1 May 2019
Rolex, Chopard and Sprüngli may inhabit different realms of retail, but they are tied together by common threads. They are the epitome of luxury, boast a rich heritage and – last but definitely not least – they are all Swiss.
The list could run to hundreds in the Alpine nation’s high-end business landscape, where names like Audemars Piguet, Caran d’Ache and Weleda rub shoulders with Tag Heuer, Victorinox and Davidoff.
One thing is clear: when people think about Swiss brands, the automatic assumption is of luxury. And with good reason. Yet while traditional perceptions of luxury are all well and good, what of the future? Is there a danger of being stuck in the past, trading on past glories?
It is a unique combination of style and status that counts”
According to David Dubois, Associate Professor of Marketing at INSEAD, heritage is a lasting asset. “Many Swiss brands spanning high-quality goods and services own a powerful and distinctive identity earned in the past, highly authentic and associated with the country’s own DNA and values that lead consumers to trust those brands in the future.”
“It is a unique combination of style and status that counts: brands that are very successful at identifying or creating styles with original identities, which differentiate their products or services and combine them with high status,” Dubois says.
Influencers
The Swiss are not, however, resting on their laurels. Management works hard to imbue their products with high status, sometimes through scarcity (limiting production to just the right number of items) or by recruiting influencers.
It may be Lewis Hamilton designing his own watch range for IWC Schaffhausen or George Clooney lending style and credibility to coffee capsules at a time when Nespresso was barely known.
Many Swiss brands spanning high-quality goods and services own a powerful and distinctive identity earned in the past”
Researchers at INSEAD have identified three of the key game-changers for luxury brands. Firstly, the technological challenge of digital, data-centric transformation, secondly a shift in consumer behaviour from conspicuous consumption (in short, showing off) to conspicuous production (setting more store by the ethical way in which an item is produced). Finally, negotiating the pivot in the luxury market from European and US territories to China and other emerging economies.
Perhaps the greatest of these challenges is driven by the millennials, who were born between 1981 and 1996. This generation is more interested in the provenance of products and services, including the sources of raw materials, the amount employees are paid and how companies spend what they earn. Their concerns can be summed up in one word: sustainability.
Technology
Then there is the challenge of technology, which can be compared to the ‘quartz crisis’ of the 1970s and 80s, when Asian-made cheap digital watches presented a compelling alternative to Swiss luxury watchmakers. That was seen off by the creation of the relatively low cost Swatch, which restored Switzerland as a major force in the global industry.
Today, Tag Heuer is taking on the smart watches produced by Apple, Samsung and others with their own Tag Heuer Connected Smartwatch. The innovation, sustainability and heritage of Swiss luxury items are distinctive in a world of shorter duration products.
Tellingly, a large proportion – almost 88 per cent, according to a study by St Gallen University – of Swiss businesses are family-owned. The subsequent emotional attachment gives long-term stability to the companies, which are prepared to sit out downturns and hold on to staff whose skills would otherwise be lost to the business.
Short-term for most family-owned businesses often means until the next generation takes over”
“Family-owned businesses are also free of the short-term pressures faced by listed companies, which may have to report profits and margins quarterly to shareholders,” says Laurent Belloni, Senior Investment Manager at Pictet Asset Management.
“Our own bank is private and wholly owned by a handful of partners, and it manages for the next century rather than the next quarter. Short-term for most family-owned businesses often means until the next generation takes over, which could be 25 to 50 years hence.”
Swiss brands are undoubtedly helped by the country’s business-friendly environment, especially its low and stable tax rates. If they are to continue reaping the rewards, however, they must integrate environmental, social and governance (ESG) issues into their business plans.
As Pictet’s Belloni puts it: “Small is beautiful and local diversity of products should be the watchwords for all premium brands.”
