Tissot Slashes Costs of Automatic Watches as Price War Brews

(Bloomberg) -- Tissot is considering making an automatic chronograph for as little as 500 francs ($528), knocking more than a third off the current price, as a price war breaks out in the crowded segment of lower-end watches.

The chronograph would follow a $365 automatic watch that Tissot introduced last year. Chronographs are timepieces with a stopwatch function, and Rolex sells them for more than $10,000.

Tissot Slashes Costs of Automatic Watches as Price War Brews

Tissot has been gaining market share and its sales rose almost 10 percent last year, President Francois Thiebaud said in an interview at the Baselworld watch fair. That comes as most of the lower-end price segment reels from competition with fitness bands and smartwatches. Automatic watches can be found for less than $200 from brands such as Fossil. 

Tissot, which makes about one-sixth of the timepieces that Switzerland exports, has the advantage of bearing the Swiss-Made label, which commands higher prices due to its reputation for quality. It also has the backing of production powerhouse Swatch Group AG, which owns ETA, which sells components to third parties. The unit has economies of scale because it makes most of the mechanisms that make Swiss watches tick.

“Nobody can compete with this,” Thiebaud said. “Tissot makes quantities, and with Swatch Group, we have strong industrialization and technology that help us produce cheaper.”

The brand’s revenue exceeded 1 billion Swiss francs ($1.1 billion) last year, capping two decades of almost constant double-digit growth. Most lower-end watchmakers are suffering as 2017 quartz exports fell to a 33-year low.

Tissot Slashes Costs of Automatic Watches as Price War Brews

Automatic watches are powered by the movement of the wrist, which means they need no battery. They are more expensive to produce than quartz watches, which are electronic. Tissot’s cheapest quartz models sell for about $200.

Automatics used to be the bread and butter of midrange Swiss watch brands, because producers convinced buyers that the craftsmanship behind timepieces that need no batteries made them worth more. That’s no longer necessarily true, making life difficult for Swiss producers such as Movado and Frederique Constant.

Tissot’s Swissmatic line is one of the cheapest Swiss automatics on the market. Movado’s self-running pieces typically cost at least twice as much. Tissot’s lower prices are a response to stark competition, according to Luca Solca, an analyst at Exane BNP Paribas.

“It has the efficiency of Swatch movements manufacturing behind it, so they can be more aggressive than most on pricing,” he said. “That’s of essence in a market now dominated by middle-class consumers.”

Tissot’s sister brand, Swatch, sells plastic self-running watches for even less, around $150. Thiebaud said it would be unrealistic for his marque to reduce prices to that level.

“That would not just kill Tissot,” he said, “but the whole industry.”

©2018 Bloomberg L.P.