rom “entry-level mechanical watches” to “entry-level watchmaking excellence”: this more or less sums up the path of Louis Erard since 2004. CEO Alain Spinedi explains the reasons for and effects of the multiple crises affecting the priced Swiss mechanical watch brands and shows us how the brand’s strategy is adapting to the new situation.
- Alain Spinedi
The strategy implemented by Alain Spinedi at Louis Erard from 2004 was was viewed at first as innovative and clever, with its clear positioning “at the entry level of the Swiss mechanical watch” range. Over the next ten years, this positioning bore fruit, with the brand selling up to 20,000 watches a year. But the strategy was gradually undermined. There were several concomitant factors for this. The first of these, according to Alain Spinedi, was the price rise imposed by ETA. To cite just one example, the price of a Valjoux movement rose rapidly from CHF 150 to CHF 300 – an increase that was not only difficult to pass on for entrylevel mechanical timepieces, but one which also gave the Swatch Group an obvious competitive advantage. At the same time, the Swiss franc was escalating, making watches more expensive by the rules of simple economics.
Added to these external elements were a number of internal errors, which Alain Spinedi willingly acknowledges. One such error was the decision to break with the initial strategy of all-mechanical watches by introducing ladies’ quartz watches, then starting to produce men’s quartz watches. The consequence was that, while they succeeded in lowering the average price, they created no additional value, nor any steep rise in volumes. In his own words, “the brand was poorer, in every sense of the word”.
Louis Erard new motto, “the entry level of watchmaking excellence”, does indeed appear to be well-received by distributors.
The weight of distribution
At the same time, distribution began to undergo what proved to be radical changes. All over the world, and for different reasons, traditional distribution disappeared. In Switzerland, for example, a market in which Louis Erard posted one-third of its turnover, the network of small-town retailers (B and C-list retail customers, as we say in the trade) unravelled as small, multibrand stores closed. Businesses that stopped trading were not bought up, others closed due to the combined competition from towns, shopping malls, the rise of e-commerce and social change. Little by little, all the small towns fell.
In Asia – Malaysia for example – successive openings of proprietary boutiques and ever more hegemonic malls reduced the brand’s presence from 13 sales outlets to just six. “Along with the whole question of stocks to cope with, which delayed the arrival of new watches on the market,” underscores Alain Spinedi.
Then along came big Apple
To top all of that, the arrival of the smartwatch, especially its hegemonic, “high-end” version, the Apple Watch, was another push in the same direction Alain Spinedi has no illusions. “For the average person, what’s better today? Isn’t it a better idea to look ‘with-it’ by wearing an Apple on your wrist rather than a mechanical watch, which, when all is said and done, is obsolete?” “There’s a profound change in consumer habits,” he goes on. “Louis Erard was founded on rational choice, price, quality, beautiful design. Customers got their money’s worth. But we no longer function on a rational level. We function emotionally, everyone’s saying it. Now, you have to weave a whole story around the product. The product itself is no longer enough. You have to insinuate yourself onto social media and tell stories there, all kinds of stories.”
A new concept
“With Manuel Emch (read “The future of creativity lies in the hands of independent structures”), we’ve adopted a more subtle approach, which seems to be working. Manuel has gone back to the grass roots of Louis Erard, first and foremost the Regulator, the brand’s distinctive timepiece. Everything below CHF 1,200 has been removed from the collections. The number of references has dropped from around 300 to 40- 50. There are no more quartz watches and only men’s watches in the collection, except for one single ladies’ watch, the most expensive in our range, priced at CHF 4,000.
“Our offering is redefining itself as the entry level to watchmaking excellence. It is aimed at A-list retail customers. To attract them, the product has to be refined, with greater emphasis on the decoration, but without going over the top. Because apart from a few specific watches, none will cost more than CHF 4,000, the average price being between CHF 1,200 and CHF 3,500. So we’re coming back with a limited collection, a deliberate niche. Beautiful, fine-quality, identifiable products, recognisable design.”
Growth is over
In his view, “The kind of growth we’ve seen in the watch industry is quite simply over. And there won’t be another China – which has calmed down radically, incidentally – any time in the near future. So you have to choose your path and stick to it. Come back to the mature markets. You have to spark desire again, and do it by means of the product. It’s the right time to start implementing our new strategy.”
Their new motto, “The entry level of watchmaking excellence”, does indeed appear to be well-received by distributors. Although Louis Erard has decided to close down certain markets, others are returning, and promising doors that were closed until now are opening up. The niche strategy (with an objective of 10,000 watches) seems to be bearing fruit.