features


Market Focus USA: No rainbows, but a glimpse of the sun

September 2012


Ever since the global recession, the United States has been, in varying degrees, written off by the watch industry. For most watch brands, China has become the biggest market and the USA has become more or less an afterthought, and not without reason.
In fact, the US has been a tough place to do business for quite some time, what with the housing market problems, stock market woes, unemployment and now the 2012 presidential election. Storm clouds have been hovering over the US market in general, and disposable income purchases (like watches) in particular, but, according to retailers and brands active in the US, the sun might finally be peeking through.

The market
Exports from Switzerland to the US continue to rise, up 18.4 per cent in 2011, according to the FH, with a value of almost two billion Swiss francs. The growth seems to be continuing, as exports grew by just over 10 per cent in May of 2012, the last month figures were available.
The US market is a huge one, and one that is largely untapped for luxury watches. Sure, fine watches sell in the bigger cities and entry level watches do well throughout the country, but there is a vast, unexploited populace that buys one or two watches over the course of their lifetimes. Reaching these people is important, and could be a windfall for many brands, but for the time being watch companies are focusing on maximizing their existing markets, leaving expansion for the future.
In the bigger cities, watches seem to be picking up at each end of the retailing continuum – entry level (up to $1,000) and high end (over $10,000) are seeing strong sales, while the mid-range has been struggling.

There are brands in the market that are doing quite well in this mid-range, however – brands like Hamilton, Baume & Mercier, Victorinox Swiss Army and others, for example. In truth, this segment of the market was vacated before the crisis, as brands sought to raise their average price points.
“Business in the USA is like an hourglass, with sales at the top end and the lower end strong, with the middle being a challenge,” says Rudy Chavez, president, Baume & Mercier NA. “The opportunity for us is here, to firmly establish Baume & Mercier as the leader in the classic $2,000 - $5,000 range. We offer a strong value proposition, beautifully designed men’s and ladies’ pieces, with an authentic watchmaking heritage. In addition, we have our connection to life’s special moments.
“It’s quite often that I meet people who have stories about their watches, as a milestone in their lives,” he continues. “This gives us a special relationship. Celebrations always happen. They survive ups and downs in economies and they are what make watches special.”

CHRONO CLASSIC by Victorinox Swiss Army
CHRONO CLASSIC
by Victorinox Swiss Army

LINEA by Baume & Mercier
LINEA by Baume & Mercier

René Stutz, President of Victorinox Swiss Army NA, confirms that the market is not doing too poorly. “The timepiece business for Victorinox Swiss Army is growing with independent fine jewellers and better regional chain jewellers in the US. The strength is in the product collections between $495 to $995 US retail and new automatic timepieces introduced the fourth quarter of 2011 are continuing to sell well this spring/summer. Retailers are cautiously optimistic about the second half of 2012, but they are resistant to build inventories for additional growth.”

Zenith president Jean-Frédéric Dufour is optimistic about the US market, despite the challenges. “The overall business in the US has remained good so far and even shows indications of growth which gave us the confirmation that it is a strong and well established market,” he says. “Thanks to that, we can consolidate this zone of the world which is of course of first importance for Zenith.
“Zenith is still building its image in this huge market and we need to continue to reinforce our presence in order to make consumers more familiar with our collections,” Dufour continues. “The US territory is an impressive market in terms of possibilities and we need to get closer and closer to the watch aficionados in every region. We are therefore monitoring our network very carefully not only in terms of quantity but also in terms of the quality of our representatives.”

