Indian Apparel

Swatch Group Ltd, The in Luxury Goods - WorldJanuary 2011Downloaded fromwww.warc.com

Euromonitor International*Luxury Goods Swatch GroupDownloaded from www.warc.comLearn MoreTo find out more about Euromonitor International's complete range of business intelligence on industries, countries and consumers please visit www.euromonitor.com or contact your local Euromonitor International office:DisclaimerMuch of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errorsFigures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies opinions, reader discretion is advised

ScopeScope of the ReportFigures reflect the sum of markets researched by Euromonitor International

Euromonitor International*Luxury Goods Swatch GroupDownloaded from www.warc.com

Strategic EvaluationMarket AssessmentLuxury Jewellery and TimepiecesLuxury AccessoriesSuper Premium Beauty and Personal CareBrand StrategyOperationsRecommendations


Swatch Power in Swiss Watch MakingSwatch is involved in the manufacturing of watches and jewellery. It produces watch movements and components , both mechanical and quartz. The Swatch Group also produces movements and components for third parties (private label). The Swatch Group produces Timberland- and Mango-labelled timepieces on behalf of those retailers. This vertically integrated company produces all of its components and final products in-house. The Swatch Group also produces a range of luxury jewellery, as well as luxury accessories including wallets. The company is active across the price spectrum from entry-level watches, Swatch and Flik Flak (designed for children) to mid-range watches including Tissot, Mido, ck (through a joint venture with Calvin Klein Inc), Certina and Hamilton. High-end watches include Longines, Rado and Union Glashtte. Swatchs luxury brands include Breguet, Blancpain, Jaquet Droz, Lon Hatot and Omega. Swatch also has a wholly owned subsidiary, Tiffany Watch & Co Ltd, which produces a range of luxury watches under the Tiffany & Co brand. These watches are distributed solely by Swatch and by Tiffany & Co and also fall within the luxury category. Swatch Group's founder Nicolas Hayek is largely credited with helping the Swiss mechanical watch industry make a comeback in the 1980s with his plastic Swatch watch.Key Company FactsStrategic Evaluation

Swatch Group Ltd, TheHeadquartersBiel, SwitzerlandRegional involvementWorldwide Category InvolvementLuxury Accessories, Luxury Jewellery and Timepieces, Super Premium Beauty and Personal CareYear EndDecemberNet Revenue 2010CHF5. 1 billion Growth in Net Sales 2008-2009-9.4%


Net sales for the Swatch Group reached CHF5.1 billion in fiscal 2009 for the year ending 31 December 2009. This represented a decline of more than 9% over the previous fiscal year. The companys watch segment sales fell by nearly 8%; however, this still represented a better result than the Federation of the Swiss Watch Industry, which reported a fall in export sales of around 22% in 2009. This suggests Swatch actually gained market share during this period in terms of Swiss watch exporters. Net income reached CHF763 million, which represented a decline of 9% over 2008. In the face of declining demand for its timepieces, Swatch resisted discounting in order to drive volume sales. On a geographic basis, only Greater China continued to see growth in fiscal 2009 over 2008. Sales in this region grew by 9% in 2008-2009. In terms of the companys luxury brands, Omega performed very well in 2009 with record sales, driven by the expansion of its retail network. Blancpain, another of Swatchs luxury brands, increased sales in the Chinese market in 2009. Meanwhile, Breguet opened five new locations in the fiscal year, including ones in Asia and in Russia. Swatch Stays Above Turbulent Water in Swiss Watch MakingStrategic Evaluation


While only Greater China registered growth in net sales in 2009, Africa and Oceania remained stable over 2008, with net sales of CHF48 million and CHF71 million respectively. At the end of March 2009, the Swatch Group made a significant investment in the African market with the purchase of the remaining 90% of share capital of its distribution company, headquartered in Johannesburg. It also established its first customer service centre in Africa here as well in fiscal 2009. In the Australian market, Omega produced record sales and opened its second boutique in the country in the Chadstone Shopping Centre in Melbourne.The new Tiffany & Co range launched through an agreement with the jeweller Tiffanys was launched in 2009 at Baselworld. The range was first launched in the US, Europe, China, Hong Kong, Korea, Japan and the Middle East. In the Chinese market, Swatch saw growth across all of the brands it offers in the country. In 2009, Swatch increased its stake in Hengdeli Holdings, which owns a chain of muli-brand stores in China. Glashtte Original opened its first flagship store at the Beijing Oriental Plaza in 2009, while Omega launched the Constellation collection in this market in 2009. Only China Continues to Grow in 2009Strategic Evaluation


