There is no diplomatic way to say this - Baselworld is in serious trouble, much of its own making. Its autocratic management style precludes honest and direct feedback from exhibitors and their representatives; unless an exhibitor is so big that it feels power to speak with the conviction of superior authority. Swatch Group is feeling that power right now – but more of this later.
Many exhibitors have walked away from the event. They have not booked space for 2019 and such direct action is far more convincing than words.
For example, in 2015 there were 1,500 exhibitors and the halls were full. However by 2017 the tools hall was abandoned following the loss of 350 exhibitors to other dedicated exhibition sites around Switzerland, which offered more reasonable exhibition rates and balance of cost to outcome.
As well, in 2017 there were reductions of exhibitor numbers more broadly, but statistics were no longer provided and journalist’s questions were evaded at the opening Baselworld Press Conference that year.
“A period of consolidation – we are concentrating on exhibiting only best quality makers,” it stated, implying “lesser” exhibitors might be refused registration. Concerns raised by this statement went unanswered and few believed the “best quality” declaration had anything to do with the decreasing exhibitor renewals.
It gets worse. When Baselworld 2018 industry promotions began, it emerged that the number of mainstream exhibitors had collapsed from 1,300 to 650. Causes and effects at MCH Baselworld have been brewing and festering for many years - but first, a brief history.
Swatch Group’s recent withdrawal from next year’s show came as a surprise because on Wednesday 28 March, the day after the 2018 show closed, MCH Baselworld issued a reassuring press release declaring that "All leading brands will exhibit at Baselworld 2019" – the Big Five (Rolex, Patek Philippe, Swatch, Chopard, LVMH) would be back.
Baselworld managing director Sylvie Ritter resigned in June following ongoing turbulence following the 2018 event, which suffered a 50 per cent drop in exhibitor numbers. At the same time sales director Martin Fergusson and marketing and communications director Loraine Stantzos also tendered their resignations.
Industry bombshell
This seemed to establish a holding pattern for the MCH administration allowing some time to sort things out.
But six weeks later on Monday 30 July, Swatch CEO Nick Hayek dropped his surprise bombshell announcing that Swatch would not participate in Baselworld 2019. In a very frank interview with US network CNBC, Hayek challenged the raison d'être of the giant trade shows: “The old traditional watch fair doesn’t make sense anymore. If you look around the world we are close to the consumer, close to the retailer.”
Following this, a few days later on Friday 3 August, Rene Kamm resigned as CEO of the MCH Swiss Exhibition (Basel) Ltd and his resignation is perhaps the last piece of the management collapse at MCH, all of which followed the disruptive unrest within the Baselworld exhibitors.
Kamm’s departure was certainly triggered by the stormy withdrawal of the Swatch Group. In an interview with NZZ am Sonntag, Hayek announced the withdrawal of the 18 Swatch Group brands from Baselworld with immediate effect. Swatch was the biggest Baselworld exhibitor with a reported budget of CHF 50 million (AU$68.9 m) for all Baselworld-related costs including booths, travel, accommodation, staffing, food and hospitality for the six-day show.
Swatch Group felt free to be a bit cavalier with the unresponsive MCH Management as it was emboldened by its triumphant, record (unaudited) half-year results:
- Net sales up by 14.7 per cent to CHF 4,266 million at current exchange rates
- Operating results up 69.5 per cent to CHF 629 million
- Operating margin up from 10 per cent on the previous year to 14 per cent
- Net income increased 66.5 per cent to CHF 468 million
- Massive gains in market share in all price segments and regions
These numbers are supported by the export statistics published by the Federation of the Swiss watch industry FH, which comments: “Exports of timepieces priced at more than 500 francs experienced sustained growth. The strongest growth was achieved by watches priced at more than 3,000 francs whose value rose by a strong 16.7 per cent.”
Deja Vu all over again
This is not a new issue - others have left Baselworld to never return – and, in fact, the first rumblings started a long time ago. For example, MCH management never took a 1991 split seriously when Cartier together with Richemont’s high-end brands hived off from Baselworld (then Basel Fair). They created the Salon International de la Haute Horlogerie (SIHH) with its own exclusive salon expressly aimed at the top end of town.
Initially it seemed MCH Baselworld regarded the Geneva Salon, as it became known, as a spoilt child. But the tantrum persisted along with Salon’s continuously improving understanding of the changing needs of luxury brands and buyers and what they want has seen this Geneva-based event persist.
Geneva Salon has grown in stature and doubled in size to about 35 prestigious exhibitors in 2018. Richemont Group wanted more intimacy and didn’t see the need of having itinerant 'tyre-kickers' coming through when they really just wanted to meet their agents, buyers and the press.
MCH Baselworld simply didn’t try hard enough to accommodate this radical idea.
Rapacious pricing
Now the difficulty for the Swiss industry is that 10–15 years of deteriorating goodwill cannot be rectified overnight, given it has morphed into a Basel ‘culture’. It’s not just the exhibitors who have objected to the rapacious pricing. As already reported, 110,000 jewellery buyers, exhibition staff, constructors and journalists visit Basel during the show, and they feel trapped in the finely honed culture across the city of relentless personal and corporate wallet gouging.
By way of example, the price gouging extends to the bars and restaurants printing “special” (read "inflated") Baselword menus and there is a sudden increase in “broken” taxi metres!
It is for these many reasons that today we can see little sympathy around the traps for Baselworld or the MCH management, which implemented outrageous pricing within the show and set an appalling example for what took place elsewhere within the city.
This is not the first time the Swatch Group has left the Baselworld Show, or the Basel Fair as it was known, and plans to coax the world’s leading watch group back to show are likely to be well under way.
But Mr Hayek gave no quarter. In his explosive interview with CNBC he went on to accuse Baselworld’s executive team of lacking the clout to make real progress. “I invited the executives and told them they have a big opportunity to change. The Swiss watch industry is booming, so now is the time to make changes. All of the Swiss watch industry is ready to help, not just Swatch Group. But you must open up. You must do something now,” he stated.
So if Swatch returns to Baselworld then it is most unlikely to be in 2019, given MCH Group has a long way to go.
More reading:
Swatch Group withdraws form Baselworld
Baselworld CEO resigns as crisis deepens
Slow decline of Baselworld: What a shame!
Baselworld: restructuring in a recovering market