Could this be an opportunity to disrupt the watch industry?

 

CODE41 is a startup initiative that aims to shake up the watch industry with brute transparency

 

As of current, the Swiss watch industry is all over the place. What we have is a heavily saturated market that’s having to cope with fluctuating currency, weakened overseas demand, criticisms over lack of innovation and trying to adapt to new technology trends. You would think then, that there isn’t room for any new troubles?

It appears that one particular brand isn’t going to let the Swiss watch industry get off lightly. The folks threatening to interfere with the ‘status quo’- Code41, plan to unmask the elements which certain parts of the Swiss watch industry isn’t really keen on sharing.

 

The emphasis of transparency

Think of the last time you saw a “Swiss Made” written on something. I’m sure you acknowledged it as a mark of precision and high quality associated with some of the world’s most premier brands. That’s pretty fair. You might also think that the product was made entirely in Switzerland. That’s also pretty fair; but there is an off-chance that you could be wrong.

In reality, the use of “Swiss Made” to describe the origin of a product is regulated by the Swiss government. There are two sections in Swiss law which dictate how the term can be used, with one of the laws referencing Swiss watches directly. To save you reading through legislature, the current principle of a Swiss watch is as follows:

• The movement is of Swiss origin
• The movement is cased in Switzerland
• The manufacturer carries out the watch’s final inspection in Switzerland
• A movement is Swiss if at least 50% of its value (not including cost of assembly) was realised in Switzerland AND if it has been assembled and “inspected” by the manufacturer in Switzerland.
• The watch must be fully assembled in Switzerland

 

There are a few semantics regarding this:
The extent to which a watch is actually “Swiss Made” varies greatly from each individual watch manufacturer. The point of interest (as shown above) is that the component origins of a Swiss Made watch need to be at least  50% to be able to legally use the term. The case, dial and strap can be sourced abroad. I’ll quickly mention that as of 2017, this will be increased to 60%, and will encompass the Case, movement and strap. The movement will still have to be completely “Swiss”

The Code41 project aims to change this with transparency. Run by a trio of designers by a small design studio called Cosanova design. The firm has spent over a decade designing watches for the likes of Tag Heuer, Parmigiani Fleurier and Montblanc. Their concept is being called “TTO”: Total Transparency of Origin. The company will not only let clients know where the watch parts have come from, but also how much they cost to make, and how it differs from the retail price.

I spoke to founder Claudio D’Amore, who explained his approach to the whole thing:

“I always wanted to start a watch brand and at the beginning of this year I thought “why not?”. When we first started, we knew we didn’t want to be like all the other brands in a similar situation. We thought about going the Swiss made route, only to quickly realise what a big joke it was. We didn’t want to be part of that”

Claudio was very vocal about how even the most renowned luxury brands would simply multiply their cost of production up to tenfold. He added however, that the retail for Code41’s watches would be 3.5 times the cost of production (with some subsidies for kickstarter supporters). Claudio explained that the pricing strategy was feasible as the brand would not operate through traditional distributors and retailers. The watches would be available online and then delivered by an eCommerce partner. The company has designed and developed its first model, from the suggestions of up to 10,000 registered users and has raised over 300,000CHF since their campaign launch. The first watches are to be delivered sometime in June

“What we are offering is complete transparency and letting the clients know exactly what they are part of.  It’s not like we’ve come up with a brand new concept of horology in terms of movement, we are watch designers who are offering a watch with a great design. Our story is what gets us support from the community”

 

The watch will feature a Japanese Miyota mechanical movement and will be assembled in China, using Chinese made components. An option of various straps and bracelets will be made available upon order. Pictures with permission from Code41.

My take:

Having looked into the brand and spoken directly to the people behind it, I have to say the prospect at hand is very interesting. Here we have a brand that is willing to share just exactly what goes on behind the scenes of producing their watch.

