Swiss watchmakers are facing a threat from within their clubby ranks even as they struggle with the strong franc, weaker Asian demand, and new technologies such as smartwatches.

An example is the Goldgena Project which is open to using non-Swiss components for mechanical watches. The company is led by 40-year-old designer Claudio D’Amore and is a shoestring-budget brand.

Supporting his attitude towards foreign made parts, Claudio D’Amore says that most watches sold under the ‘‘Swiss-Made’’ label for less than 2,500 francs ($2,500) contain some bits from Asia as parts from that region make production cheaper.

Certifying that a timepiece is mostly made of parts manufactured and assembled in Switzerland, Swiss Made is an official government designation that is givne to watch manufacturers.

“Swiss-made is a joke,” D’Amore said in an interview in his downtown Lausanne office. Designing watches for brands such as TAG Heuer, Parmigiani Fleurier, and Montblanc, the Swiss-Italian has spent 13 years in the industry.

Compared to the $4,000 starting price for Rolex models, the brand is planning to sell automatic watches for as little as $700 after it claims to have figured out that it can cut the price of a timepiece by more than half by using imported parts. This is a test by Goldgena about whether consumers are still interested in Swiss-designed watches that would come without all the glamour hidden inside. Goldgena says it can undercut the industry by the use of a Japanese movement, Chinese assembly and avoiding middlemen.

If at least half the value of the timepiece’s movement comes from Switzerland and if the watch is assembled in the country, watchmakers are allowed to call their timepieces Swiss-Made. At least 60 percent of the manufacturing costs of the entire watch, including the strap and case, will have to be Swiss according ot requirements starting next year.

In recent years, the country’s four-century-old watch industry has suffered. Exports have dropped for 10 months. According to Rene Weber at Bank Vontobel AG,  Switzerland gets more than half the revenue in the 38 billion-franc market because Swiss-Made timepieces command higher prices even though the country makes about 2.5 percent of the world’s watches each year.

Swatch Group AG, whose brands include Omega and Longines; Richemont, which makes Cartier and IWC; and Rolex, which also makes Tudor, are the three companies that make the majority of Swiss watches.

As smartwatches sap demand for lower-end watches, there is growing completion in the watch industry. Allowing people luxury watches to wear to parties, websites such as Borrowed Time have increased the completion. While Richemont’s stock is down 34 percent, Swatch shares have slumped 27 percent in the past year.

In order to make 5,000 to 10,000 pieces which he’ll sell online, D’Amore hopes to garner some 10 million francs by the end of September through its plans to raise money through crowdfunding. The first models are planned for next year.

D’Amore has taken to the Internet in an attempt to attract consumers with punchy YouTube videos as he does not have much of a budget for advertising.

To see if consumers would be interested in cheaper non-Swiss-Made watches, Goldgena is conducting surveys. In proportions of either 50 percent or 99 percent, so far, 63 percent of website visitors have voted for Swiss-Made. However the fact that there may be consumer demand for an Asian-assembled automatic watch is shown by 348 out of the 947 saying no for an answer. Before it makes a decision as to which route to follow, Goldgena will wait a few weeks to gauge consumer interest.D’Amore said he’d prefer the non-Swiss-Made route.

According to Edouard Meylan, chief executive officer of H. Moser & Cie., whose watches start at $15,000, Goldgena’s watches would most likely put pressure on entry-level brands with a price tag of 500 francs to 2,000 francs.

(Adapted from Bloomberg)

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