Watchmaking and the pandemic: #Resilience


“You create a community of believers, not just buyers”

OLIVIER R. MÜLLER

Español
December 2019


“You create a community of believers, not just buyers”

In our latest report about the transformation of the watch world, we selected six major issues which are having a profound impact on the industry’s present and also on its future and discussed them with about forty stakeholders of the industry. Here is the take of Olivier R. Müller, CEO of Luxeconsult.

ENTRY-LEVEL
“The war of the connected watches has been lost”

“To put it bluntly, I would say that the war of the connected watches was lost by the Swiss watch industry five years ago. There are a few minor initiatives (in terms of volumes) which show that we could have competed, and I always like to mention Alpina and Frederique Constant. Apple dominates a market in which the object – the watch – is not the critical factor. It is the data acquired from the contented and largely captive users of the ecosystem which is making the difference. Apple and Samsung aren’t competing with watches, but with connected devices. We need to recalibrate the whole business model in terms of price positioning, margins and communication channels. Swatch is dead, let’s reinvent the new Swatch!”

POLARISATION
“A few brands create a community of believers, not only buyers”

“Why do Patek Philippe and Audemars Piguet perform so well currently with very few but very iconic watches? Because there is strong brand equity and a product which over time has become an absolute icon by not changing. I think the brand which is best in class for doing the same thing for more than 50 years is Rolex. Once you have gained a strong and positive brand awareness, you create a community of believers, not just buyers. The clients of luxury goods want to be reassured that the brand is giving them the status they want to show. Louis Vuitton and Hermès are referential for bags, so are Patek Philippe and Audemars Piguet for high-end watches.”

"Swatch is dead, let’s reinvent the new Swatch!”

DISTRIBUTION
“The best retailers will be forced to open monobrand boutiques”

“The mix of sales and communication channels depends of course on the size of the brand. If you are small, going directly to your end consumer will be the most efficient way to communicate and sell. It rewards you with higher margins, brand equity control and, last but not least, data on your clients. Multi-brand retailers are not dead, but many will disappear, and the remaining ones will have mainly to concentrate on the B brands. A few – the AAA locations
- will face the decision of operating mono-brand boutiques – mostly as joint ventures with the brand – or losing the coveted A brands. Successful brands will use a network of showrooms, mono-brand boutiques and e-commerce. The days of powerful retailers dictating the rules are gone!”

Olivier R. Müller, CEO of Luxeconsult
Olivier R. Müller, CEO of Luxeconsult

PRE-OWNED
“Preserving your brand equity in the long run”

“Let’s face the reality: the big online players were playing an easy game – and still are with some weaker brands – by moving goods, which you can also qualify as grey market. Interestingly, the first initiatives to regain control over the sales of second-hand watches came not from the big brands, but from niche players such as Greubel Forsey, F.P. Journe or MB&F who realised that controlling the CPO (certified pre-owned) preserves your brand equity in the long run. The most coherent approach was recently made by Audemars Piguet who opened up CPO boutiques, thus making sure that the watches resold have been controlled and that no counterfeits are sold. Major retailers such as Bucherer have also finally understood that, as in the car business, people won’t keep on buying new watches if they can’t resell their old ones.“

"I think the brand which is best in class for doing the same thing for more than 50 years is Rolex."

OPPORTUNITIES
“We can still develop a lot of business around the world”

“Even though there won’t be a ‘new’ China any time soon, we can still develop a lot of business around the world. Keep in mind that the Swiss watch industry controls only 2% of volumes (est. for 2019, 20 million watches on 1 billion units sold worldwide), but 53% in value, as 95% of the watches above USD 1,000 retail are Swiss made! We are too niche and we have abandoned the lower price segments. This is a major and potentially lethal mistake! We have lost more than 10 million watches since 2000 and that figure could be even worse if mechanical watches hadn’t compensated for some of the losses made by quartz watches.”

“Nurturing a whole industry doesn’t work anywhere!"

HIGH-END
“Only volumes can justify the R&D and the manufacturing capacities”

“Nurturing a whole industry doesn’t work anywhere! If you look at the car industry, even though BMW is a premium brand they keep selling at an accessible price range with the 1 and 2 series. Porsche as a luxury brand has never given up the premium level where they sell to aspirational clients… the clients of the future for the brand! You can only compete on a global basis if you make sure that you occupy all the price segments, because only volumes can justify the R&D and manufacturing capacity. A pyramid whose basement becomes thinner and thinner will collapse one day!”