hat are the solutions for retailers, after almost a full year marked by an unprecedented crisis? How can they navigate through the “perfect storm” of aggravating factors that are posing an existential threat to the vital arteries of the watch trade?
In compliance with government measures, physical stores have been closed, then allowed to reopen, them closed again, especially in the places most affected by the Covid-19 pandemic: Europe and North America. Asian visitors, the luxury travel consumers to whose presence these continents have become accustomed, have vanished.
For watch retailers, the pandemic has accelerated the major trends that were already at work before the virus: the migration towards online sales, compounded by growing competition from second-hand watches, branded boutiques and, for the most accessible segments, from smartwatches.
How can they navigate through the “perfect storm” of aggravating factors that are posing an existential threat?
The city/country effect
In almost a century of monitoring the business of watchmaking at Europa Star, we have rarely observed, in the absence of world conflicts, such a sudden deterioration in the trade. The global pandemic is also bringing an end to the golden age of globalisation that benefited luxury watchmaking from 2000 to 2015. What comes next?
Watch retail specialist Thierry Huron issues a monthly index of sell-out on the main global markets. He identifies two distinct situations: “On the one hand, countries that can rely on the strength of their domestic consumption, starting with China; and on the other, tourist hubs which are recording a fall in sales.”
In almost a century of monitoring the business of watchmaking at Europa Star, we have rarely observed, in the absence of world conflicts, such a sudden deterioration in the trade.
A similar polarisation is also taking shape within certain countries, as the expert points out: “The case of the United Kingdom is striking, with a sharp fall in watch purchases in London, while sales elsewhere in the country are growing, with strong investments by local retailers.”
Faced with the desertion of international hubs, some retailers are making drastic strategic choices. Kirchhofer, for example, a Swiss retailer highly dependent on Asian customers, is investing massively in setting up in the new Chinese tourist destination of Hainan, widely seen as a “new Hong Kong” for watch purchases.
More dependent on travel than any other category of retailer, the major companies active in duty-free watch and jewellery sales, a segment that accounts for around 6 billion francs per year according to estimates by Thierry Huron, are experiencing dramatic falls in average sales. “It is estimated that a return to the 2019 level of air traffic will not occur before 2024,” the consultant points out.
“The case of the United Kingdom is striking, with a sharp fall in watch purchases in London, while sales elsewhere in the country are growing.”
The resilience of Watches of Switzerland
As is the case among the watch brands themselves, the pandemic crisis seems to be accelerating polarisation among retailers. Among the latter, the British group Watches of Switzerland, which has launched a vast expansion in the United States, opening numerous boutiques over the past two years, has emerged among the winners, recording positive results amid the pandemic.
The group posted growth in turnover of more than 20% in the first ten weeks of its 2021 financial year (i.e. up to 4 October 2020). This performance was stronger than expected, thanks in particular to e-commerce and sales in regional outlets.
- A pop-up store from Jacob & Co. in the VIP Room at Watches of Switzerland’s Wynn Las Vegas store
“All of our stores closed in both the UK and the US in the middle of March through to the end of May, but we took a number of proactive steps in the circumstances of the lockdown, which are bearing fruit,” says Brian Duffy, CEO of The Watches of Switzerland Group, which controls Watches of Switzerland, Goldsmiths, Mappin & Webb and Mayors.
These measures included increased spending on online capability, and bringing more brands into the fold (Panerai, Jaeger-LeCoultre, Vacheron Constantin); engaging in close coordination with them for the launch of new products; updating their systems to support appointment options for clients through online sites and also directly with stores; the use of Zoom and new CRM tools to interact remotely with customers; and maintaining all levels of project investment and marketing support, as well as employment, salaries and training. “We believe that during the current year we will have gained market share, and will be in a strong position to push momentum in the year ahead,” adds Brian Duffy.
- Brian Duffy, The Watches of Switzerland Group (UK & USA)
“We believe that during the current year we will have gained market share.”
This optimistic statement contrasts with the dominant mood in the context of the pandemic, but it comes as no surprise to Thierry Huron, given the maturity of the United Kingdom in terms of online sales: “In this country, e-commerce already represents 28% of total retail sales since the beginning of the year. That is even more than in China, where the figure stands at 24%.”
Countries that were early adopters of e-commerce are more resilient to the effects of the pandemic – and this resilience extends to their national watch retailers.