It has to be said that the idea of letting the clients know price margins of a product can be called “unconventional”. As pointed out, a lot of big labels would rather have it that their customers don’t know the margin between cost of production and final retail. That being noted, the concept of pricing is relative and choosing prices will determine your customers. There will always be a market for people spending exorbitant amounts of money, and luxury brands exist to fill that gap. Customers will always create a mental hierarchy when presented with various price ranges. In the case for Code41, I think this will play as a strength. The brand is unapologetic about it’s use of Chinese components. Such examples of the “no frills” and honest nature, gives the brand a strong sense of integrity. It is the retailer’s job to both set the price and convince the customer. Code41 claim that they can compare quality of production of their piece, with a watch priced at around the $2000-$3000USD mark. That competes with quite a few entry level watch labels.  The fact that Code41 will provide all the details of how much their watch actually costs to produce, will most likely lead to heightened buyer confidence. Their Thousands of supporters is a testament to this.

The aforementioned supporters will be crucial in this, as Code41 won’t exactly be making any industry friends with their outspoken views about pricing and origin of components. That being said, the larger Swiss labels won’t really have anything to worry about. Brands that go nearer to the five figure price range are in a different tier entirely; in terms of history, marketing, distribution and quality of production. Code41’s pieces will be competing with entry level watch brands, and so that’s where the pressure will be. The “origin of source” concept is where this pressure will come from. An example that a friend mentioned to me, is that there are a lot of watch startup companies in Asia. Quite a few of them are from common manufacturers in the far East. Some of these brands have been fiddling around with legal loopholes, allowing them to market watches as “Swiss Made”. The watches produced by said brands tend to be made with lower standards than legitimate “Swiss Made” timepieces. The issue is that they then have the nerve to charge a luxury price for them. In other words, newer companies with no track record of success are solely relying on the status that Swiss watch companies have built and earned over the past 300 years.

Personally, I welcome the idea of bringing something fresh to the table.  As shown in the dying retail industry of Asia, customers no longer want ‘face on’ value, but are looking for something more “genuine”. There are already labels that cater to this: offering a healthy ratio of quality and price. In terms of horological value, they won’t be turning heads. Their price range roots them at the very entry level of the horology world. What Code41 has however, is a branding concept that’s new. It’s a concept that appeals to many people, which is important. It’s too early however, to say if that will represent any actual value, but I have to give the brand credit for trying. They’ve built themselves up as a sort of ‘Horological political pressure group’ in the watch industry. I absolutely love that. They may not cause the level of disruption they advertised, but they’ll certainly ruffle feathers. By raising awareness, companies might have to reconsider using the term “Swiss Made” on their watches. That’s quite a way to make an entrance into the watch scene. I’m looking quite forward to seeing what they have to offer.

You can check out their campaign here.

Trying to understand why people are saddened by the ‘Stepan Sarpaneva/Kari Voutilainen phone’

Near the end of October, the online horology world was in uproar over a bit of news that seemingly came out of nowhere: Kari Voutilainen is apparently making mobile phones for luxury company 8848. As a natural response to this, the timepiece wizards over at the major journalism sites began frantically typing away at their desks to give their views on the matter.
The problem at hand is that the nature of the news was extremely short notice and as a result there really wasn’t much information circulating around. But boy was it a topic that would generate headlines. The fact that a lot of the information available was speculation didn’t stop the online world from blasting Sarpaneva, who was also commissioned by 8848 and Voutilainen with criticism. Hodinkee managing editor Stephen Pulvirent wrote a pretty damning article that expressed how “disappointed” he was with the venture. I have to admit, I was also lulled into the hysteria following sensationalised articles and Instagram posts.

The dust has since settled, and a lot of new facts have emerged. The idea of someone with an upstanding reputation such as Kari Voutilainen potentially “cheapening” his brand by putting his name on a shoddy Chinese phone has mostly subsided. What has now come to light is the fact that Voutilainen and Sarpaneva will only be producing a limited run of bespoke sim card covers (using the dial/bezel making techniques the duo are famous for) that essentially act as an additional accessory to a luxury phone. The craftsmanship and quality of the covers will be the very same as you’d expect to see on both of their timepieces. Apart from that, there isn’t any further relation between the horology masters and the phone company.