Net sales in the first half of fiscal 2010 grew by 22%. This growth reflected a wider turnaround for the Swiss watch-making industry. According to the Federation of the Swiss Watch Industry, exports in value terms in October grew by 18% over the same period in 2009. The Swiss watch industry is on track for a record year in 2011 according to the Federation, and Swatchs results are strong evidence in support of this. Sales for Swatch have not been undermined by the strong Swiss franc. While the Federation has pointed to some manufacturers having reduced their margins in order to drive sales, Swatch in the first half of 2010 actually saw an increase in operating margin to 22.5% over the same period in 2009. Much of the growth for the industry as a whole and for Swatch is driven by Asian demand. The Federations latest forecasts suggest that this region will account for 52% of all overseas sales, up from 48% in 2009. The Chinese are the industrys largest consumers, with Hong Kong the single largest market in terms of value sales for exports of Swiss watches and mainland China ranking fourth behind the US and France in the month of October.

Asia Fuels Comeback for Swiss Watches Strategic Evaluation

Euromonitor International*Luxury Goods Swatch GroupDownloaded from www.warc.comStrengthsOpportunitiesWeaknessesThreats

By taking a direct stake in key distributors such as Hengdeli in China and through its Tech Airport retail company which operated 27 locations in airports at the end of fiscal 2009, the Swatch Group has more control of its retail presence than many other producers. Direct Retail Model As a vertically integrated company, the Swatch Group has direct control over design and production of movements, and watch components. It has also extended this model to directly operated retail stores and distribution. Vertically Integrated Company The Groups electronic systems division saw a decline in net sales in fiscal 2009 of 15% at constant exchange rates. The division engages in the design and production of electronic systems and components. Strong Swiss FrancA very strong Swiss Franc may work against Swatch as it attempts to drive sales in the emerging markets. Its products will be more expensive relative to other watch producers based in markets with relatively weaker currencies. Electronics Division The tie-up with Tiffany & Co provides Swatch with yet another luxury brand in its portfolio. The launch of the first collection in 2009 will be followed by further roll-outs of the range into new markets in 2010. Tiffany & Co Strong demand from Asian markets should help drive growth for Swatch. Chinese consumers are increasingly moving into the luxury category in which Swatch markets a range of collections and brands. Asian Opportunities Like most luxury goods producers, Swatch must carefully protect the integrity of its brands from the grey market in counterfeit goods. It must also defend itself from trademark and patent infringement. Defending its ReputationLike many luxury producers, Swatchs forecasts for future growth are closely tied to the assumption of rising disposable income in China. Any economic shocks to this market will have a detrimental effect on the company. Relying on China to Drive Growth SWOT The Swatch Group Strategic Evaluation


Other markets will also need attention from Swatch, including the US where many luxury goods producers retrenched somewhat in 2008-2009. Some including Swatch have announced plans to expand in this market. The economic recovery in this market, however, remains fragile and there is a possibility that the type of rapid expansion planned by Swatch may not reap the rewards it is hoping for. Turkey is another key market for luxury timepieces producers with strong growth in both the mens and womens categories. Swatch must continually seek out these opportunities. The Chinese market is emerging as the key factor determining the future of the luxury timepieces category. Mainland Chinese shoppers are increasingly dominating Hong Kong sales of luxury timepieces, They are also influencing the performance of the European market as well, delaying their purchases until they are abroad and thereby taking advantage of the stronger renminbi of recent months. Swatch must find a way to increase its profile among this key group. It will also face strong competition from other producers targeting the same group. The Swatch Group is unlike many of its competitors, actively involved at all price points. This means the company must seek balance between promoting its luxury products and its mid-range and entry-level ranges. The fact that Swatch is involved across the price categories, arguably makes it more robust as a corporate entity able to adjust to changing market conditions. However, it must seek to create a clear demarcation between its luxury and standard ranges in order to prevent dilution of its luxury brand image. The vertically integrated model adopted by Swatch makes the company able to reduce costs and increase profit margins during good times; however, arguably during a downturn it makes the company less flexible in reducing capacity and responding to weaker market demand. Its long-term investment in production facilities and capital equipment means a higher risk of having to leave these assets idle during economic downturns while still having to absorb the costs of maintenance of these assets. Balance Between Luxury and Standard Vertical Integration Chasing the Dragon Targets for Overseas Expansion Swatch Seeks Growth Overseas Strategic Evaluation




