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Price War Forces Tissot To Slash Minimum Price Of Its Automatic Watches

Price War Forces Tissot To Slash Minimum Price Of Its Automatic Watches
The global market segment of lower end watches has got very competitive. Even established brands like Tissot has bene forced to drastically slash its prices in this segment as the watch maker announced 500 francs ($528) to be the starting price for an automatic chronograph for that it plans to make.
Tissot had already introduced a $365 automatic watch last year. a stop watch function is the addition that makes chronographs different from other watches and such watches sold by Rolex is priced at over $10,000.
Last year there had been a rise of almost 10 per cent in the sale of Tissot as the company steadily gained market share, according to company president Francois Thiebaud in an interview at the Baselworld watch fair. This despite the fact that fitness bands and smartwatches are providing a stiff competition to watch companies in most of the lower-end price segment. Brands such as Fossil sells automatic watches for less than $200.
The Swiss-Made label is a competitive advantage for Tissot as the company manufactures about one-sixth of the watches that are exported annually out of Switzerland. This competitive advantage gives the company the leverage to demand higher prices because of its reputation for quality. The watchmaker is also supported by production powerhouse Swatch Group AG – the owner of third party components seller ETA. Because most of the mechanisms that are required for a swiss watch are made by it and therefore the unit has economies of scale.
“Nobody can compete with this,” Thiebaud said. “Tissot makes quantities, and with Swatch Group, we have strong industrialization and technology that help us produce cheaper.”
The brand has witnessed double digit growth for almost two decades now and last year it generated revenues in excess of 1 billion Swiss francs ($1.1 billion). The exports for quartz in 2017 dropped to a 33-year low and hit most of the lower-end watchmakers.
No battery is required in automatic watches because they draw their necessary power from the movement of the wrist. Such watches are more cost intensive compared to quartz watches which are electronic. Around $200 is the price for eth cheapest quartz watch from Tissot.
Watch makers marketed the higher skills and craftsmanship necessary for making automatics and managed to create an impression among consumers that these watches without batteries are worth more. This made the automatic watches the staple product for most watch makers. But that myth seems to have ended which has caused problems for Swiss producers like Movado and Frederique Constant.
“It has the efficiency of Swatch movements manufacturing behind it, so they can be more aggressive than most on pricing,” said Luca Solca, an analyst at Exane BNP Paribas. “That’s of essence in a market now dominated by middle-class consumers.”
“That would not just kill Tissot,” he said, “but the whole industry.”

Christopher J. Mitchell

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