The whole ordeal took place during my school half term so I had a bit of free time to follow up on things. I was actually quite fascinated by it all. I initially asked the question: “Why are people riled up over this?”
It’s fair to say that following the world of watches is quite a niche interest. We’re talking about a community that finds it ‘controversial’ if a particular watch label moves the positioning of a subdial by a fraction of a millimetre. It can be said that any sudden sparks of news in the volatile industry can start a fire. I took this in mind and began trying to come up with an answer. My initial approach was to use the model of ‘Food Truck Economics’. The idea being that, a well established small business with a loyal fan base seems to work on the sole basis it’s a simple thing to appreciate.

A person drives around in a van selling food in a street corner, whilst customers happily queue in line to get a bite to eat. There’s a strong direct relationship between the person making/serving the food, and the customers, which is what makes this unique. The model is broken however, when the presence of ‘big business’ gets involved. All of a sudden the interactions between the customer and food truck owner are lost, as the business begins to expand and making profit is the highest priority. Suddenly the food truck has lost its intangible value and people begin to point fingers and accusations of being a “sell out” begin to emerge.

I suspect this is the main reason people had strong emotions over the news that Voutilainen was associating his name alongside a Chinese phone company. Voutilainen is a leader in independent horology, something that is deemed beloved for its “purity” in an overall industry that often gets riddled with criticism over cheap marketing tricks, superficial exploits and pointless gimmicks. Not to mention the fact that the product in question is a smartphone, which I remember describing as a bit of an antagonist to the realm of traditional watches in my first ever article.
Let’s not forget the fact that there are some clear cultural biases involved. The whole idea of “made in China” already provokes negative sentiment. Any immediate thoughts of luxury in China often stir up images of poor quality items or outright fakes. It definitely plays a part in the reason some might claim the relationship cheapens the brand. I can imagine that there would be less emotion involved, had a well established British luxury label such as Vertu approached Voutilainen instead.

After breaking down the question “why are people annoyed?” the next question is “Does it even matter?”.
It was pointed out to me that Voutilainen isn’t someone who is just “selling food out of a truck” but he is in fact the face of his brand and the owner of a business. Choosing to look at independent watchmaking solely through the window of its “purity” is quite naive. There is a bigger picture to be painted.
What has to be understood is that in a market where the taste of a client can change at a moment’s notice or a sudden dive in the economy will drastically affect buying habits, the prospect of making sales is uncertain. Traditional watchmaking is very resource intensive. The cost of labour and materials runs high. Buying a block of Gold and training a craftsman for several years to tinker away at tiny bits of metal doesn’t come cheap. An opportunity to open doors to a new market of Chinese collectors by showcasing what the watchmaker is capable of producing, especially during financially difficult times is always welcome. If anything it opens a door to ‘insourcing’ and harbouring talent in a well established field.
As Ian Skellern from Quill and Pad stated: “There’s irony in the fact while many Swiss suppliers have been threatened by manufacturing moving to China, here is at least one instance of a Chinese manufacture sourcing from Switzerland.”

I personally played around with the phone myself, belonging to Voutilainen. Whilst the phone was originally marketed using Voutilainen’s name; with the Sim card cover off, you wouldn’t have the slightest clue that it was associated with a watchmaker. It’s really well made and feels quite good to hold. The performance is snappy and I even took a selfie with it. The Sim card cover added a bespoke feel to the device, something that is sought after in luxury items. Voutilainen seemed like an ideal craftsman to approach for the matter. If anyone is personally familiar with his work, you’ll know how much he values the human interaction with objects. Each of his watches are lettered with “Hand Made” on the dial, to really drive home the emotion. I can see why Voutilainen agreed to work alongside the 8848, and more importantly, why his partners and existing client base had no problem with it whatsoever.

It appears that the people who were stirred up the most emotionally, were those who skimmed through headlines and Instagram, without taking a moment to really look into things. To the snotty Hodinkee fanboys crying about entitlement to opinions, I’d like to kindly say let’s not worry about how the value of your outlook has devolved, but rather look at how a pair of watchmakers are going out of their comfort zone with the intention of achieving more than just their own personal gain. The business of creating is about being free and bold. Let us not forget how the innovators of the past were criticised for their (then seen as) outlandish actions, only to be praised thereafter.