- Breitling Premier B01 Chronograph 42 Watches of Switzerland Limited Edition
Christmas miracle or Christmas disaster?
Nevertheless, physical boutiques still account for the vast majority of sales as far as watch retailers are concerned. And the real “crash test” is on the horizon: Christmas. Will the year end see an upsurge in sales, or the confirmation of a lasting decline? “Everyone is looking forward to Christmas with the hope of a winter miracle,” states Thierry Huron.
“That’s why we haven’t yet seen any major store closures or bankruptcies, even in the markets most affected by the pandemic such as the United States. Many retailers have tightened their belts but will not be able to afford a full year of decline.”
Anticipating this issue, some governments have taken preventative lockdown measures, in the hope that stores will be able to reopen during the Christmas holiday period. A worrisome countdown has started for many retailers who oppose these measures, which they deem too harsh.
A worrisome countdown has started for many retailers.
Second-hand watches enter the equation
The resilience of online sales, coupled with the rarity of certain blue chip timepieces with an interminable waiting list, has given a boost to a particular segment of watch sales: secondhand. Watches of Switzerland, for instance, as part of its expansion strategy, recently acquired Analog Shift, an American platform specialising in vintage watches, founded in 2012.
The leading watch retailer in the Middle East, Ahmed Seddiqi & Sons, has formed an alliance with another platform specialising in secondhand watches: WatchBox. This partnership, initiated in November 2019, was seen as a sign of the rapprochement between establishment players (the Emirati company celebrates its 70th anniversary this year) and second-hand newcomers like WatchBox. Richemont’s buyout of Watchfinder treads a similar path.
Ahmed Seddiqi & Sons embarked upon this strategic partnership to satisfy the expectations of their local clientele. The reputation and resilience of the Middle Eastern retailer lies first and foremost in its proximity to local customers, a fact to which many other big names in independent watch retail can attest.
“Our business thrives on maintaining our longstanding relationships with clients and partner brands,” says Mohammed Abdulmagied Seddiqi, Chief Commercial Officer of Seddiqi Holding. “During lockdown, our retail outlets were closed due to heavy mall restrictions. This curbed operations and prevented us from being able to interact with them one on one. But the pandemic has encouraged us to be more agile and adapt to rapidly changing external factors.”
- Mohammed Abdulmagied Seddiqi, Seddiqi Holding (United Arab Emirates)
“As international clients were unable to visit due to travel restrictions, we focused a lot more on our local clientele.”
For Ahmed Seddiqi & Sons, one of the first responses to the pandemic was to set up not an e-commerce platform, but a luxury home delivery service curated especially for regular and VIP clients. “This service allowed us to deliver watches to consumers, bearing in mind all the health and safety regulations. As international clients were unable to visit due to travel restrictions, we focused a lot more on our local clientele. Even during lockdown, we observed a spike in demand from our clients who were keen to get their hands on new releases from brands.”
- The Rolex boutique operated by Ahmed Seddiqi & Sons in the Dubai Mall
Mohammed Abdulmagied Seddiqi adds: “We live in a region where consumers are constantly on the lookout for the newest and latest in the luxury industry. They are curious, knowledgeable, aware of the current trends and all that brands have to offer. We foresee this continuing to be the case into 2021 and it is up to us as a retailer to continue to adapt and cater to the different needs in the market, including working alongside brands to create limited edition timepieces.”
Catering to a vibrant local horological scene, Luis Peyrelongue, one of Mexico’s leading watch retailers, found himself in a similar situation: “Fortunately, our sales were much better than we anticipated,“he says.”We stayed connected to our clients by WhatsApp, social media, Zoom and phone, and we implemented home delivery. We sent them special attentions, gifts and fun digital activities. I think 2021 is going to be a continuation of this new normal.”
- Luis Peyrelongue, owner of Peyrelongue Chronos (Mexico)
“I think 2021 is going to be a continuation of this new normal.”
The lockdown and absence of foreign tourists has also impacted the Milan-based Italian retailer Pisa Orologeria, which is celebrating its 80th anniversary in 2020. “Luckily we were able to defend ourselves well, as we have done our best to keep the atmosphere as peaceful as possible. This certainly facilitated the return of customers, for the most part Italians, given the impossibility of leisure travel from abroad,” says Chiara Pisa.
Representing the third generation of the family company, she insists on expressing her “most heartfelt thanks” to the local customers who helped to keep her company afloat in a country that has been hit hard by the pandemic.
