shape than it was then to weather this latest storm.

This article was first published in The Straits Times on Nov 11, 2008.