How Swatch Saved Swiss Watch Making

Swatch Chronograph Men's Watch

Many of our visitors who enjoy fine watches will know—or remember, depending on their age—that in the mid-1970s the Swiss Watch industry was in disarray. In fact, it was in the middle of the worst crisis it had ever faced. Technological competition from Japanese watches and their ability to price match had rendered a once loved industry – out of price and almost out of sight. Japanese competition predominately came in the form of Seiko and Citizen.

In many ways, the average watch buyer had started to move away from the luxury and quality of the “Swiss Made” watch, preferring to buy cheaper, and sometimes more fashion-focused watches. It’s important to note that at the top-end of the market, people were still buying high-quality watches, but the average watch consumer was seeking something slightly more dollar friendly.

The Swiss Watch industry needed a saviour: a brand that captured customer need. A watch needed to appeal to the fashion conscious customer, as well as being competitively priced.

How did the Swiss Watch industry recover from this crisis?

Nicolas Hayek

The founding of SMH (Swiss Corporation for Microelectronics and Watchmaking Industries), known in Switzerland as Société de Microélectronique et d’Horlogerie was a solution devised by the highly influential Nicolas Hayek, a Lebanese native who moved to Switzerland in 1951. In the early 1980s Hayek was asked by a group of Swiss bankers to oversee the liquidation of ASUAG and SSIH, two large Swiss watch-making firms who were in turmoil due to the aforementioned heavy competition from Japanese watch manufacturers. Hayek believed that the Swiss watch-making industry could remain competitive, and that instead of liquidation, ASUAG/SSIH could recover after a restructuring of operations and a repositioning of the different brands. Famous brands contained within the holding companies of ASUAG/SSIH included the much loved Omega and Tissot brands.

The SMHs solution to the threat posed by brands such as Seiko and Citizen was the creation of “Swatch” – a slim plastic watch with greatly reduced components. In comparison with the 91 components of a typical swiss watch, the swatch had only 51. Thus, Swatch watches were cheaper to manufacture. Swatch combined top Swiss Watchmaking quality with a highly affordable price tag. The first Swatch watches fulfilled exactly what the general public wanted from a watch: fashionable design, accurate time keeping and a good quality movement.

The Swatch watch helped the Swiss watch industry to reconquer a large share of the lower-end of the watch market which it had lost to Japanese makers. Although the colourful plastic watch became widely known for its flamboyant marketing, Hayek always emphasized that the Swatch watch was first and foremost a technological breakthrough (source).

Market Introduction

Swatch logo Swatch watches were introduced in Zurich, Switzerland on March 1st 1983. The price ranged from CHF 39.90 to CHF 50 (which is approx. $40.00/£26.00—$50.00/£35.00) – making the Swatch watch incredibly competitive. In the autumn of theat same year, the price was standardized to CHF 50.00. Sales targets were set to one million timepieces for 1983 and 2.5 million the year after. Swatch undertook a very aggressive marketing campaign, which combined with a very low price for a Swiss Made watch, meant Swatch quickly gained popularity in its home market. Compared to the conventional Swiss watch, a Swatch watch was 80% cheaper to produce, due to its fully automated assembly process and the reduction of parts from the usual 91 to only 51 components.

After four years of spearheading the reorganization of ASUAG and SSIH and finally brought around a much needer merger. Hayek, with a group of Swiss investors, took a majority shareholding in the group in 1985, becoming Chairman of the Board of Directors and CEO in 1986. The merged company was initially named Société Suisse de Microélectronique et d’Horlogerie, or SMH. It later changed its name to “Swatch Group” in 1998.

Market Recovery

The recovery of the Swiss watch-making industry was partly due to the strategies implemented by Nicolas Hayek. This led to the success of the entire Swiss watch industry and allowed it to regain its leading position worldwide since 1984. The truth be told: consumers bought in at a very low price level (Swatch) and opened their eyes to the magnificence of the whole Swiss watch industry allowing high level Swiss brands to capitalise and sell like never before. Hayek’s work with the SMH heralded a consumer change in how we purchase watches. This consumer focused change allowed the quality of Swiss watch manufacturing to continue in a market-place that could well have fallen to Japanese brands. If this change hadn’t taken place, the Swiss watch industry may never have recovered.

Shop for Swatch Watches at the online store.

Further Reading:

http://magazine.wsj.com/features/behind-the-brand/time-bandit/
http://hbr.org/1993/03/message-and-muscle-an-interview-with-swatch-titan-nicolas-hayek/ar/1

Johnny Gedye works for a Digital Media Agency based in the UK. He likes watches, clothing and general fashion related stuff. You can find him DJ-ing at the weekends at an Indie Club Night in Exeter, Devon. He enjoys all types of music especially Indie Dance, Electro/Tech House and Techno.

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