Buying luxury watches on credit

Only time will tell if the credit scheme will work. Piaget

The Swiss watch industry is looking to boost sales of luxury watches in Switzerland by offering credit to customers.

Swiss Watch Credit (SWC) has concluded a partnership agreement with GE Money Bank and a network of Swiss jewellers so that customers can purchase luxury watches in instalments in the same way that they buy cars and houses.

The latest Audemars Piguet or Patek Philippe watch is now no longer out of reach of the man in the street, according to Paul Crammatte, SWC founder.

“It’s a system of financing that is specifically adapted to the luxury watch and jewellery sector, and corresponds to new consumer habits,” said Crammatte. “We want to make this market more accessible to buyers in Switzerland.”

Some 50 Swiss jewellers that have signed up to the scheme can now sell luxury watches – worth between SFr1,000-60,000 ($810-$48,579) – on credit.

With an average interest rate of 14.5 per cent, a SFr10,000 Jaeger-LeCoutre watch would cost SFr476.20 per month over 24 months, including SWC’s commission of three to four per cent.

The Jura-based organisation hopes that the system will help raise the average cost of a watch sold in Switzerland from SF350 to SFr2,500.

“Switzerland is the world’s leading luxury watch manufacturer. This payment scheme will help shake up the timid internal market,” said Bernard Metzger, president of the Swiss Watchmakers Association.

“But it’s not intended to land people in debt,” he added.

Objections

However, consumer organisations are not so sure.

For Delphine Centlivres, president of the French-speaking Consumer Protection Federation, this type of credit facility goes too far.

“It’s alright for buying household items for the kitchen or living room – but not luxury watches,” she said in an interview with Swiss television. “Young people are particularly attracted to these kind of luxury goods, so they are even more at risk.”

The watch industry argue that the ability to pay in instalments actually responds to a consumer need. “Society has evolved considerably. Credit is now an integral part of consumer behaviour,” said the SWC founder.

“Each request for credit will be handled in accordance with Swiss law – based on the buyer’s income – so there’s no way that a huge credit line could be opened for a young person on a low salary.”

Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry, is also a keen supporter.

“Buying a watch is an emotional act. It’s something that needs to be done quickly. This new service gives the consumer more freedom. [When they go into one of the jewellers,] they find a global product – the watch and the offer to purchase it,” he said.

By the end of 2007, SWC hopes to sell at least four luxury watches per month on credit via its network, which is expected to grow from 50 to 200 outlets.

swissinfo with agencies

Key facts

A 2005 study showed that the average debt per capita in Switzerland is 924 euro (SFr1,430), compared to 2,798 euro per head in Germany and 4,122 euro in the United Kingdom.
Switzerland’s low level of borrowing can be explained by the fact that being in debt is poorly viewed by society.
This traditional antipathy towards debt has held banks back from marketing in this area but the situation is changing. Consumer lending has increased by 8.5 per cent per year over the past four years.

In brief

After a low point in the 1970s, the Swiss watch industry has recovered strongly, helped among others by Swatch.

Over the past five years the sector, which includes a huge range of products from low-range to luxury, has become one of the best performers in the Swiss economy.

The value of its watch exports has climbed continuously from SFr4.3 billion in 1986 to SFr12.3 billion in 2005.

The watch sector employed 41,728 people in 2005 (+ 4.3%) in a total of 593 different watch-making companies, mostly in the western Jura region (91.4%).

The Swiss watch industry exports nearly 95% of its production.