The luxury goods market will return to growth from 2009-2010 onwards. The impact of the global economic recession is made clear in the chart below. Premium goods depend heavily on such factors as consumer confidence. Buoyant economic times make consumers more willing to spend larger sums of money on products which are not essential but highly valued for the aspirational qualities. In the US market, the bursting of the property bubble in many parts of the country has left consumers feeling vulnerable. Media reports of job redundancies make them worry about their jobs, and personal expenditure on watches, premium spirits and super premium cosmetics become less of a priority. Where once, consumers were happy to accumulate personal debt sustained by the belief in the robustness of the value of their houses, and secure in their jobs, they were suddenly hit by negative reports surrounding both. In China, however, growth is expected throughout the forecast period. Over the 2010-2015 period in Russia, following a sharp contraction, the market for luxury goods is expected to post a CAGR of 7%, while in India, luxury goods are predicted to grow at a CAGR of 21%.

Economic Downturn Hits Premium Hard Market Assessment


Luxury jewellery and timepieces is predicted to grow at a CAGR of nearly 5% over the 2010-2015 period. This category represents almost all of Swatchs net sales in luxury goods. Within this category the company is predominantly involved in luxury timepieces. However, it is also present in luxury jewellery with its Omega range, which extends to jewellery as well as to timepieces. Omegas Griffes Constellation Collection of luxury jewellery included rings, necklaces and bracelets. Luxury accessories represents a very modest category for Swatch in luxury goods. However, it markets a range of fine leather accessories including wallets, watch boxes and luxury bags. Luxury accessories is expected to grow at a CAGR of more than 3% over the 2010-2015 period. In super premium beauty and personal care, Swatchs only interest is in fragrances. In 2009, Swatch launched its first ever fragrance with Aqua Terra Eau de Toilette pour Homme. The fragrance was available solely through Omega boutiques. Swatch Focused on Luxury Jewellery and Timepieces Market Assessment


Swatchs most important markets are its own domestic Swiss market and China. Luxury goods in Western Europe are expected to grow at a CAGR of 2% over 2010-2015. Sales in Swatchs most important category luxury jewellery and timepieces - even in Western Europe are heavily influenced by Chinese shoppers abroad. In Asia Pacific, the CAGR is expected to reach 4%. Sales of luxury jewellery and timepieces in Western Europe and Asia Pacific are predicted to grow at CAGRs of nearly 4% and 10% respectively. Both China and the US are key target markets for Swatch. Swatch intends to open 50 new stores across China in the first half of 2011. With the US dollar weaker than historic levels and with a market correction in real estate bringing down the cost of retail locations in the US, Swatch intends to open nine new Omega boutiques there. Luxury goods overall in North America is expected to grow at a CAGR of more than 2% over 2010-2015. Swatch has also expanded in Eastern Europe with new boutique openings in Russia and a move to bigger headquarters in Poland including enhanced customer service. This region is expected to post a CAGR of 7%.

