What's going on?

Fresh data on Thursday showed exports of luxury Swiss watches were 13% lower than a year ago in November � fault! � and that this year would probably see the fewest exports in 35 years. Double fault!

What does this mean?

The rise of smartwatches has long been frustrating � if not necessarily game-changing � for leading Swiss watchmakers Richemont and Swatch. But that might now be changing, as more and more customers move away from mid-range traditional watches that lead to the pricier likes of Rolex, and toward smartwatches that cost less than $200.


Watchmakers, then, are refocusing their efforts on marketing their high-end wares, rather than gateway products. But there�s no guarantee they�ll succeed, especially with unauthorized dealers selling their surplus inventory at large, brand-damaging discounts. And it remains to be seen whether Swatch�s strategy of buying its own watches back from those dealers will work, either�

Why should I care?

Zooming out: No tempting these shoppers.

Luxury watchmakers will hope they�re able to lure shoppers into late holiday purchases. Then again, maybe not: data released on Thursday showed UK retail sales in November missed predictions and fell for the fourth month in a row. And in Hong Kong � the home of some of the world�s biggest luxury spenders � retail sales have been falling as protests keep stores closed and shoppers housebound, hitting luxury powerhouses like Gucci-owner Kering and LVMH.

For markets: Fixed vs. flexible.

A recovery in Swiss watch exports would affect Richemont and Swatch in different ways, influencing which of the two investors decide to back. Swatch�s �fixed costs� � salaries, rent and so on � are proportionally higher than rival Richemont�s, which means it shouldn�t have to increase its expenses much to deliver any extra sales. Richemont�s greater proportion of flexible costs, on the other hand, could more easily be slashed to save money, which could help it weather a long-term slump better than its rival.