How Low Can SMH Go? Say Hello to Lanco.

Visitors to the SMH booth at the Las Vegas show might have been surprised to see the familiar face of Raymond Zeitoun working the crowd, meeting with buyers, discreetly showing them a small collection of watches he kept in rolls in his briefcase.

Zeitoun, you might remember, headed up SMH U.S. for five years before returning to his base in Paris in 1994. These days, Zeitoun, who is a member of the SMH board of directors, has several portfolios, as is the SMH custom. Besides being chairman of SMHís French subsidiary, the Moroccan-born Zeitoun is responsible for SMH operations in Sweden, Spain and Brazil. Since not a lot of Swedish, Spanish or even Brazilian buyers make it to the Vegas show, one couldnít help but wonder what Raymond was up to.

You might say Zeitoun and SMH are up to a new trick. The trick is to develop a Swiss brand in what is called the "bottom range" of the global watch market. SMH estimates that 400 million watches are sold annually at a retail price of $50 or less. The major players in this high-volume, low-margin business are Timex, Japanís Big Three (Citizen and Seiko with different brands and Casio under its own name), and a horde of Hong Kong firms. The Swiss are nowhere. You can count the Swiss entries in the low end of the market on one finger of one hand: Swatch. At the bottom of the market, the less than $20 category, there are none.

Until now. Zeitoun was in Las Vegas giving mass merchandisers a sneak preview of SMHís newest brand, Lanco, a line of menís and ladies quartz analog watches retailing from $13.95 to $19.95. (Lanco is a 100-plus-year-old Swiss brand, which SMH owns, but has not used actively until now.)

How can a Swiss producer make complete watches that are cheaper than a large, multitopping pizza? By doing it the way everyone else doesóin China. Lanco watches are made by a new SMH production company, Zhuhai SMH Watchmaking Co. Ltd. in Zhuhai, just across the Chinese border from Macao. SMH owns 85% of the firm, which has a share capital of $2 million. The factory makes watches and movements, using components manufactured in Switzerland by ETA, SMHís movement subsidiary.

The watches are surprisingly good-looking for the money. Zeitoun enjoyed showing models to buyers in Las Vegas and asking them to guess the retail price. No one guessed less than $50. Some guessed much more. Thatís because the watches have stainless steel backs and are water-resistant to three atmospheres. Many watches in the 80-piece line have decorated dials and engraved bezels.

Lanco makes its worldwide debut in the United States in major mass-market stores (presumably in blister packs) in September. Next year Zeitoun will launch the brand in Latin America and the Middle East. Here, Lanco will operate independently of the SMH U.S.