USA and China Key Target Markets for Swatch Market Assessment




With luxury timepieces making up the vast majority of Swatchs sales in luxury goods it is worthwhile to look at this category in isolation. The US market is expected to post the strongest growth in the mens category. Given that Swatch plans to open nine new Omega boutiques between autumn 2010 and spring 2011 with a further 15 locations expected to open from spring 2011 onwards, this is good news for the company. For firms that retrenched in the US market during the 2008-2010 period, now represents a good time to rethink future investment in this market. Following a period of decline in this market in 2007-2008, mens luxury timepieces has posted consistent growth. The pace of this growth is expected to pick up from 2010 onwards. Swatch is shifting its distribution model in the US market towards direct operation. Prior to this rapid expansion, the company operated only one stand-alone Omega store in New York, although it operated previously through 120 franchise partners. The company chose to move away from indirect distribution in order to control its brand image in this market. Outside of the Omega brand, Swatch maintains the Tourbillon network of stores, which focuses exclusively on Swatchs range of luxury watches. At the end of 2009, Swatch counted 18 of these retail points. They were further enhanced by the addition of the Tiffany & Co range of watches in 2009. The chain positions itself in premium shopping districts worldwide such as Wall Street in New York. Swatch Chooses to Go Direct in the US Market Luxury Jewellery and Timepieces


The Turkish market also represents a very persuasive opportunity, with sales of womens luxury timepieces expected to expand by US$139 million over the 2010-2015 period. Spain and China will follow with growth of US$68 million and US$50 million respectively over the same period. The influence of the Chinese on the luxury timepieces market will be the single most important factor in shaping opportunity for companies such as Swatch. As purchasing power among the Chinese increases, with the renminbi having appreciated in recent months and with a strong possibility of further appreciation, there is considerable demand for luxury goods in general including luxury timepieces. For Chinese consumers, these products are seen as investments, and high price tags act as a mark of quality rather than a deterrent. In the Turkish market, growth in disposable income is also taking place, although on a much smaller scale. South Korean sales of womens luxury timepieces are predicted to increase by US$42 million. In 2010, Glashtte Original, one of Swatchs key luxury brands, entered the South Korean market for the first time. It is also testment to the importance of the South Korean market to Swatch that it was chosen as one of the first markets for the launch of the new Tiffany & Co watch collection in 2009. Turkey to Lead Growth in Womens Luxury Timepieces Luxury Jewellery and Timepieces


Globally, the strongest absolute value growth in luxury jewellery and timepieces is expected in womens luxury rings. The strongest growth in womens luxury rings will be in India, with sales expected to expand by US$397 million. Globally, luxury jewellery is expected to grow by US$1.3 billion. As mentioned previously, jewellery is a small but growing category for Swatch. It has entered the jewellery category through its Omega and Breguet ranges. Outside of luxury, Swatch is active in jewellery through its ck range, which it produces through a joint venture with Calvin Klein.Given the strong growth in luxury rings, much of which is derived from sales of wedding and engagement rings, Swatch should ensure that through its Omega and Breguet ranges, this category is appropriately covered. Breguet maintains four boutiques in the Indian market, which will lead growth in this category in Chennai, Mumbai, New Delhi and Bangalore. Swatch has made a good decision in ensuring that its coverage in this market is not just limited to the first-tier cities. Much of the growth will come from second-tier cities, where a rising class of entrepreneurs have seen their disposable incomes grow.

Expand into Luxury JewelleryLuxury Jewellery and Timepieces




Luxury accessories are a minor interest for Swatch. The companys key presence here is in leather goods, wallets and luxury bags. The company does not heavily promote these products, which are available exclusively through its international Omega flagship boutiques. The US market is predicted to lead global growth in luxury accessories over 2010-2015, with sales expanding by US$2.3 billion. Distribution of these products will increase in markets such as the US, as part of a wider expansion plan for Omega stores in this market. At the global level, however, they are unlikely to ever be a significant focus for the company. One strategy which Swatch could employ if it were to choose to expand in this category would be to partner with a well-known designer in a collaberation much as Bulgari has recently done with Matthew Williamson. Bulgari, which is predominantly a jewellery and timepiece producer, chose to expand in luxury accessories. The attractions of the category are numerous. High margins, low seasonality and relatively low risk in size assortment make this an attractive revenue stream for many luxury goods producers. The Chinese market is set to be among the top performers in luxury accessories, with sales predicted to expand by US$319 million. Given that this market like the US will be a major focus for Swatch going forward with 50 boutique openings over the autumn 2010-spring 2011 period, it should consider including its luxury accessories range in its product line-up here.

