Can Swatch keep up with changing times?

Swatch changed the face of wristwatches in the Eighties by putting precision time movements in lurid plastic cases. But times have changed, and as with many innovators, Swatch has lost much of its reputation for breaking new ground.

Still, with worldwide sales last year increasing a healthy seven per cent to some &£1.3bn, and net profits rising by 30 per cent over four years to last year’s &£146m, perhaps the company need not worry too much.

But little has come of some of its recent innovations, and observers are wondering how the Swatch brand will be updated for the millennium.

A succession of marketers in the UK have failed to pump fresh ideas into the company and give it the new direction it needs. Indeed, marketers rarely seem to stay long enough to make much of a difference.

Swatch’s UK marketing chief Sally Plumridge, who left to join Japanese toy manufacturer Tomy (MW July 8), is the latest to quit. She joined Swatch a year ago from toy giant Mattel, where she had been for nine years.

Swatch brand director Jill Pinnington left last year, and was replaced by former Diesel European retail director Jamie Home – who has also left the company.

Pinnington’s departure came hot on the heels of the exit of Karl Oliver, the managing director of SMH (Societé Suisse de Microelectronique et d’Horlogerie SA, the former name of The Swatch Group AG), who left the company in May last year.

Oliver took up the role of managing director of watch retailer Watch2Watch. Malcolm Douglas, previously brand director for SMH-owned Tissot, is the current managing director. Quentin Higham, the former marketing manager for cosmetics at Revlon, took up the post of Swatch brand director at the end of May.

Rivals claim this “churn” of personnel at the Swatch Group is a reflection of the way the company is run.

One source close to the company says it is because Nicolas G Hayek Snr, chief executive and chairman of the board of directors with The Swatch Group AG, runs the company autocratically.

“People come and go all the time. Swatch never keeps marketers for very long,” she says.

“There is simply no power in the UK – it all seems to come from Switzerland. Hayek seems to rule all. It is his decision on everything. Whatever he says goes.

“A lot of companies which are family-owned, like Swatch, don’t want to give any power to outsiders. That restricts marketers, so they quickly move on.”

She says agencies which pitch for business are expected to go in with the finished films – before any decisions are made.

Malcolm Douglas, managing director of The Swatch Group UK, says there is nothing sinister in Plumridge leaving the company.

“She made a strong contribution here. It’s well-known that Swatch is a demanding brand – people come and go,” he says. “We are happy with the group. We have an exciting brand and a strong team. To say that Hayek runs the company with an iron fist is not the case. He is charismatic and has led the company well over the years. He is very supportive to everyone.”

A senior marketer at a rival watch brand contrasts Swatch’s big turnover of marketing staff with other companies, which he claims have an “astonishing stability”.

He says: “The company operates a very strange structure, which has led to a great deal of frustration in the UK. The top-level UK marketers have to report to their counterparts in Switzerland. That is where the control lies.

“The Swatch brand is no longer a phenomenon. People don’t want to wear something which had its day in the Eighties.” Still, maybe he protests too much. Swatch’s global turnover has almost doubled over the past ten years while net profits before one-off items have trebled.

Industry observers believe The Swatch Group may be reaching saturation point with its Swatch, Omega, Rado and Tissot watch brands.

While there is little doubt these will remain its core business, the company has looked elsewhere to build commercial growth.

Its collaboration with car manufacturer Mercedes-Benz resulted in “Smart” (Swatch/Mercedes/art) – car technology married with Swatch’s flair for design – built as an icon to rival the Mini.

But by the end of the year, The Swatch Group AG had sold its stake in Micro Compact Car Corporation, which developed Smart, to Mercedes’ owner Daimler-Benz. Swatch attributed its decision to withdraw to both technical problems and financial considerations.

Following its withdrawal, Swatch developed the idea – previously only seen in Star Trek – of a wristwatch which doubles as a telephone. But Swatch Talk had a limited release and a subdued reaction, because it needed a separate holder for fresh batteries.

Swatch has also developed a new time standard intended to take the difficulty out of dealing with multiple time-zones on the Internet.

Swatch Beat divides a day into 1000 “beats” and has no time-zones, and has been greeted enthusiastically by the Internet community. The average number of visits to Swatch’s Website has risen from 13 million to 51 million per month.

There are also plans to increase watch sales over the Internet, and marketing agreements are mooted with Cable News Network (CNN) and Sony. Future plans include a Swatch watch with a liquid crystal display (LCD) to run alongside the conventional analogue face – perhaps jumping onto the retro bandwagon rather too late.

The Swatch Group (UK) spent just over &£2m on advertising last year. Creative work for its Swatch brand was through Interfocus Network, and media planning and buying was handled by CDP Media and Mediaworks.

The company’s financial results reveal a healthy turnover, although there has been a levelling off in recent years.

Last year, Swatch’s gross turnover was SwFr 3.3bn (&£1.3bn), up seven per cent on 1997’s SwFr 3.1bn (&£1.26bn). This was a 9.5 per cent increase on 1996’s SwFr 2.8bn (&£1.1bn).

But the Swatch brand is still viewed as something of a high street dinosaur, undercut by young companies with new ideas. It has six stores in the UK and 175 across Europe, with plans to open a further 20 by the end of this year.

Design agency Cobalt was instrumental in creating Watch2Watch, the retailer which opened its first store in London’s King’s Road last year, with plans to open 20 more.

Doc Thody, design director at Cobalt, says the range of watches created by sports companies such as Adidas, Puma and Nike, have become as collectable as some of the old Swatch watches.

“One of the problems is that Swatch doesn’t have an overall brand look,” says Thody. “The different stores, the various materials, colours and finishes don’t give a coherent message. When Swatch first came along and put a Swiss time movement in a plastic watch, it was unheard of. But other manufacturers have caught up.

“No one really understands what Swatch is about. Some of its ideas are great, but so what? I don’t think people will buy into these niche ideas.”

A high turnover of marketing employees may be a feature of brand companies run by entrepreneurs who find it hard to let go of the reins of power. But the issue is whether management style is stifling creativity.

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