Mar 17, 2010

U.S. Economy Alters Face of Luxury BrandsBy Victoria GomelskyNYTimes.com

Munich — In 2006, shortly after Hartmut Kraft took over as second-in-command at Chronoswiss, a well-regarded Swiss watch manufacturer based here, he initiated a meticulous three-year analysis of the brand’s performance in the United States.

His conclusion: It was time to fire the company’s independent distributor.

In addition to complaints about the distributor’s lack of advertising and poor retail network, which then numbered 60 stores, Mr. Kraft took issue with what he considered its exorbitant pricing. He recommended to the Chronoswiss chief executive, Gerd R. Lang, that the brand open its own subsidiary, and he offered to supervise its creation in 2008.

Instead, Mr. Lang gave Mr. Kraft the U.S. distributorship.

“That was September 2008, and we all know how much of a gift that was,” said Mr. Kraft, now the chief executive of Chronoswiss of North America, referring to his move to the United States, which coincided with the collapse of Lehman Brothers and the onset of a full-blown economic crisis. “It took me two weeks to figure out I had to close down the entire operation because of the mess I discovered.”

A year and a half later, Mr. Kraft is up to eight authorized retailers. He says he has plans to grow by no more than six new accounts this year — a prudence that reflects less the specific problems he identified at Chronoswiss than the systemic problems facing the entire U.S. watch market, historically Switzerland’s largest and most sophisticated.

In 2009, same-store retail watch sales in the United States dropped by an average of 14 percent compared with 2008, according to data collected by LGI Network, a market research firm specializing in the U.S. fine watch and jewelry industries. Exports from Switzerland to the United States over the same period recorded a much steeper decline of 38 percent. The discrepancy suggests that retailers were still dealing with excess inventories at the end of the year, one of the ongoing stories of the recession.

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