City Markets and Chinese Shoppers At Home and AbroadLuxury Accessories


The strongest growth overall is expected in luxury sun glasses, with global sales expanding by US$1.9 billion over the forecast period. Presently, Swatch is not involved in this category but should strongly consider moving into both sun glasses and optical glasses. However, it is unlikely that any move into this category will qualify as luxury. While Swatch has a range of luxury watch collections, its most widely recognised brand is Swatch, which would not justify a luxury price tag. Those luxury goods producers, which have successfully moved into this category, Gucci, Prada, Chanel, all benefit from luxury brands, which enjoy very wide consumer recognition. The Breguet or Blancpain brands, while highly respected among luxury timepiece buyers, are not widely recognised by the general public. The only possibility for Swatch would be to extend the Omega brand into this category, as this brand has the highest consumer profile. Swatch has also already extended this brand into other luxury accessories categories, e.g. bags, wallets. Womens luxury handbags is predicted to grow by more than US$1.2 billion over 2010-2015. This is one category in which Swatch is not involved. It does market a range of mens luxury bags under the Omega brand. As previously suggested, in order to compete in this crowded marketplace against brands with a fashion heritage - Hermes, Chlo, a collaberation with a well-known designer may be the best strategy. Consider Expanding Omega Brand into Eyewear Luxury Accessories




Swatchs only interest in super premium beauty and personal is fragrances. Its first fragrance launch in 2009 was in the mens fragrances category. Currently, the company has not hinted at any plans to move into womens fragrances, although this would represent the most logical next step. Its Aqua Terra Eau de Toilette pour Homme will need to expand distribution if it hopes to compete with other brands in mens fragrances. Swatch has not invested significantly in promoting this product, limiting it to Omega boutiques. Fragrances is set to see the strongest absolute growth is Russia, with sales expanding by US$68 million over 2010-2015. Swatch should consider expanding the availability to its entire distribution network to maximise sales. The company has a chain of monobrand boutiques in Russia, not just under the Omega banner. It also has established a Russian subsidiary, which gives it direct control over its retail network in this market. Swatch should ensure it makes room for its fragrances throughout its retail network. In the Indian market, where super premium fragrances is expected to grow by US$22 million, Swatch should leverage its planned expansion of the mid-priced Rado watch brand, which currently has 14 monobrand stores in India. Swatch has announced plans to open six new Rado outlets in 2011. Again, this is an opportunity to increase distribution for Swatch fragrances.

Leverage Global Retail Network to Drive Fragrance SalesSuper Premium Beauty and Personal Care




Association with Sporting/Entertainment EventsIn 2009, Swatch renewed the Omega Official Timekeeper contract with the International Olympic Committee up to and including the 2020 Olympic Games. Swatch invests considerably in advertising campaigns with media partners including MTV and Yahoo. It is also particularly active in sponsoring high-profile sporting and entertainment events. It does this through its various luxury brands. Omega in 2009, continued its title sponsorship of the European Masters and World Cup of Golf. It also continued its long-term commitment to the Glashtte Original Music Festival Prize, marking its sixth year of sponsoring the award giving ceremony in 2009. Advertising Focused on Omega Brand The Omega brand continued to highlight its unique achievement of being the only watch to have ever been worn on the moon. At the Baselworld trade fair in 2009, Omega invited four of the 12 astronauts who participated in the first moon landing in 1969. Furthermore, The John F. Kennedy Library Foundation allowed Omega to use the Kennedy image in its campaign to commemorate the 40th anniversary of the moon landing. Swatch also promoted the 10th anniversary of Omegas Co-Axial technology, using brand ambassadors such as Cindy Crawford, George Clooney, Nicole Kidman and Michael Phelps in the advertising campaign. In terms of brand ambassadors, Swatch frequently uses regionally well-known celebrities when launching ranges into overseas markets. The launch of the Constellation range for Omega was supported by Cindy Crawford in London, while the Shanghai launch featured the Chinese actress Zhang Ziyi. Omega benefited from the most aggressive advertising among the Swatch luxury brands. Other luxury brands including Blancpain, Breguet, Glashtte Original, Jaquet Droz and Lon Hatot focused on the launch of limited editions, new model additions and expansion of their retail networks to drive sales. The exception to this was the new Tiffany & Co range, launched in 2009, which was accompanied by an advertising campaign. The collection was first unveiled at Baselworld 2009.

