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Friday, March 9, 2012

Cautious Optimism Fills Baselworld Buoyed by Asian Demand for Luxury

A fractured arm kept me from attending Baselworld this year. Fortunately, I know some of the best writers and experts in the jewelry and watch industry. One of those folks is William George Shuster who has kindly agreed to take time from his busy schedule to write a few stories from the tradeshow. Below is his first report from the event.

By William George Shuster
Special Correspondent

BASEL, Switzerland – Baselworld, the world’s largest and most important watch and jewelry trade show, opened March 8 amid optimistic expectations by many for good business in 2012—but not too optimistic.

“We’re confident about 2012” because of strong business results in 2011, especially in luxury due to China’s appetite for it,” said Francois Thiebaud, chairman of the show’s Swiss exhibitors and president of upscale watch brand Tissot, echoing many vendors, “but we’re not overconfident. The Eurozone crisis and debt problems elsewhere could still have effects [on business].”

This 40th annual BaselWorld fair, in Basel, Switzerland, Mar. 8 – 15, has 1,815 exhibitors (608 in watches, 689 in jewelry and 518 in related products and services) from 41 countries. More than 100,000 buyers and visitors from 100 countries are coming, and all is being reported on by more than 3,000 print, TV, radio and Internet journalists from around the globe.

The reason for their interest is obvious: Because Baselworld is, in the words of Show Director Sylvie Ritter, “a microcosm, where the players from the world’s watch and jewelry industry gather for a week.” It is an important bellwether of products, innovations and trends affecting the industry, consumers, and the retail business worldwide for year ahead.

Bullish. The cautiously bullish mood among exhibitors and analysts at the show is based on strong—even record-breaking—results for watch and jewelry exports and sales in 2011, especially in the luxury sector. That’s due largely to sharply rising consumer demand in Asia, especially China, say industry analysts in Basel. These strong business statistics for 2011 came despite many economic problems affecting sales and profits worldwide, they say, including the dramatic debt crisis in many Eurozone countries, the uncertain U.S. economy and the strong Swiss franc (which weaken Swiss watchmakers’ profits). Still, “[even] in this far-from-encouraging environment,” said Jacques J. Duchêne, long-time President of the Show Exhibitors’ Committee and former Rolex SA executive, at the annual pre-show press conference, “one industry has been able to stand up well and even break numerous records—the watch and jewelry industry.”

Indeed, it has. The year 2011 was “historic,” as Duchene put it, for the Swiss watch industry. Their exports totaled 19.3 billion Swiss francs (about $21 billion), an increase of 19.2 percent, making it the best year ever in the industry’s history—rebounding from its worst in 2009. Actual pieces exported were just under 30 million.

Unquenchable. Much of that was led by the seemingly unquenchable demand in Asia for fine watches: Over half (55 percent) of the Swiss exports went to Asia, primarily China, up 48.7 percent. (North America got 14 percent while Europe got 29 percent).

Duchene was quick to point out, however, that the Swiss success is not only due to the Far East. “It’s true demand was very buoyant in Asia,” he said, “but the watch industry has built up a good reputation in all emerging countries and succeeded in creating demand, especially in the luxury-products segment.”

So, “even in the face of a rather unfavourable economic environment, we envisage export growth in 2012,” Duchene said.

The Swiss aren’t the only ones feeling bullish about 2012. Spokesmen for the German, French, Italian, Israeli and Hong Kong delegations (the latter, being the show’s second-largest) also report good sales and export results in both watches and jewelry in 2012, despite the economic challenges, again especially in the luxury sector (and again, buoyed by record Chinese consumer consumption of revelry and watches). They too were upbeat about business results for the industry in 2012. As Gaetano Calvalieri, president of The World Jewellery Confederation (CIBJO) and spokesman for the Italian delegation, noted, “consumers in Asia, especially China, will carry Italian jewelry industry to new heights.”

Even if Chinese consumption slows slightly in 2012, as some reports suggest, “Even a one digit increase in demand this year is more than last year,” said Thiebaud.

"Excellent.” Those in the gem and diamond business also expressed upbeat predictions for 2012.

Eli Avidar, Managing Director of the Israel Diamond Institute Group of Companies, told its annual Baselworld luncheon that 2011 was “an excellent year” for the Israeli diamond industry, which exported $7.2 billion of polished diamond, and has “emerged from the crisis [of the 2008/2009 recession] stronger.” Again, some of this is due to Asia. “There is a steady rise in demand for large diamonds in China and we believe it will go much further,” especially is the international industry invests significantly in promoting diamonds and diamond jewelry in China. He also noted that there are “signs of recovery in the U.S. economy”—unlike Europe, where was no visible increase in diamond demand in 2001 or 2012—and we expect significant rise in demand in diamond jewelry in the U.S. this year.”

William George Shuster is a multi-award winning writer—including three Jesse H. Neal Award, business journalism's highest honor. He has 40 years experience as a journalist, author and editor. He is considered one of the world’s top watch industry journalists, covering the world of timepieces for the past 30 years.