Views from the brands
Almost everyone Europa Star talked to was upbeat and positive about the US market as a whole, and their business in particular. There is some caution however, as the country braces for the upcoming presidential election, pitting current president Barack Obama against Republican challenger Mitt Romney (the election takes place in November, 2012).
“Business in the US overall for retailers is steady at the higher end of the watch category,” says Larry Pettinelli, president, Patek Philippe NA. “Everybody has their eyes towards the upcoming election, and some below-average economic indicators have given retailers cause for concern. Fairly low GDP rates around the 2 per cent mark are keeping the recovery modest. Everyone seems to be in agreement that this is going to be a long, slow, but hopefully steady recovery.
“Many businesses are frustrated at their inability to plan due to the unusually slow recovery,” he adds. “However, we are confident that short of any unforeseen economic crises, the US economy will continue to grow. For our brand, we are very fortunate to be at the higher end of the retail business, which tends to be steadier. Long term, we feel very positive about our prospects. We have significant opportunities to raise brand awareness here in the US. We will focus on educating the younger clientele about the intricacies of Swiss watches, and Patek Philippe in particular, enabling them to understand the underlying value of our brand.”

Patrik Hoffmann, president, Ulysse Nardin, acknowledges that business is not easy in the US. “Our numbers are about the same as last year, but last year we had enormous growth,” he says. “We are back where we were in 2007 and 2008. It is a push, it’s not easy. I am convinced that the export numbers into the US don’t agree with the sell-out, brands are building inventory. I see it less positive than the numbers reflect. We never push in, but the big groups have to show numbers. I feel that the US is quite safe, it is doing well. If the crisis comes, out of Europe, the US will go down as well. The US on its own is in quite good shape.”

Stacie Orloff, president of Bell & Ross NA, is also a bit cautious. “Business is not fantastic, but it’s not horrible either,” she says. “It could be, and should be, better. Last year, the US came out and spent some money, then realized the economy was still bad and pulled back. There weren’t any signs – one minute we were flying high and the next we were flat. We are still really confident. We have good partners, we have a great collection.
“There is caution out there again and the brands that have a great collection, a solid marketing plan and strong partners will move again,” she adds. “We have some challenging times ahead, but we are up to it. Retailers should look for brands that will partner with you, have solid financial backing and are good people. This way, they can reduce their dependence on the big boys.”

VINTAGE Collection by Bell & Ross
VINTAGE Collection by Bell & Ross

WW1 HEURE SAUTANTE by Bell & Ross
WW1 HEURE SAUTANTE by Bell & Ross

Evan Yurman, the designer of David Yurman Timepieces, is pleased with how the timepiece business is doing in the US. ”Our women’s watch, the Classic Ladies, is really selling well, especially in steel and diamonds,” he points out. “Business is great for watches. The jewellery business this past quarter didn’t do so well, but we are doing all right, in spite of a down economy. Watches are about 8 per cent of our total business. I’d like them to be 20-30 per cent, and it could easily go up to 40 per cent.”

For Korloff Paris, it was important to have something different from other brands when they entered the US market. “We started in watches 20 years ago. We have over 50 mono-brand boutiques now, and we are in 12 independent retailers in the US,” details Christopher Meek, general manager, Americas, Korloff Paris. “We were surprised – what we heard was to expect an average of 1.2 turns in US retailers but we have had an average of 3.2 turns, which is great. We think it is because of the value for price point. To get a five time zone reversible timepiece, the Kalahari, for $3200, is pretty spectacular.”

KALAHARI by Korloff Paris
KALAHARI by Korloff Paris

Michael Goldstein, president, Perrelet NA, echoes that uniqueness in the US market is a must, especially for a small brand. “We have had good results in big cities,” he says. “In Las Vegas, for example, because of the limited editions, we are doing very well. We are selling limited edition Turbines regularly, and we have a total of over 40 doors in the US now. Because the Turbine has become an iconic design, stores want us now. It doesn’t cannibalize what they are already carrying, and many stores want to work with independent brands.”

Ernst Benz has taken uniqueness to a higher level, making it possible for customers to customize just about any timepiece in their line. “In the US market, we have been opening a number of new independent jewellers who understand who we are,” Leonid Khankin, president, Ernst Benz, says. “We can adjust any watch for any customer – if they want to change the hands, we’ll do it, for a retailer or an end consumer. We make our idea but we will adjust it to any way a customer wants it. We should do anything the customer wants. It’s possible for us to do bespoke quite easily. We are even able to put names on the dial – so customers can have their own personalized watch with their name on the dial! “What’s working for us is that our retailers understand and tell their customers about our craftsmanship and our heritage,” Khankin continues. “We are profitable for them, we are unique in the market and we offer a real margin.”

