SELLITA TO SUPPLY THE MARKET, DUMPED BY ETA
Going back in early 2002-2003, Swatch Group/ETA made a motion by announcing that it would be cutting its supply of movements to third-party vendors or companies that use their movements to produce their own completed watches. ETA is owned by Swatch Group whose founder was Nicolas Hayek. The company specializes in creating high-quality, mass-produced Swiss made movements which are sold to different watchmakers, both independent and major brand watch companies.
There is no denying that ETA dominates the watch industry for so many years. The decision that taken by Swatch Group to gradually reduce its sales of mechanical movement to third parties and eventually end all their deliveries resulted in watch companies to produce its own in-house movements and if they can’t or if they can’t find alternatives, they will have to stop creating watches.
Sellita, being the acting spokesperson of major watch brands organized resistance along with La Joux-Perret. That time, Sellita’s business revolved around the assembly and finishing of ETA kits, and with Swatch Group’s decision, it, therefore, threatened the company’s long-term survival. It ended up Sellita taking two actions: referred the case to COMCO and launch a program to develop its own movements.
Noting that the Swatch Group held a dominating position in this sector, COMCO ordered ETA to continue its deliveries to the third party market with 15% reduction of mechanical movements to brands using them to make their own completed watches and 30% reduction to customers who also have a movement production unit but do not make their own completed watches. The obligation of ETA to deliver to third parties runs until December 31, 2019.
Since it is clear that ETA would stop supplying movements, Sellita was formed with fiscal backing from major watch brands to produce clones of ETA’s most popular movements. There are also other companies that started to produce replacements of ETA movements. This means that many of small to mid-class watchmakers were offered good alternatives. They no longer threatened with ETA no longer supplying third party vendors.
It came to a point where supply exceeds demands, but it seems that ETA lacked customers and their existing customers are ordering 50-60% less than they were over the past years. This maybe because some third party vendors found other solutions like buying replacement movements from Sellita which can also deliver what ETA can offer or they started to create their own in-house movement or a combination of both. Because of this, ETA wants to penalize the others by charging inflated prices simply because ETA no longer has the clients they thought they would have. If this continues and they have plenty of unsold movements on-hand, ETA will probably result in a massive price hike for their completed watches and price raise for each movement or ETA will sell their excess movements to new customers and so-called microbands to avoid bankruptcy and to cover their manufacturing expenses.