Swatch Celebrities and Sporting Events in Marketing Brand Strategy




Vertical IntegrationSwatch operates through three divisions - Watches & Jewellery, Production and Electronic Systems. The companys Production division includes the manufacture of chronological watch movements and components. Electronic Systems engages in the design and development of electronic components and systems related to watches as well as to ultra low power consumption, miniaturisation and very high precision. The company also increasingly took direct control over its distribution and retail network, establishing its first wholly-owned South African subsidiary, expanding its Tech Airport retail network and increasing its stake in Chinese watch distributor/retailer Hengdeli in 2009. This makes Swatch among the most vertically integrated of the luxury goods producers. As of 31 December 2009, Swatch employed 23,562 people, down from 24,270 in 2008. The Swatch Group maintains 156 production centres making it the worlds largest watch producer. As well as producing all the models sold through its 19 brands, Swatch also supplies parts and components to other watch makers. From 2000, the Swatch Group added new jewellery producing from design through to production through its Dress Your Body SA (DYB) operation. Swatch Group Assembly is the Groups watch assembly company. It operates assembly facilities in Saint-Imier and Genestrerio, Switzerland. The former acts as a technological centre of excellence for the Swatch Group and in particular serves the Groups luxury brands, for which it pre-assembles complex parts.In 2010, Swatch consolidated Frdric Piguet SA, a company employing 481 people under the Blancpain brand as it sought to increase the brands capacity for component and movements. Investment in Production Swatch announced in December 2010, plans to build a new production site at La Chaux-de-Fonds, Switzerland, at a projected cost of CHF10 million. The new site will consolidate all activities of the companys watch hands subsidiary Universo in Chaux-de-Fonds. Currently, Universo occupies three sites within the town.

Operations Operations




The Chinese market is set to be the dominant factor influencing sales of luxury timepieces going forward. This not only refers to in-country sales but to the growing influence of Chinese shoppers abroad. Swatch should look for ways to target Chinese tourists in Europe and the US, possibly by allowing these shoppers to buy in advance with collections of their products in-store at foreign locations. As Chinese purchasing power increases, so too will the importance of this group for luxury goods producers. With growth in luxury eyewear set to be very strong over the forecast period, Swatch should consider extending the Omega brand via a licensing agreement with a producer such as Luxottica, which has already signed on many other fashion and jewellery brands, Bulgari, Louis Vuitton and Ralph Lauren, to produce branded eyewear on their behalf. In promoting its new fragrance, Swatch should look to leverage its rapidly expanding retail network. The company should expand beyond its current strategy of limiting sales of the new fragrance to its Omega boutiques. Additionally, given that the Russian market will outperform all others, it should look in particular for opportunities to promote the fragrance there, both through its own retail network and possibly through an agreement with a distributor with a strong track record in the beauty and personal care category. Swatch should consider expanding its Omega range of luxury accessories to include womens bags. In order to compete with category leaders such as Louis Vuitton, Chlo and Hermes, it should consider collaborating with a well-known designer to capture public interest. Bulgari, known more for its jewellery than for its luxury accessories is taking this route. There are significant advantages in luxury bags, including higher margins brought about by a lower rate of discounting and less seasonality. Increase Distribution for Fragrances Expansion into Luxury Bags Via CollaberationMove into Luxury EyewearCater to the Chinese Shopper Abroad Look to Expand Omega and Target the Chinese Recommendations


To find out more about Euromonitor International's complete range of business intelligence on industries, countries and consumers please visit www.euromonitor.com or contact your local Euromonitor International office:

London +44 (0) 20 7251 8024Chicago +1 312 922 1115Singapore +65 6429 0590Shanghai +86 21 63726288Vilnius +370 5 243 1577Dubai +971 4 609 1340Contact Euromonitor

****************************

Date post:	11-Nov-2015
Category:	Documents
Upload:	sourav-das
View:	230 times
Download:	0 times

Indian Apparel

Documents