In an earlier interview with Diplomacy&Trade László Bakonyi, the owner and General Manager of Btech Hungary Ltd., the market leader in the wholesale of watches (and in the retail under the name BL Óraszalon) in Hungary in terms of turnover, number of employees, product portfolio and the number of shops, noted that demand for top brand Swiss watches had plummeted during the COVID-19 pandemic. Now, he is more optimistic.
“Primarily because of China, demand for more expensive watches has returned this year. As far as the situation here is concerned, demand is also higher now because of the summer. As Europe opened up, we reopened in March-April due to the improvement in the COVID-19 situation and we see that sales numbers are better than in the corresponding period in 2020. So, things are a bit better, people are more optimistic. The rate of decline in turnover, for example, was 40% here in Hungary for 2019-2020, but this figure for 2019-2021 is only 20%,” the General Manager says.
Good summer sales
In March this year, it was reported that the decline in sales in the Swiss watchmaking sector slowed significantly in February, the 13th consecutive month a drop in sales was recorded. “I can confirm that this is the reality, there is growth. As far as watches are concerned, if it's summer, people are happy to wear a watch because the wrists are visible and thus, others can see the watch – so, sales are better. Countries have opened, the malls have opened, the shops have opened, it was summer, the weather was good, so business is booming, I'm not complaining,” he adds.
The prestige watch
According to the Swiss watch industry association (FHS), the biggest drop in the number of watches sold was in the under CHF 200 range, while the number of watches sold increased in the over CHF 3,000 category, but revenue fell slightly, with the biggest increase in the lower mid-range range of CHF 200 to 500 at the beginning of the year. László Bakonyi puts this down to the fact that a prestige watch is always a prestige watch. “In the meantime, smartwatches have appeared on the market and people are trying them out, but I also see that people buy the smartwatch, then they realize that they have to charge it often, it's a hassle to use, so they buy it and then they simply stop using them. The reason why there is a drop in the sales of Swiss watches in the lower category is because people try the smartwatch but then they go back to buying watches of higher prestige. The COVID-19 situation and the smartwatches put together – those two things first made me a little bit scared about what the future will bring. All in all, we are not despairing, people will buy watches. What is important to know is that, overall, over a billion watches are purchased every year in the world. Of that, Swiss watches are only 21 million, the Apple watch 20+ million. So, I see room for improvement.”
Expensive or not?
In a web chat forum, someone asked the question ‘Why is the Swiss watch expensive – or not expensive?’ As the expert explains, a few years ago the requirements for the 'Swiss made' standard were tightened. “This means that a watch can only get this certification if it is more than 60% Swiss made. Obviously, the raw materials are made in Switzerland, where the standard of living is high, prices are high and average wages are high, so the production costs are high. Of course, the quality is very good. It is very strange that while the market is shrinking, prices are rising, but it is because the regulations make manufacturing more expensive and also that most of these watches are produced mainly by hand. For watchmaking, it is very important to employ precision craftsmen who should then be paid accordingly.”
The watch wholesaling business, BL Watch Salon, has been dealing in quality watches since 1993, so László Bakonyi has nearly 30 years of experience and contacts in the watch distribution world, which helped him through the pandemic. He has observed that the Swiss partners are very loyal to their clients and “that shows in problem situations like the one we are in now. They have changed their attitude to the world which is positive. So, I am completely satisfied with this situation in the sense that they have been fair and the thirty-year relationship has worked. In Hungary, we have been in a similar position to be able to help our partners wherever we could.”
Reacting to the circumstances
Last year, the General Manager told Diplomacy&Trade that "what I can promise is that we adapt to the situation in no time – whatever that situation may be." Now, he recalls that in terms of the sequence of events, “2020 saw at least two ‘reboots’ of the business, as was the case in February this year. I can say that the crisis management worked well and with my colleagues, we were able to adapt very quickly and really hats off to those of us who are here because we had to react quickly to the circumstances – and we did. We had crisis management last summer, and in the fall, we got back to business as usual, back to normal day-to-day operations. This January, I sat down to restart the business with full power and then came the ‘hard reset’ again around February-March. Now, we are back to the same optimism we had in January that hopefully there will be no shutdown and then, we can get back to normal.”
Cleaning the portfolio
Making a comparison with 2008, László Bakonyi says that the world economic crisis 13 years ago basically went unnoticed in the watch industry. “However, the current crisis caused by the new coronavirus infection is affecting everyone – we have also felt it, but we are coming out of it. The pandemic has cleaned up the market a bit, even on the manufacturing side. Many have closed down, the smaller brands will disappear and the big ones will be even stronger. As for the future, if there are no closures, we will grow. Our strategy right now in Hungary for this company is to eliminate all the small brands and sell only products that we ourselves import directly, products of factories – currently 26 of them – we represent in the stores we operate. What is more, the COVID-19 situation has led to a lot of factories approaching us to work together, so we have even improved in that area. So, there is no end to optimism, we are improving in all areas, we have reopened all our stores and we might even open new stores in the future if we can get good conditions,” he concludes.
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