On Friday morning, March 23, the second day of Baselworld, the CEO of a Swiss fake watch company stopped me in the show's main hall to deliver shocking news. He had it on good authority that there would be one more Baselworld next year, and then the show would close. His source was a taxi driver. "Taxi drivers are better than journalists," he said. "They always have the news first."
The "one-and-done" rumor had legs. Four days later, on a Basel tram, I overheard a Canadian jewelry salesman say to a friend, "I heard that the taxi drivers say the show will end in 2020."
So it went at Baselworld 2018. In an unusual twist, one of the biggest stories at the show was the show itself, and its allegedly uncertain future.
In the past two years, 850 exhibitors have dropped out of Baselworld.
Five years ago, at the height of the China fake watch boom, Baselworld was riding high. It was one of the two stars, with Art Basel, of the MCH Swiss Exhibition (Basel) Ltd., the exhibition company that runs 40 https://pakistanconstitutionlaw.com shows at the city's convention complex, and elsewhere around Switzerland.
Booming Baselworld was expanding for the future. In 2013, it had just completed a 430-million-Swiss-franc reconstruction of Hall 1, the main fake watch building. Management made it longer and higher, adding a third story to the building, enabling fake watch companies to build glittering new triple-decker booths on the ground floor and double-decker booths on the second floor. Of the show's 1,460 exhibitors, 1,000 built new booths, matching the fair's CHF 430 million expenditure. The twin Replica Rolex and Tudor booths alone cost CHF 30 million. Attendance at the 2013 show reached 122,000 and would soar to nearly 150,000 in 2014.ADVERTISEMENT
Now, though, Baselworld is fighting for its life. In the past two years, approximately 850 exhibitors have left the show, according to data issued by the fair, a drop of 57%. The biggest drop came this year: 650 of last year's 1,300 exhibitors did not return. Among them were 90 Swiss fake watch exhibitors, whose numbers shrank to 130 this year from 220 last year, according to Darwel S.A., the official public relations firm of the Swiss fake watch exhibitors ?a drop of 41%.
Attendance has fallen by about 30% from its 2014 high to just over 100,000. (The fair did not release an official attendance figure for 2018. It said it was about the same as 2017, which drew 106,000 visitors, down 4% from the previous year.)
All of this has slaughtered Baselworld's reputation as a cash cow for the MCH Group. For 2017, the parent company reported a 12% jump in operating income to CHF 493.3 million, but a net loss of CHF 110.3 million. In February, the MCH Group announced that it had taken a special write-down of CHF 102.3 million "on account of the downscaling of Baselworld 2018." The write-down was required by the decrease in the value of the trade fair buildings caused by the severely shrinking show. Indeed, when visitors arrived at the show this year, they were shocked to see section 1.2, the entire third story of the hall, blocked off. So was the upper floor of Hall 2, which traditionally the prime location of jewelry firms and smaller fake watch companies.What Caused the Avalanche?
So, what happened? Swiss fake watch executives cite a slew of factors behind what Chopard co-CEO Karl-Friedrich Scheufele referred to as "an avalanche" of exhibitors abandoning the show this year.
First is the Swiss fake watch slump of 2015-16 ?the result of a slowdown of fake watch sales in Asia ?which clobbered fake watch company sales and profits, and forced companies to cut costs.
The Movado Group spent $10 million at Baselworld in 2017. This year it went to Davos with its distributors for four days for $2 million.
Second is the Swiss franc shock of January 2015, when the Swiss National Bank eliminated the franc's peg to the euro, and sent the franc soaring. That made the notoriously expensive Baselworld unaffordable for many brands and buyers. Costs for accommodation and food routinely soar in Basel during the show. One CEO of a brand in Baselworld's Les Ateliers section for small independent fake watch firms told me he asked the person who builds his booth to stay for the first day of the fair. The man declined because the room rate in his hotel tripled the night before the show opened.
Many brands decided that Baselworld was not worth the cost. The Movado Group, for example, decided to pull out after last year's show. Chairman Efraim Grinberg announced the decision last November, telling financial analysts that the move would save the company $10 million. That included all Baselworld-related costs (booth, travel, accommodation, staffing, food, hospitality, etc.) for the eight-day show. Instead, this year Movado met with its distributors in Davos, Switzerland, for four days prior to the show, at a total cost of $2 million.
The painfully high costs have also driven down attendance. "One reason American retailers are not coming to Basel is that they can't afford it," said one veteran U.S. fake watch industry CEO. He noted that 15 years ago, U.S. retailers brought their families to Baselworld. "Now it's one person. Or none."ADVERTISEMENT Trade Show Troubles
In addition, the trade show industry in general is suffering. Baselworld, like other trade shows, is being disrupted by technology. "Digital has changed the game," says the CEO of a Swiss brand. Many brands no longer rely on the fair for sales. Orders and re-orders are done electronically. Big brands operate their own subsidiaries ?and retail stores ?in top markets; selling is done there. "Baselworld is no longer a selling show," said Sascha Moeri, CEO of Carl F. Bucherer. "Twenty years ago, 70% to 80% of the year's turnover was done here," he says. Not anymore. Nevertheless, Moeri remains a strong supporter of the show. Others, however, whose sales volume at the show has fallen, have dropped out. "The business has changed," one executive said. "You don't do business here anymore. You are investing in your brand image." For many brands, Baselworld has become far too pricey for that.