- Pisa Orologeria in Milan
“It has been really emotional, because despite the lack of foreign visitors, finding our compatriots once again at our counters took me back to the old days, when Italians represented the liveliness of Via Montenapoleone, and when sales lasted hours, spent discussing the value of time,” says the general manager.
Pisa Orologeria also took advantage of the lockdown to implement two new projects. First, “Pisa Circle” is a step towards the digital world in the form of a virtual shop window showing all the watches, jewellery and accessories available in the boutique at the time of consultation. This additional tool can lead to communication with an expert, but no e-commerce, explains Chiara Pisa: “We still firmly believe that the human touch always wins over the digital interface.”
- Chiara Pisa, Pisa Orologeria (Italy)
“This period took me back to the old days, when Italians represented the liveliness of Via Montenapoleone.”
And second, the “Timeless” project is a step towards vintage or second-hand watches, the other major trend of the year in the face of the crisis. This service gives customers the opportunity to trade in a timepiece, if purchased no earlier than 2010, and provided it’s complete with box and guarantee. “The proceeds can be used by the customers to renew their collection by acquiring a new watch or piece of jewellery from our store.”
Hopes for the summer
Spain is another southern European country heavily affected by the coronavirus. “The state of alert in our country came with a lockdown that meant that our four stores were closed for approximately three months,” explains Pablo Fuster, head of Relojeria Alemana on the island of Mallorca, which depends mainly on tourism from northern Europe. “It was a difficult time because all our employees were out of work and we had to reorganise all of our fixed costs.”
However, the recovery was not as difficult as the retailer feared: “Once we were able to open again, we expected a worse situation than what actually happened. The re-activation of tourism helped us, and our local and foreign clients were willing to buy again.” In order to attract local and European customers, Relojeria Alemana has put in place the full range of tools available: online sales, free deliveries, virtual tours, WhatsApp conferences, etc.
- Relojeria Alemana in Mallorca (Spain)
Even more than at Christmas, the Spanish retailer is expecting a real rebound in the summer of 2021: “We have high expectations for next season, especially if there are no mobility restrictions. Most of our clients are looking forward to coming back to Mallorca, and are in the mood to enjoy our island, our services and our products. If governments allow everyone to travel, next summer will be a great one for the company.”
From retailers to media and vice versa
Further north in Amsterdam, Alon Ben Joseph is an e-commerce veteran: the entrepreneur at the head of Ace Jewelers set up an online shop in 2007. The lockdown gave him the idea of launching virtual interview sessions as an alternative to physical encounters: live sessions for everyone to watch, with industry celebrities ranging from Giles English, founder of Bremont, to the CEO of Zenith Julien Tornare or Anish Bhatt of WatchAnish.
- A Nomos Club Campus model in collaboration with Dutch retailer Ace Jewelers
“It has been the most volatile year in our corporate history. What we miss the most is organising events for our customers and visiting fairs ourselves,” says Alon Ben Joseph. “Instead, we came up with a new marketing tool through a series of interviews where viewers can interact live with our guests.” This initiative, like the many Instagram Live events organised by brands, bloggers, media, retailers, collectors or e-commerce sites, reveals an acceleration of the fusion under way between sales and media content.
- Alon Ben Joseph, owner of Ace Jewelers (The Netherlands)
“It has been the most volatile year in our corporate history.”
On the one hand, media such as Hodinkee or Fratello have become official retailers for certain brands; and on the other, many retailers and e-commerce sites are leaning ever more heavily on media production – sites such as WatchBox, which has set up a broadcasting studio. The idea behind the initiative is to build and maintain loyalty among a community of customers.
Leaning on jewellery
For some other retailers, jewellery is becoming increasingly important. In the midst of the crisis, Swiss family company Gübelin, founded in 1854, which sells watches from renowned partners as well as its own jewellery, has introduced several new jewellery R&D projects. A specialist in gemstones, Gübelin was the first Swiss jewellery house to launch an e-shop in 2017, followed by a home delivery service.
“Due to the pandemic, boutiques had to close and many events were cancelled, but it is important to be innovative through challenging times,” explains its president Raphael Gübelin, who represents the sixth generation of the family company. “With the Gübelin Gem Lab we are pioneering in gemmology, and Provenance Proof promotes greater transparency in the gemstone industry.”
