THE UPS AND DOWNS OF THE AMERICAN MARKET - Watch Around
THE UPS AND DOWNS OF THE AMERICAN MARKET - Watch Around
THE UPS AND DOWNS OF THE AMERICAN MARKET - Watch Around
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58HISTORYHISTOR<br />
<strong>THE</strong> <strong>UPS</strong> <strong>AND</strong> <strong>DOWNS</strong> <strong>OF</strong><br />
<strong>THE</strong> <strong>AMERICAN</strong> <strong>MARKET</strong><br />
Source: Switzerland’s foreign trade statistics, Bern. Federal customs department<br />
Percentage share of the American market in the value of Swiss watch exports in the 20th century.<br />
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YHISTORYHISTOR<br />
MIH La Chaux-de-Fonds / Waltham / Library of Congress / Bulova<br />
Swiss brands exported their movements in the early<br />
20th century to get around American protectionist duties.<br />
Despite the faith in market diversification and the<br />
hope that emerging markets like China, Russia<br />
and India will secure the Swiss watch industry’s<br />
future, the current economic crisis highlights the<br />
adage that when the American consumer sneezes,<br />
Swiss watchmakers catch the flu.<br />
Since the mid-19th century, the United States has<br />
been the principal destination of Swiss watches.<br />
During the entire 20th century, Swiss horological<br />
exports to that country totalled 32.8 billion Swiss<br />
francs (USD31bn) or 16.3% of all watch exports. One<br />
franc in six was thus earned in America. Of course,<br />
exports fluctuated according to political, economic<br />
and technological changes, but the importance of the<br />
American market explains the extreme concern at<br />
the shifting American policies concerning watchmaking.<br />
These can be grouped into five broad phases.<br />
1830-1870. There are no reliable statistics on the<br />
American market from the mid-19th century to the<br />
1870s, but it is clear that the big east-coast cities<br />
were the main target of Swiss horological exports<br />
and sustained the expansion of the watch industry<br />
in the Swiss Jura. There are records of Swiss<br />
watchmakers and dealers in the United States in<br />
the late 18th century, including a large colony of<br />
businessmen from Neuchâtel in Philadelphia in the<br />
1790s, and then in New York early in the next century.<br />
The watch business of Auguste Agassiz,<br />
founded in Saint-Imier in 1833 and which later<br />
became the Longines company, illustrates the<br />
importance of the American market. <strong>Watch</strong>es made<br />
by Agassiz were mainly sold to the Americans by<br />
his brother-in-law, Auguste Mayor, who set himself<br />
up as a watch dealer in New York in the 1840s. The<br />
growth of this market from 1830 to 1850 led to what<br />
Swiss historian, Béatrice Veyrassat, calls “the<br />
Americanisation of Swiss exports”. The United<br />
States market was not only the main outlet for<br />
Swiss watch exports in the mid-19th century, but<br />
also expanded vigorously after the American Civil<br />
War. The value of Swiss exports to the United<br />
States grew from around 8.5 million Swiss francs in<br />
1864 to more than 18 million francs in 1872.<br />
The Philadelphia lesson. Although the United<br />
States was responsible for the strong growth of Swiss<br />
watchmaking in the mid-19th century, it also set the<br />
scene for its first crisis. The constant expansion of the<br />
American demand for watches led to the development<br />
of a domestic industry. The two biggest<br />
American watch factories were Waltham <strong>Watch</strong> and<br />
Eglin <strong>Watch</strong>, respectively founded in 1854 and<br />
1864. Their production was enormous. Waltham<br />
saw its output rise from 91,000 units in 1872/73 to<br />
882,000 in 1889/90, while Eglin’s soared from<br />
100,000 watches in 1879/80 to half a million a<br />
decade later. In comparison, Longines, then one of<br />
Switzerland’s biggest and most modern watch companies,<br />
produced only 20,000 watches in 1885.<br />
Pierre-Yves<br />
Donzé<br />
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HISTORYHISTORYH<br />
The American Waltham company competed ferociously<br />
against Swiss watches in the late 19th century.<br />
This rise in America’s domestic production had a<br />
dramatic effect on Swiss exports. After peaking at<br />
18 million francs in 1872, Swiss watch exports to<br />
the United States slumped to four million francs in<br />
1877. Swiss watchmakers were quick to react. The<br />
Philadelphia Centennial International Exhibition in<br />
1876 brought home to the Swiss watchmaking<br />
establishment the manufacturing superiority of the<br />
United States, and the ensuing decades saw a dramatic<br />
modernisation of the Swiss factories with the<br />
introduction of machine tools. A few manufacturers<br />
started copying the American success in a more<br />
direct way. One notorious, though rare, example<br />
was Woog & Grumbach of La Chaux-de-Fonds,<br />
which produced counterfeit Waltham watches in<br />
the 1880s and 90s.<br />
However, the more usual response to the strong<br />
American competition and the domination of the<br />
Waltham and Eglin companies was to seek new<br />
markets in Europe, Latin America and the orient. At<br />
the same time the value of Swiss watch exports to<br />
the United States during the 1890s went from a<br />
maximum of 9.8 million francs to a minimum of<br />
3.4 millions in 1898. Although the Swiss watch<br />
industry was expanding, the importance of the<br />
American market was decreasing: from 1885 to<br />
1893 it represented 9.1% of Swiss exports, and<br />
from 1894 to 1900 only 4.6%, subsequently staying<br />
at around 5% until the outbreak of World War I.<br />
The chablonnage era. After World War I, the<br />
United States regained its position as the main outlet<br />
for Swiss horological products. The proportion<br />
of Swiss watch exports to America rose steadily<br />
(except during the economic crisis of 1930 to 1935)<br />
from 5.5% in 1913 to a peak of 49.1% in 1945.<br />
During the 1950s the United States remained<br />
