(MENAFN- Swissinfo)
Cartier closed its boutique in Moscow – as did all other Swiss watchmakers – after the Russian invasion of Ukraine. Oleg Sharan
The luxury watch market in Russia has crumpled following the departure of Swiss brands in the wake of war in Ukraine. The consequences for social and cultural life in Moscow are far-reaching.
This content was published on October 21, 2022 - 09:00 October 21, 2022 - 09:00 Konstantin Startsev, journalist and member of the Geneva Watchmaking Grand Prix Deutsch
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Not long after war began in Ukraine last February, Swiss watch companies halted commercial activities in Russia. Shops have closed, imports of new models into the country have come to a stop, and retailers have sharply increased their prices. Not only has it become impossible to buy new luxury watches directly from the manufacturer, but the departure of the top brands is bound to have a negative impact on the Russian luxury market.
Boycott and retaliationIn retaliation for the halt in Swiss watch exports to Russia, the Russian authorities confiscated watches worth several million dollars from the premises of Audemars Piguet in Moscow in March. Audemars Piguet had closed its two boutiques in Moscow and suspended exports to Russia on February 24.
End of insertionA look at facts and figures gives an idea of the extent 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 represented solely by retailers. The arrival of the big watch companies took business to a whole new level: boutiques and in-house services sprang up; limited editions were issued to celebrate particular events; brand ambassadors, owners and CEOs dropped by for visits.
Until recently, virtually all Swiss watch brands, whether they belonged to corporations or independent makers, were represented in Russia – either through retailers or with a presence of their own.
Konstantin Startsev, journalist and member of the Geneva Watchmaking Grand Prix. / Kondrateva.marka
According to the 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. Russia was the 17th largest market in the world for Swiss watches last year, with exports worth CHF260.1 million ($260.1 million), representing an estimated retail value of over half a billion francs.
After adding exports of non-Swiss brands and investment in infrastructure (boutiques, service and personnel), the size of the market is even more impressive. Although Morgan Stanley analysts estimate that sales in Russia for Richemont, Swatch and independent watchmakers only account for 2-3% of their total turnover, the attention paid to the Russian market has been considerable in recent years.
But all of that came to an end on February 24. Since that date, watchmaking 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) – meaning a halt to deliveries of a large share of Swiss watch manufacturers' products.
By March, Rolex – which, according to consumer data platform Statista, accounts for 25% of the Russian luxury watch and jewellery market – had 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 that step.
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 CHF229,000 were delivered to Russia. This means that the average price of each watch was CHF73.
Besides the fact that it is now difficult and expensive to buy an upmarket watch in Russia, we can list six other consequences that are not immediately evident, but which are worth keeping in mind in order to understand what lies ahead for the industry and its customers in the years to come.
The official market for Swiss luxury watches will disappearThe most successful retailers, which did good business in peacetime, are selling off their stocks and looking for ways to get around the sanctions. For example, Mercury, the distributor of Patek Philippe, Rolex, Hublot and other top brands, has doubled or even tripled the prices of available models to avoid being left with empty shop windows in the short term. Secondary-market players and pawn shops have also gained 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 one would expect, are virtually unchallenged in the luxury sector. Despite the presence of some watchmaking talent in Russia, it is impossible to create a watch brand or manufacturer there within a few short months. Russia has gone from ranking among the 30 largest watch markets in the world to the periphery, with no boutiques, no representative offices and no after-sales service.
Social life in the capital city and support for cultural projects will disappearAudemars Piguet will no longer support the Bolshoi Theatre or even dedicate a watch model to it – as it did with the limited-edition Bolshoi in 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 classic car rallies set up by the Scheufele family, owners of the Chopard brand, will no longer take place. There will be no museum exhibitions and nothing interesting or unique on display in the boutiques.
There will be no more parties for customers, no more visits by directors, owners or ambassadors of world-famous brands. The level of cultural activity is likely to diminish. Moscow social life may turn into a series of provincial parties reminiscent of the 1990s.
Watchmaking journalism will disappearWatchmaking journalism, which used to be of a high standard because local journalists were invited to judge international competitions, will also disappear. For example, about ten Russians are members of the Geneva Watchmaking Grand Prix, which is a lot for one market.
The supply of information in Russia about the world's great watchmaking premieres is likely to dwindle, and all the industry news will be secondary – at best translated and at worst picked up from emerging bloggers who have neither attended international fairs for fine watchmaking nor visited any manufacturers. These bloggers will instead glean their 'knowledge' about watches from rap music and Instagram. In the past, national public relations agencies could give big-name agencies a run for their money: but without these high PR standards, we risk going back to where we started 20 years ago.
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