TURBINE TOXIC by Perrelet
TURBINE TOXIC by Perrelet

CHRONOSCOPE by Ernst Benz
CHRONOSCOPE by Ernst Benz

Milus USA just introduced a new limited edition Snow Star watch to commemorate Milus’s history with the military in the US. “The goal is to give the Snow Star Heritage kit the right platform,” says Doron Basha, president, Milus NA. “Business is all right, but it’s not easy – we are holding our own. This is a very targeted campaign, so I need retailers to find the committed customer.”

For Ball Watch NA’s president Jeff Hess, business is going very strongly. “Business for us is stunning,” he says. “We had our first down month in five years in March, and that was because of Basel, with us out of the office for so long. We had our best April ever. People collect our brand and we have a great price point. There are people who have five, six, seven Ball watches. I know one collector who has 35. We have people who buy one of every model we bring out.
“We are doing this big project with the Grand Central Terminal in New York City, and in September, we are doing a huge launch with BMW – Ball for BMW,” he continues. “We are only doing BMW with our top 25-30 retailers in the US. They really have to be our partners.”

BALL ENGINEER MAStER II GCT by Ball Watch
BALL ENGINEER MAStER II GCT by Ball Watch

Romain Jerome put the US market to the side over the last two years, but the brand is paying more attention now, according to Manuel Emch, president, Romain Jerome. “We are slowly building the US market,” he says. “The US economy is coming back. We’ve had some good sell-through. We have six retailers now and we are adding more. We would like to have about 10.
“The country is so big, but the market is relatively small, so word of mouth is very important,” he adds. “We don’t want to be over-distributed. We need to be very responsive and to offer great service. That’s why we work with independents, because they have to educate the end consumer. Now we are refocusing on the US. The miracle of the US market is its resilience.”
A brand new limited-edition Romain Jerome watch made out of metal from the Statue of Liberty debuted this year—a very cool idea that Emch expects to do very well in the US and all across the world.

STEAMPUNK CHRONOGRAPH by Romain Jerome
STEAMPUNK CHRONOGRAPH
by Romain Jerome

SPACE INVADERS by Romain Jerome
SPACE INVADERS
by Romain Jerome

In the US, according to Paul Ziff, president, Salvatore Ferragamo Watches, customers want luxury, but they don’t want to waste money, meaning value for money. ”Business is ok, it’s uptrending,” Ziff says. “Overall, things are moving in the right direction. For Ferragamo, we have huge name recognition and we are in a great price range, from $800 - $2000. It’s all about value. We are trying to position part of our collection towards young people, as a way of educating them about watches.”

RENAISSANCE by Salvatore Ferragamo
RENAISSANCE by Salvatore Ferragamo

1898 by Salvatore Ferragamo
1898 by Salvatore Ferragamo

A positive outlook from the retailers
Scott Bolozky is the owner of Clarkson Jewelers in St. Louis, MO, a Patek and Rolex dealer. For Bolozky, business has been good. “Watches are strong for us,” he says. “We had a bit of a slowdown in December – we had been up 15 per cent every month until then, then it went down to single digits. It has now picked up again.
“Rolexes are selling best, and Patek is doing well,” he continues. “We sell the complicated Patek pieces very well, better than the standard models. The 24 is also very good for us too. I am anticipating no slowdown.”

Russel Kaplan is the co-owner of Tapper’s, a family-owned multi-brand retailer in San Francisco, CA. “Business keeps getting a little bit better, but it hasn’t gotten to the point where I am saluting the flag, but it is better,” he says. “Omega and Glashütte Original have been selling well. Zenith has been on a very good upswing – it’s accessible and very upscale. There is really something to talk about. We like to talk about these brands. We are doing well with Ball Watch and Bremont because there is really something there.”