Swiss watchmaking’s main market, accounting for<br />
29.3% of its exports by value.<br />
This new “Americanisation” of Swiss watch exports<br />
was mainly an attempt to avoid high import duties<br />
on finished watches by exporting them in kit form<br />
to be assembled locally – a practice known as<br />
chablonnage. The United States had since the<br />
start of the 20th century imposed swingeing duties<br />
at the behest of the Waltham and Eglin companies,<br />
which had the ear of the Republican Party. Although<br />
trade relations between the United States and<br />
Switzerland during the 19th century were relatively<br />
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ISTORYHISTORYH<br />
Longines advertises to the Americans in New York in the<br />
late 1800s.<br />
America’s Elgin company manufactured 500,000 watches<br />
a year in 1885, while Longines only produced 20,000.<br />
free, the Americans enacted a series of protectionist<br />
measures against watch imports in 1909, 1913,<br />
1922 and 1928. This new policy caused the Swiss<br />
to switch to exporting movements and components.<br />
The number of watch movements exported to the<br />
United States rose from 203,000 in 1900 to 254,000<br />
in 1910 and to 2.3 million in 1920, before dropping<br />
to 1.2 million in 1930 because of the economic crisis.<br />
These movements were assembled and cased<br />
up by American watch dealerships, which, as watch<br />
producers, started to undermine the market dominance<br />
of Waltham, Eglin and Hamilton.<br />
The Bulova company is illustrative of this trend. It<br />
was founded by a Czech immigrant, Joseph Bulova<br />
(1851-1936), who opened a watch and jewellery<br />
shop in New York in 1875 and started importing<br />
Swiss watches in 1887. In 1911, to ensure a direct<br />
supply of Swiss products, the company opened a<br />
branch in Biel, Switzerland, which soon became a<br />
watch-manufacturing workshop. Thus in the mid-<br />
1910s the company had a dual role, manufacturing<br />
in Switzerland and selling in the United States.<br />
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HISTORYHISTORYH<br />
Joseph Bulova (1851-1936) had his watches manufactured<br />
in Switzerland from the 1910s.<br />
However, increasing American import tariffs<br />
encouraged Bulova to transfer some of its production<br />
to the United States and become partly independent<br />
of Swiss manufacturing. In the 1920s it<br />
embarked on an acquisition strategy, buying up<br />
Swiss machine-tool and parts manufacturers. The<br />
expertise thus gained enabled it to open a movement<br />
factory in the United States in the early 1930s,<br />
although it continued to make some movements in<br />
Switzerland to be assembled in America.<br />
In other markets, chablonnage led to a transfer of<br />
technology and the rise of new industrial competitors,<br />
which is why the Swiss watchmaking industry<br />
opposed the practice and the government outlawed<br />
it in 1934. However, the Swiss authorities turned a<br />
blind eye to companies selling watch kits to the<br />
United States because they also maintained production<br />
facilities in Switzerland and thus benefited<br />
the Swiss watch industry. In fact they even encouraged<br />
chablonnage in America and went so far as to<br />
sign an agreement with Bulova in 1948 allowing the<br />
company to produce certain movements there.<br />
Indeed it was the sale of watch kits for assembly in<br />
the United States that made it the Swiss watch<br />
industry’s main market from 1913 to 1960.<br />
Cheap competition. The 1960s and 70s were<br />
another difficult period for Swiss watch firms in the<br />
United States. In 1960 the American market<br />
accounted for 21.6% of Swiss horological exports<br />
by value, but by 1980 this had fallen to 12%.<br />
Accustomed to having a virtual monopoly of the<br />
American market, Swiss watch firms, including<br />
Bulova, found themselves facing new competitors<br />
who flooded the market with cheap pin-lever<br />
watches and then with quartz watches from the<br />
late 1970s. The American Timex corporation<br />
started with low-cost mechanical watches in the<br />
1950s, and then Japanese manufacturers, notably<br />
Seiko, emerged as the main rivals to the Swiss<br />
watchmakers in the sixties.<br />
The American share of Swiss watch exports hovered<br />
at around 10% in the 1980s, except from 1984 to 1987<br />
when it rose to an average of 18.7% due to the Swatch<br />
which became a huge success in the United States.<br />
The final boom. The final and current phase has<br />
seen the United States return as the main outlet for<br />
Swiss watch exports. Even though the mid-eighties<br />
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ISTORYHISTORYH<br />
LO<br />
CO<br />
M<br />
OTI<br />
VE<br />
Bulova was one of the leading names in American<br />
watchmaking in the 1950s.<br />
showed that there was still a market for cheap<br />
Swiss watches, it was the more expensive product<br />
that reconquered the American market. Absorbing<br />
17.9% of exports in 2000 and 17.4% in 2005, the<br />
United States emerged as the locomotive of the<br />
booming Swiss industry at the start of the millennium.<br />
Furthermore the expansion of the American<br />
market for Swiss watches from 1990 coincided<br />
almost exactly with the growth of the United States<br />
trade deficit, as if the Americans, by getting<br />
increasingly into debt, became the major buyers of<br />
Swiss watches and so contributed to the tremendous<br />
prosperity of the industry. The fall was all the<br />
more brutal. The share of the American market<br />
dropped to 13.9% in 2008, allowing Hong Kong to<br />
become the biggest market for Swiss watches at<br />
15.9%. The growing interdependence of the different<br />
global economies makes it increasingly difficult<br />
to diversify into new markets. Yet it might still be<br />
worth betting that the United States will return as<br />
the top market for Swiss watches, at least in the<br />
short term. •<br />
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