It takes more than exorbitant rents and a strong Swiss franc to keep Swiss watchmakers from opening stores on Zurich's prestigious Bahnhofstrasse as they seek to polish their image with customers at home and around the world.
After years of buoyant growth in Asia, Swiss watchmakers have the cash to expand their retail network at home even if the new stores lose money for several years. Many consider a store as a marketing investment, thus justifying the high expense.
Swatch Group's Breguet brand and family-owned Patek Philippe recently opened stores on Bahnhofstrasse and Richemont's Piaget will follow soon. Jaeger-LeCoultre and LVMH's Hublot and TAG Heuer brands are also looking for a shop.
“It is important that people see the brand at its best in Switzerland. You have to remember the local market,” said Marc Hayek, head of Swatch Group's high-end brands Breguet, Blancpain and Jaquet Droz, adding it took Breguet years to find a spot.
Rents on the popular stretch connecting the main railway station to Zurich lake are among the most expensive in the world, topped only by New York's 5th Avenue and Hong Kong's Causeway Bay, retail real estate firm Location Group said.
Real estate firm Cushman & Wakefield put Zurich in 8th place worldwide with rents of 6,553 euros ($8,721) per square metre per year.
“Bahnhofstrasse is getting more and more expensive because retail space is rare. It is one of the cities where rents have risen most,” Hublot Chief Executive Jean-Claude Biver said.
Watch retailer Rene Beyer, who just opened a boutique for Patek Philippe, said around 90 candidates were competing for the retail space that now hosts Patek's intricate timepieces.
One reason that branded stores in Switzerland have become so important for watchmakers is that Asian tourists expect to see their favourite brands represented in key locations.
“Chinese tourists know the brands well and are sensitive to what makes up their identity,” said Raymond James analyst Marc Wuillaume. “A Swiss presence is at the heart of the legitimacy of a brand.”
The appreciation of the Swiss franc is, however, making shopping in Switzerland less attractive at present.
“Of course, people think twice before buying a 100,000 franc ($108,377) watch in Switzerland if they can get it cheaper abroad,” said Thierry Stern, president of Patek Philippe.
Renato Vanotti, chairman of watch retailer Les Ambassadeurs, said the currency problem was leading to striking price differences and keeping traditionally price-sensitive shoppers from Central Europe, Russia and Ukraine away.
“In London, sales are booming and also the US are selling more because in these markets watches are being sold at prices that are very close to our cost prices,” he said. “It is crazy that rents in Zurich stay high even in the current environment.”
A poll conducted among the street's retailers by the Bahnhofstrasse association showed only 10 percent of participants had higher sales in August versus a year ago.
“Watches and jewellery retailers were hit most and from what I hear September has not really brought an improvement,” said Markus Huenig, chairman of the association.
Les Ambassadeurs' Vanotti said if the current trend continued Bahnhofstrasse might lose its charm like Geneva's Rue du Rhone where people no longer come for a leisurely stroll to do their window shopping.
“The advantage of Bahnhofstrasse is that ... there are still the big department stores like Jelmoli and Globus that attract people. There's a danger that (at current prices) Bahnhofstrasse will degenerate into a pure luxury avenue. That would be a pity,” he said. - Reuters