Russia after the departure of Swiss watchmakers – Eurasia Review

The luxury watch market in Russia collapsed following the departure of Swiss brands following the war in Ukraine. The consequences for social and cultural life in Moscow are considerable.

By Konstantin Startsev*

Shortly after the start of the war in Ukraine last February, Swiss watch companies halted their business activities in Russia. Stores have closed, imports of new models into the country have stopped, and retailers have raised prices sharply. Not only has it become impossible to buy new luxury watches directly from the manufacturer, but the departure of the biggest brands is sure to have a negative impact on the Russian luxury market.

A look at the facts and figures gives an idea of ​​the scale of the upheaval underway. Swatch Group opened an office in Moscow in 2006; the Richemont group did the same a year later. Before that, the watch market was only represented by retailers. The arrival of large watch companies took business to a whole new level: boutiques and in-house services were born; limited editions were issued to celebrate particular events; brand ambassadors, owners and CEOs dropped by for tours.

Until recently, virtually all Swiss watch brands, whether owned by companies or independent manufacturers, were represented in Russia, either through retailers or through their own presence.

According to the annual report of the Federation of the Swiss Watch Industry, exports of wristwatches to Russia increased by 30.5% in 2021 compared to 2019, all before the Covid-19 pandemic. Last year, Russia was the world’s 17th largest market for Swiss watches, with exports worth 260.1 million Swiss francs ($260.1 million), representing an estimated retail value more than half a billion francs.

After adding exports of non-Swiss brands and investments in infrastructure (shops, service and staff), the size of the market is even more impressive. Although Morgan Stanley analysts estimate that sales in Russia of Richemont, Swatch and independent watchmakers represent only 2-3% of their total turnover, the attention paid to the Russian market has been considerable in recent years.

But that all ended on February 24. Since that date, watch companies have refused to deliver watches to Russia. Subsequently, Switzerland adopted European Union sanctions, which include a ban on the export of luxury goods worth more than €300 (CHF292), which means a halt to deliveries of a large part of the products of Swiss watch manufacturers.

In March, Rolex – which, according to consumer data platform Statista, represents 25% of the Russian luxury watch and jewelry market – announced the suspension of its deliveries to Russia. Swatch Group (Swatch, Omega, Longines, Tissot, Breguet) and Richemont (Cartier, Van Cleef & Arpels, Vacheron Constantin, Montblanc, Panerai) had already taken the plunge.

As a result, watch exports to Russia have fallen by 95.6% since February. In August, only 3,149 watches with a total value of CHF 229,000 were delivered to Russia. This means that the average price of each watch was 73 CHF.

Besides the fact that it is now difficult and expensive to buy a high-end watch in Russia, six other consequences can be listed which are not immediately obvious, but which should be borne in mind in order to understand this that awaits the industry and its customers. in the years to come.

The official market for Swiss luxury watches will disappear

The most successful retailers, who have done well in peacetime, are selling their stocks and looking for ways to circumvent the sanctions. For example, Mercury, the distributor of Patek Philippe, Rolex, Hublot and other major brands, has doubled or even tripled the prices of the models available to avoid ending up with empty display cases in the short term. Secondary market players and pawnbrokers have also found a new lease of life, but there is no longer a formal, structured market for luxury watches.

There will be no substitution by imports from countries that have not imposed sanctions on Russia, because Swiss watches, as you might expect, are virtually unchallenged in the luxury sector. Despite the presence of a few watchmaking talents in Russia, it is impossible to create a brand or a watchmaking factory there in a few months. Russia has gone from being one of the 30 largest watch markets in the world to the periphery, without boutiques, without representative offices and without after-sales service.

Social life in the capital and support for cultural projects will disappear

Audemars Piguet will no longer support the Bolshoi Theater or even dedicate a watch model to it – as it did with the limited edition Bolshoi from the Audemars Piguet Code 11.59 collection. Rolex will no longer be the official timekeeper of the Formula 1 Grand Prix, traditionally held in Sochi in September. After 14 consecutive years, the magnificent vintage car rallies set up by the Scheufele family, owners of the Chopard brand, will no longer take place. There will be no museum exhibits and nothing interesting or unique in the shops.

There will be no more parties for customers, no more visits from directors, owners or ambassadors of world famous brands. The level of cultural activity is likely to decrease. Moscow’s social life can turn into a series of provincial parties reminiscent of the 1990s.

Watch journalism will disappear

Watchmaking journalism, once high-level because local journalists were invited to judge international competitions, will also disappear. For example, a dozen Russians are members of the Grand Prix d’Horlogerie de Genève, which is a lot for a market.

The supply of information in Russia on major world watchmaking premieres is likely to dwindle, and all industry news will be secondary – at best translated and at worst picked up by emerging bloggers who have neither participated in international fine watchmaking fairs or visited factories. . These bloggers will instead glean their “knowledge” about watches from rap and Instagram. In the past, national PR agencies could give big agencies a hard time: but without these high standards of PR, we risk going back to where we started 20 years ago.

The watch community will disappear

The audience of collectors, watch aficionados and boutique customers carefully nurtured by the brands will disappear, and they are mostly very wealthy people from various industries. Each one was worth its weight in gold, but all of them quickly disappeared from marketers’ radar.

The high-end commercial real estate market is under serious threat

Watch shops were largely responsible for the appearance of Moscow’s main shopping streets, such as Stoleshnikov Lane and Petrovka. Until the end of the year, the brands will keep these premises and will continue to pay their Russian employees, so their presence will be felt for some time to come. But if they leave permanently, these premises will remain empty for an indefinite period of time and, with new owners, they risk losing the chic and glamor of true luxury because there simply will not be enough luxury brands for them. to fill in.

The market for counterfeit watches will flourish

The risk of coming across counterfeits has already increased because, in the absence of official sales channels and services, it will only be possible to obtain a guarantee of authenticity for watches on the basis of an examination expert. There will also be problems with after-sales service. In general, the black market will thrive: watches will be brought into the country on the wrist while boxes and documents will be carried in luggage, as was the case in the 1990s. Today, it is possible to order a new model from black market dealers who say they are ready to deliver the watch of your choice at a premium of 30-50% within a month or two.

The watch culture in Russia has not had time to fully assert itself, and in most cases watches are just a means of displaying social status. Experts who have spent decades gaining knowledge and experience in the luxury watch market will be forced to turn to other professions. Russian cultural institutions will lose loyal and generous sponsors who previously supported memorable events. The world of luxury magazines in Russia has collapsed, all because the advertisers who until recently were so generous are no longer there. The hope remains that this situation will not last long and that a recovery in the Russian market will be around the corner. After all, Swiss watches are loved and happily worn in Russia.

*Konstantin Startsev, journalist and member of the Geneva Watchmaking Grand Prix

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