LVMH Announces Its Departure From Baselworld – Is This The Final Nail In The Coffin?
BY HARLAN CHAPMAN-GREEN
Last week news broke out that all of the most prominent exhibitors of the Baselworld shows had decided to call it quits simultaneously. On the 14th of April Rolex, Patek Philippe, Chopard and Chanel jointly left the show. Unlike the other exhibitors, it appeared that the staff running the show behind the scenes were taken by surprise. Well, the shock should have mounted up a bit more now as LVMH’s watch brands TAG Heuer, Hublot and Zenith all announce their departure as well (Bulgari had already announced that it as a standalone brand wouldn’t be returning, even though other LVMH brands were), in favour of the new show being set up to coincide with Watches & Wonders in April next year.
Things have not been rosy behind the doors of the MCH Group, the operator of the Baselworld show. It appears to us that the handling of 2020’s show cancellation has angered a lot of businesses, to the point where they were given two offers which they didn’t like and were forced to walk away from. When it was made known that the 2020 show would have to be cancelled in accordance with laws introduced by the Swiss Federal Government, the showrunners at Baselworld offered the show’s exhibitors two options:
1. Carryover 85% of the fees for Baselworld 2020 to Baselworld 2021, with the MCH Group retaining the other 15% to cover lost costs, leaving brands out of pocket for 2020 but with reduced fees for 2021’s show
2. Receive a 30% refund from the expenses of Baselworld 2020, carryover 40% of Baselworld’s 2020 show to Baselworld 2021 with the remaining 30% kept by the MCH Group to cover lost costs
On an average day, these might sound like two perfectly normal solutions between businesses in a payment dispute. Either receive some money back or take the hit this year and get a mega discount in the next. But this didn’t sit well with the big players, who have been angered by the offer and the behaviour of the MCH Group, which has been sticking to its contractual stipulations and arguing back that it doesn’t have to pay anyone a refund at all. Now, having worked customer services in a supermarket, I know that saying you don’t actually have to refund anything and implying that you are because you’re a “kind person” rubs people up the wrong way entirely. I would be annoyed if someone came along and said that if I wanted to refund an Easter egg, let alone the costs of displaying at Baselworld.
Surprisingly, the reason the brands are leaving is more than just a reflex action to protect their balance sheets. Their main concerns are for smaller companies that use the show as a vital way to raise capital. Rolex, Patek Philippe, Chopard & Chanel are amongst the industry’s most profitable companies, with Rolex, in particular, being the least likely to be affected by the loss from 2020’s show. But smaller watch brands, and jewellery brands, that require Baselworld to get them new customers could be severely affected if they didn’t get all their money back.
Also, the proposed date of January 2021 was at the wrong time for most of the brands and indeed the sectors they operate in. With Baselworld traditionally held in March, businesses grew accustomed to a cycle of product development, marketing preparations and then eventual display. It wouldn’t surprise me if the entire industry revolved around the Baselworld date as most of the brands will exhibit there.
Despite 2019’s show being a massive loss for the MCH Group, the Group’s chairman one Dr. Ulrich Vischer claimed that they had “abundant liquidy” thanks to their state ownership. The cantons of Basel & Zürich hold 49% of the MCH Group’s equity. If that is the case, and the MCH Group does have almost unlimited access to state funds, then there is no reason why they can’t payout in my opinion. Sure, they can stick to their contracts vigorously and do everything by the book if they want to. Still, with LVMH’s departure that leaves almost no major brands in the show for 2021, they’d better get their act together before this becomes another business destroyed by its own arrogance. I can almost hear the tumbleweed approaching.