- The Gemstone Rating system by Gübelin
In September, the Gübelin Gem Lab announced that it would partner with Swiss research centre CSEM to advance gemstone analysis with the power of artificial intelligence. Then, in November, the company presented the Gübelin Gemstone Rating, a service aimed at helping end consumers find their way around coloured gemstones.
- Raphael Gübelin, President of Gübelin (Switzerland)
“Ultimately, the whole industry will benefit from the current innovations.”
“The more consumers know about gemstones, the more they appreciate, buy and invest,” states Raphael Gübelin. “Compared to diamonds, coloured gemstones are more complex, and we offer orientation, comparability and more transparent information to end consumers and professionals. Our system makes it easy to filter out the desired gemstones, even more importantly as they cannot physically be seen and touched. This gives more confidence when it comes to buying. Ultimately, the whole industry will benefit from this service.” Gübelin also plans to set up an online course on gemstones through its own Academy.
The temptation of an in-house brand
Operating in a more accessible segment, Parisian retailer Chez Maman primarily targets a clientele of trendy young urbanites. For the past 15 years, it has offered a number of neovintage, unconventional and special design brands and timepieces. Its marketing manager Violette Milteau notes that because of the lockdown, “some long-time customers have even rediscovered us, staying in one place more than before.”
- Violette Milteau, marketing manager, Chez Maman (France)
“Despite the pandemic, we have decided to launch our own new watch collection.”
The retailer has been very active on social networks, via its e-commerce arm, and has set up free delivery in France, and by bike courier in the capital since March.
Despite the pandemic, Chez Maman has also decided to launch its own new watch collection. “This period has strengthened our desire to stand out from the crowd and to offer a range of models that can only be found here,” points out Violette Milteau. Just as others have become “media retailers”, the temptation of becoming a “watchmaker retailer” is high, and the merging of different activities is more frequent in the digital age. The next objective for the company is to develop its own Chez Maman Timepieces brand internationally.
- The new collection of Chez Maman timepieces
The vibrant world of micro-brands
The niche brand segment is shared by Tankred Tescher, a German watch retailer specialising in so-called “micro-brands”. His Chronofactum boutique only operates online or by individual appointment, and presents a selection of brands that are little known to the general public. This segment has actually embraced digital sales much faster than mainstream horology and is therefore less sensitive to the closing of physical stores.
This vibrant facet of the watch world is also one that has seen countless new projects appear on online crowdfunding platforms such as Kickstarter. “Some say that online business is the nail in the coffin for stationary trade. In some cases there is some truth to it. But online trade is also the most important sales channel for an entire business segment, that of microbrands,” stresses Tankred Tescher.
- Tankred Tescher, owner of Chronofactum (Germany)
“Some say that online business is the nail in the coffin for stationary trade. But it is also the most important sales channel for an entire business segment, that of microbrands.”
This new wave of smaller horological projects first gained momentum in North America. Chronofactum, founded at the end of 2018, focuses on representing European watch manufacturers in the segment.
For Tankred Tescher, there is no doubt that he belongs to a “new generation of online watch stores: personal, approachable, visually appealing, clearly arranged and with lots of background information about the brands and the world of micro watches.” It’s a generation for which the top end of the range cannot exceed 1,500 to 4,000 euros, and which largely escapes the realm of Swiss made. This world is more volatile, but also more reactive to economic variations...
“We are a start-up helping other small businesses,” says the entrepreneur. “With the lockdown, the decision was made to bring the more online- oriented lifestyle segment forward immediately, in order to keep the business running. Brands had to be researched and contacted, conditions negotiated and the entire website reprogrammed. In the end, it proved to be the best decision to survive the crisis.”
Everything here and now
In a world laid low by the coronavirus, the solutions seem to be as diverse as the profiles of watch retailers. “But behind the retail trade, it is the vitality of the brands themselves that is at stake,” underscores Thierry Huron. “Retailers reflect the brands they represent. And what we see is a stagnation or even a decline of many brands, as well as a growing polarisation with those who are doing better.”
One thing is clear: the pandemic has accentuated the phenomenon of customers wanting “everything, right away, at home”.
One thing is clear: the pandemic has accentuated the phenomenon of customers wanting “everything, right away, at home”. The habits developed during lockdown are probably here to stay. The adaptation to these new expectations is one of the biggest challenges for an industry that likes to take its time.