The COVID-19 pandemic has had truly global ramifications, affecting (adversely) pretty much everyone, all in different ways. Due to just how infectious and contageous it is, it has affected the wider society as a whole in terms of the way we physically interact with one another (see: social distancing). This has had an unfortunate impact on the watch world, too.
The economic crisis side of things is growing faster than anyone could have anticipated, forcing horological stakeholders to quickly adapt to this pandemic. And failure to do so may have severe impacts. In fact, a breaking headline circulated yesterday: one that may mark the beginning of the end for the 100+ year-old jewellery and horology exhibition.
Today we’ll explain everything that’s happened regarding this situation, breaking down the effects on the market, both in the present day and for the possible future.
Patek Philippe and Rolex leave BaselWorld 2021
Yesterday, on the 14th of April, a joint statement was put out by Rolex, Patek Philippe, Tudor, Chopard and Chanel. The 5 brands announced that they will officially withdraw from the 2021 edition of Baselworld. This comes as a huge blow to the Basel exhibition organisers who were only just recovering from the Swatch Group’s decision to pull out back in 2017.
But why, of all brands, would Rolex (a member of Baselworld since 1939) and Patek Philippe (who have taken part for 4 generations), decide to pull the plug on this exhibition? To answer this, we have to head back another couple of weeks.
From BaselWorld 2020 to BaselWorld 2021
As soon the outbreak reached “pandemic” status, a large number of watchmakers decided to shut their factories. And many also went as far as postponing their (what would have been) new releases. The Baselworld directors followed suit, immediately making the unilateral decision to postpone the 2020 edition (which was due to take place this March…) to January 2021. This didn’t go down too well with the boards of directors of several jewellery houses.
Understandably so, as January is logistically a very inconvenient time for that sector. However, the decision remained: Baselworld 2020 was not to be cancelled, but rather postponed. This pretext allowed the exhibition managers to keep the “participation fees” which had already been paid in full by the participants. The straw that broke the camel’s back was indeed the way that this situation was handled. Customer relations were tense at best: many watchmakers who, were already suffering economic hardship due to the pandemic, asked the event organisers for a refund for the millions of Swiss Francs that they forked out in order to take part in the 2020 edition.
In response to this, the Baselworld managers offered two options:
– 85% of the amount for Baselworld 2020 carried over to cover fees for Baselworld 2021
– The balance 15% retained by the organisers to help cover the out-of-pocket costs of Baselworld 2020
– 30% of the amount reimbursed
– 40% of the amount carried over to Baselworld 2021
– 30% of the amount used to help cover the costs incurred by Baselworld 2020
As you can imagine, these counterproposals weren’t well received, especially by Rolex’s Chief Investment and Logistics Officer, Hubert J. du Plessix. Rolex’s Senior Executive was outraged: not because of the economic impact (this was by far the least of Rolex’s concern – their cash reserve is probably greater than those of entire countries’), but because of the wider ethical implications. Du Plessix argued that those who will most suffer from this crisis are the smaller brands; the independent artisans who, enviably, are the guardians of the centuries-old Swiss tradition – one that may be on the verge of collapsing if not properly governed through this outbreak.
Alas, just as this crisis has displayed solidarity amongst many brands, it has also exposed greed.
It’s a very difficult situation. If the crisis indeed affects everybody, how can you choose who “makes it through” these hard times, whilst also acknowledging that those who organise the exhibition have their own costs to maintain? Despite the Swiss government’s partial bailout and the participants’ willingness to negotiate, the fair went into full survival mode: Baselworld’s decision was final. This seems quite selfish when considering that the MCH group (of which Baselworld is a subsidiary) has a large liquidity.
Du Plessix made it very clear that the refunds would be the straightforward and least messy solution, stating that “otherwise, we fear that this will be the end of Baselworld, especially in light of the decision to move the date to January 2021, a period in which does not cater to the needs of the jewellery world, and the co-ordination with Watches & Wonders (SIHH) no longer exists”. Instead of adopting a diplomatic approach, Michel-Loris Melikoff, the director of Baselworld, maintanted his course. This led to the joint announcement we mentioned in the beginning, which you can read below:
A new fair, taking place in Geneva’s Palexpo, will replace Baselworld as of next April. This fair is to be organised by the same management team of Watches & Wonders (ex. SIHH): the FHH Group (Fondation de l’Haute Horlogerie), and the two events will take place side by side. This announcement clearly marks the end of an era. These 5 brands were cornerstones of the entire event, and it was (depending on how you see it), the inability to manage the situation properly by the Baselword directors, that led to their own fall.
What does this mean for the watch market?
In these types of situations, it’s best practice to see if there is any precedent. We don’t have a crystal ball, but even if the extent of this crisis is totally new, similar situations in the past could serve as a good indication of what is to come.
In fact, what history has taught us is that “the strong survive”. Those who are in a position of power before the crisis, are likely to come out of it unscathed, because they have the capital to invest and make significant financial decisions, whereas the smaller brands cannot. Just because big brands like Rolex and Patek Philippe don’t have the opportunity of platform to make grand reveals on stages like Baselworld isn’t that big of a deal for them. They can (hopefully) look to slimming down their long waiting lists.
Unfortunately, the same can’t be said for the small independent brands. These are the guys who are seen as the true protectors of the savoir-faire of Swiss Watchmaking traditions. These companies may fall victim to the crisis, with some already being burdened by unjust legal fees in their battle to claim their 2020 participation fee refunds.
From a consumer’s point of view, and that of a watch dealer, it’s important to divide the wider watch market into two distinct ones to understand how this will affect these two parties. On the one hand we have the vintage market, and on the other we have the modern one.
The modern market
Which saw an immediate pause in its development (again, see: social distancing), will likely decline, exacerbating its already existing one (pre-Corona). This is because modern models, even those hard to come by via retail prices, are readily available and more likely to be subject to fluctuations in the market once demand falls as a result of lower buyer (economically motivated by the crisis) engagement. A small decline to an already inflated market won’t hurt anyone.
The vintage market
On the other hand, has (always has, and always will have) a mind of its own. Just a few days ago, Sotheby’s auctioned a Rolex Paul Newman ref. 6241 for an astronomical €335,000 ($360,400) in an online auction. What’s really hard to get your head around is that, amidst this pandemic, not only did one particular item get sold for that much, but that all of the lots from that auction were sold!
This is a clear indication as to how the vintage market is responding to the outbreak – they really just don’t care. Furthermore, aside from the odd, infrequent fluctuations in the vintage market, this is an industry that for the past 30 years has always seen a constant growth, and this certainly isn’t the first crisis that we’ve seen in that same amount of time.
This situation most certainly requires one to quickly adapt. But this market has always shown resiliance, because it itself is goverened by the unwaivering passion and support of avid watch enthusiasts and collectors.
This global crisis is definitely taking a toll on everyone, but hopefully it will push collectors to focus not on the financial aspect of their passion, but to concentrated on what binds them together from a common interest point of view.
– Translated by Patrick R.