For those who could keep up with the fast-talking CEO, the 20 minute presentation by Jean-Christophe Babin at the Four Seasons hotel in Geneva last week was probably one of the best, most frank and most honest overviews of the global economic situation specific to the watch industry that they have heard all year. One of his key messages is that the Chinese consumer still holds great sway over the industry and that he or she is now adapting quicker than ever to exchange rate fluctuations around the world. Last year they took advantage of the favourable exchange rate with the Japanese yen, boosting exports to the country; in the first quarter of 2016 it was the turn of Korea. Activity also shifted to the UK as travellers quickly adapted to the significant drop in the pound after the Brexit vote in June.
Such exchange rate fluctuations are great news for travellers who can take advantage of them but not quite so appealing to those suffering from the devaluation of their currency. It also means that those importing watches into the country in the first place have to pay more for them. But for a big luxury brand like Bulgari, which has a global presence, exports are billed in the local currency, which means the price doesn’t change for the brand’s UK retailers. The company therefore sees its own margins cut, but this can be compensated by fluctuations in other areas, such as Japan, where the yen has since strengthened and therefore bolstered Bulgari’s margin accordingly. The problem is less of a concern, therefore, for a global brand with an even geographical spread. As Jean-Christophe Babin explains, “it is more difficult if a brand is more exposed to a single region, especially if that region is China. And if, for example, a brand is not present in Korea, it will already have lost out this year.”
The language skills of sales staff can also be an important factor in adapting to these fast changes in spending habits. With its own-name stores in both Paris and London, Bulgari has been able to react as quickly as the Chinese tourists, transferring its Mandarin-speaking sales staff from Paris to London to cope with the shifts in demand. According to Mr Babin, the switch to spending in the UK happened within 48 hours of the Brexit vote, so reacting quickly to such moves is crucial.
Although he sees little chance of a global improvement over the next twelve months, the Bulgari CEO nevertheless sees some potential. “The winners will be brands with a good image and a strong distribution network,” he says. “They will be able to grab business from their competitors.”