For relatively new brands like Bremont, the US is a challenge but also a land filled with opportunity. “The USA is very exciting for Bremont,” confirms Michael Pearson, North American Sales Manager, Bremont. “We have tripled our number of retailers and they are really starting to get it. They see the authenticity. We have opened 26 independents in North America, with the bulk in the USA. They seem to like what Nick and Giles English are doing and they see how genuine they are and the company is. They can trust us.
“It hasn’t been a particularly hard sell, as the retailers have all wanted the brand,” he continues. “What’s exciting is the cities outside NY and LA, like in Alabama or Texas, are doing very well with the brand. Bremont is hitting a niche. You have the big, big brands, but people also want to have brands that are less marketing driven, but more accessible and manufacturing driven. They don’t want the watch that is on everyone’s wrist.”

Hess is also a retailer, having two stores in Florida, one in Tampa, FL and one in St. Petersburg, FL (Old Northeast Jewelers). “As a retailer, when the downturn hit, I went into the most expensive mall in our area and opened a store, and the first year we did $1.6 million, and the next year we did $2.2 million,” he says. “We are doing very well.”

The overall outlook in the US is favourable, but there are hurdles to get over, with a struggling recovery and the pending elections. There are rays of sunshine breaking through the doom and gloom, but the situation is still a bit precarious.

The Vegas shows
The Vegas shows
June is the month for the watch and jewellery shows in Las Vegas, Nevada, US. There were two shows going on at the same time, for the second year on opposite ends of the Strip. At the Wynn Hotel were the Couture and Couture Time shows, while at the Mandalay Bay Convention Center (and hotel, as well as THE Hotel), were the JCK Shows, including Swiss Watch by JCK. Until two years ago, the shows were more or less together, with Couture at the Wynn and JCK at the Sands Exhibition Center and Swiss Watch in the Venetian. Now, however, the shows are separated by the entire length of the Las Vegas Strip, which is challenging to retailers who want to visit all the shows. This year, Couture Time had more watch brands than ever before, 66, and increasingly, brands are re-evaluating where they belong in Vegas. Some brands, like Breitling, are not in any show, content to exhibit on their own in one of the many luxury hotels in Vegas. This year’s Vegas shows opened to sizzling temperatures, going up to 100 degrees and more (40+ C), but the mood in general, despite the heat, was upbeat, with brands, retailers and distributors excited about the promise of the coming watch year.

Vegas product introductions
Vegas product introductions
There were several new products introduced at the Vegas shows. Normally, these shows are an opportunity for brands to show their Basel or SIHH product to their retailers on US soil for the first time, but every so often a new product is debuted at these shows.
This year, here are the highlights launched in Las Vegas:
To introduce its newest collection, the Revolution, David Yurman had an event at a local racetrack where retailers and journalists had the opportunity to drive Shelby Cobras. The Revolution is a new platform for Yurman, offering a tonne of interesting options for limited editions. During the show, Evan Yurman, the son of David and the designer of the watch line, showed off the new Shelby Cobra limited edition, developed in partnership with Carroll Shelby (who recently passed away – in fact, Yurman left the Couture show to attend the memorial service).
Ball Watch debuted the special Grand Central Terminal timepiece for the first time on US soil. With a strong railroad history, it makes enormous sense for Ball to partner with the Grand Central Terminal in New York City to celebrate its 100th anniversary. The limited edition watch (999 pieces) for this event is the Engineer Master II GCT, a 44mm dual time zone piece with the GCT logo on the dial and the famous Tiffany clock from inside the terminal engraved on the caseback.
And finally, Perrelet introduced the new Turbine Toxic, a decidedly darker version of their hugely successful Turbine collection. On the dial is a skull adorned with diamonds (two sizes are available – 50 mm and 41mm), subtly hidden by the openworked turbine on the dial side. Spin the turbine and see the dial, or keep it hidden. It’s your choice.

Read the other articles in our Market Focus on North America:

Distributor profile: One-on-one with Maurice Goldberger
WorldWatchWeb: The online demand for luxury watches in the United States

Source: Europa Star August - September 2012 Magazine Issue