Despite international austerity and the depressing economic outlook of many countries, luxury retailers had a banner year in 2011, posting significant gains where other retailers are still seeing losses. The Swiss watch industry, the heart of haute horology, has been at the forefront of the recent boon and has been a huge factor in driving industry growth over the last few years; in fact, 2011 was a record-breaking year for many Swiss watch and jewelry brands. The Swatch Group, LVMH, and Richemont have all seen sales growth of 15 percent of more, crediting their fine jewelry and watch brands for generating much of that burgeoning bottom line. Much of this success can be attributed to opening markets on continents other than North America and Europe, as well as enhanced marketing practices.
The Swatch Group, home to such esteemed brands as Breguet, Blancpain, Tissot, Omega and Tourbillon, had a record year in 2011, posting a sales increase of 21.7 percent and an operating profit of 12.4 percent over the pervious year. Even while European economic turmoil and exchange rates had negative effects on the ultimate bottom line, the watches and jewelry sector still showed a gain of approximately $1.5 billion. According to the Federation of the Swiss Watch Industry, “The group’s leading brands recorded very impressive rates of growth not only in the enlarged China, but also in all other regions and in all price segments. Despite the unfavourable economic situation, the Swatch Group maintained its consistent policy of renouncing short-term price increases, preferring to focus on gains in market share.” Stepping up marketing efforts within the watches and jewelry sector, instead of raising prices, the Swatch Group saw its operating profit grow by 8.4 percent.
LVMH Moët Hennessy Louis Vuitton SA reported sales growth of 16 percent last year, with an operating profit increase of 22 percent and a net profit of $4.12 billion. The watches and jewelry group within LVMH recorded astounding increases of 98 percent in sales and 107 percent in operating profits. (Equating to +23 percent and 41 percent based on comparable structures.) Dedicated consumers in the Western Hemisphere responded well to marketing and innovative additions, while growth in Asian markets added to the LVMH global marketplace. Tag Heuer successfully launched the Mikrograph and Mikrotimer; Hublot introduced a popular new Masterpieces collection; Zenith and Bulgari brought back some well-loved classics.
Richemont, the Swiss luxury holding company that boasts subsidiaries such as Baume et Mercier, Cartier, Piaget and Montblanc, increased its sales by 33 percent and gross profit by 38 percent – a gain of approximately $1.6 billion. Operating profit grew by nearly double that amount – 63 percent. The highest sales growth occurred in the Asia-Pacific region, at 48 percent (or, by $3.67 billion) and sales in Japan were up by 18 percent. “We will continue to invest in their organic growth through higher levels of capital spending in manufacturing capacity and in the further development of the group’s own retail network,” said Richemont CEO, Johann Rupert. “Particularly in growth markets.” To that end, the company grew its freestanding boutique stores to a total of 876 last year – primarily in growing Asian markets.
While the Asian continent currently represents the largest growth market for the industry, Australia, South America and Africa have also been the focus of luxury brand marketing efforts. Tag Heuer, an LVMH brand that began opening North American retail boutiques only last year, has established stores in Australia, South Africa as well as across the Middle East and India. They have a retail location in Argentina and a customer service location in Chile also, catering to a small but dedicated (and growing) clientele in those regions.
It would certainly seem that a truly global reach is the safest buffer against increasingly unpredictable western markets. But it probably doesn’t hurt to be well known and widely respected for beautiful and high quality products either.