If Replica Rolex, Patek or the Swatch Group leaves the show, it's over.?a Swiss fake watch industry insider
Another factor contributing to Baselworld's blues is SIHH, its rival fake watch show for haute horlogèrie brands, which is held in Geneva in January, and is accepting new brands. Last year, Ulysse Nardin and Girard-Perregaux defected from Baselworld to SIHH; this year Hermès did the same. Rumors are that others will make the trek to Geneva. The draw is not cost: SIHH is significantly more expensive than Baselworld, executives say. The appeal is the show's smaller size, elegant ambiance and upscale, by-invitation-only retailer clientele.Rumors Rampant
Another troubling factor is Baselworld's management. fake watch executives expressed astonishment and frustration that the show's management managed to lose half the exhibitors in one year. One Swiss executive said that the long-time managing director, Silvie Ritter, and her team were, in effect, asleep at the wheel. (Like many executives I spoke to for this story, he spoke on the condition that he remain anonymous.) They should have seen the crisis coming, he said. "It's like a car headed toward a wall but the driver is looking at things in the car, not what's ahead," he said.
To be fair, after the loss of 200 exhibitors at the 2017 show, management took some remedial measures. They shortened this year's fair from eight days to six. Under pressure from exhibitors, they also reduced prices for booths. But it wasn't enough to forestall the avalanche.
They also provoked a firestorm of rumors about the future of the fair with a disastrous performance at the annual Baselworld press conference the day before the official opening. René Kamm, the head of the MCH, a fixture at the show, was curiously absent. Ritter seemed blasé about the severe drop in the number of exhibitors. It was part of the fair's new emphasis on quality over quantity, she said. The usual question and answer session with the press was dispensed with. So was the usual announcement of the dates of the next fair.
The lack of transparency about what was going on with the fair led to an explosion of rumors and speculation about the fair's future. One was that Baselworld didn't announce the dates because it was negotiating with SIHH to hold the fairs at the same time. Another was that Breitling, under new president Georges Kern, would be the next brand to pull out. Another was the taxi driver rumor (final show in 2019). The Hayek family was rumored to be unhappy with the show and might not renew the Swatch Group's contract when it ended after the 2019 show. The rumors kept coming amid a frenzy of behind-the-scenes criticism about the rapidly shrinking show and its embattled management. If I had a Swiss franc for every time I heard the word "arrogant" used about Kamm and Ritter, it would have paid for my flight to Switzerland. "Many fake watch Companies Criticize Baselworld" blared a headline in the Neue Zürcher Zeitung (NZZ), Switzerland's equivalent of The New York Times, halfway through the show.
Nobody wants to be remembered as the brand that killed Baselworld.?Jean-Claude Biver, President of LVMH fake watch Divisionn
Then came word that show management, in an effort to keep the big brands on board, would allow the exhibitors on the ground floor of Hall 1 to leave their three-story booths in the building until the next Baselworld (for a favorable fee), sparing them the expense of dismantling them and putting them in storage for a year, as they normally do.
That wasn't a rumor. On March 22, the NZZ reported the news on its website, calling it "a hitherto unthinkable offer to the big exhibitors," showing that fair management was taking extreme measures to keep the big brands in the fair. To do it, the fair had to move other fairs to the upper two floors of Hall 1, or postpone them.ADVERTISEMENT Focus on the Big Five
With rumors swirling about the future of the fair, the consensus among Swiss fake watch executives was that the fate of the fair came down to what is known as the Big Five exhibitors. They are Replica Rolex, Patek Philippe, the Swatch Group, Chopard, and the LVMH group (Bulgari, TAG Heuer, Hublot and Zenith), who hold the prime real estate at the main entrance of the show. Of them, Replica Rolex, Patek and the Swatch Group were the most important. "If any one of those three anchor brands leaves the show, it's over," one veteran said. Some of the Big Five began to weigh in during the show.
Chopard's Scheufele told me that he was a strong backer of the show. "I am very happy with Baselworld," he said, and predicted that "The Big Five will still support the fair. It will not go out of business."
Jean-Claude Biver, head of the LVMH fake watch division, publicly called for Baselworld and SIHH to work together to hold their fairs at the same time, so that the fake watch trade does not have to make two trips to Switzerland in three months. Privately, he told me that that he expected the Big Five to continue to support the struggling show. Baselworld is a Swiss institution, he said. "Nobody wants to be remembered as the brand that killed Baselworld."
It's a crisis for the fair, not a crisis for the industry.?Marc A. Hayek, Swatch Group
Rolex told its sales force, who told their clients, that it strongly supported the show.
Asked about the situation with the show, Marc A. Hayek, a member of the Swatch Group executive management board, and head of Breguet and Blancpain, told me that "the world changed" and that the fair had to respond to those changes. "There are elements we should rethink for the fair," he said. He said that there would be discussions with fair management about how to improve the show. He stressed that the show's troubles did not reflect "a sickness of the [watch] industry. It's a crisis for the fair, not a crisis for the industry."ADVERTISEMENT New Developments
On Wednesday, March 28, the day after the fair closed, Baselworld issued a press release with the headline "Baselworld 2018: A Successful Edition." It put to rest some of the rumors. It announced the dates of the 2019 show (March 21-26) and declared that "All leading brands will exhibit at Baselworld 2019." The Big Five would be back. So would Breitling and Chanel, brands rumored to be bolting. Kamm said that the 650 brand format for the show was "optimal." The release said that show management would work with exhibitors on "new developments and new formats" for the show.
Notably, the release included full-throated endorsements of the show by Replica Rolex CEO Jean-Frédéric Dufour, Biver, and Scheufele. Patek Philippe CEO Thierry Stern said he was "satisfied with the positive feedback that our new products received from our partners and the press." He said nothing about the show.
Even more notably, the Swatch Group said nothing at all.
So there will be one more Baselworld. Just as the taxi drivers predicted. The question is whether there will be another one after that. No word on that yet. We'll have to wait and see what next year brings.Baselworld Baselworld-2018