Despite the weakening economy, luxury watch brands here are pulling out all the stops to tempt and retain customers. Luxury watch brands are flying in the face of the global downturn by splurging on plusher premises and staging fancy events to tempt and retain customers.
Patek Philippe, which expanded its boutique this year, has a private VIP room with a separate entrance linked directly to the Ion Orchard driveway. Premium watch labels, among them Audemars Piguet, also spend on exclusive events such as overseas trips to international art fair Art Basel and encounters with watchmakers in which customers learn about the intricacies of expensive timepieces.
All this, despite the fact that the luxury watch market is losing lustre in a weakening economy. Like luxury retail overall, the top-flight watch sector in Singapore has been affected by the current economic malaise.
According to a report in January by market research company Euromonitor International, economic challenges, especially China’s clampdown on extravagant corporate gift-giving, had a “drastic impact” on the luxury watch market. Retail value sales dropped by 3 per cent last year to $1.04 billion, down from $1.07 billion in 2014. Weaker consumer confidence as a result of slower GDP growth, plus a contraction in tourism arrivals and spending, also contributed to the decline, according to the report.
Luxury watch labels and retailers that The Straits Times spoke to acknowledge that the situation is challenging. Yet, most are cautiously positive that a turnaround will take place. Jeremy Lim, chief operating officer of Cortina Watch, says “luxury is always the first to be affected” when the world economy runs into headwinds: “What is important to know is that the watch industry has existed for at least 200 years. It has proven to be persistent. It has proven that it can ride through downturns.”
Lim declines to disclose sales figures but says the cost of operations has increased. “The increase in our business has not been in line with the increase in the cost of operations. Costs such as rental, renovations, staff salaries and marketing have increased, while business and sales have not increased by the same percentage points.”
However, Cortina is not allowing rising costs to hold back expansion plans. In April, it opened South-east Asia’s biggest Patek Philippe boutique in Ion Orchard (picture, top). After four months of renovation that cost about $2.5 million, the boutique is 265.48 sq m – more than four times bigger than its space of 65 sq m when it first opened in 2009.
Lim says opening such a big store is not just about selling more watches, but rather, about enhancing the buyer’s experience in an elegant space that does not look like a store. “If you’re going a buy a watch in excess of $100,000, are you going to do it over a traditional counter? Or would you want to be treated the right way, where you are comfortable and can take your time and have privacy? We believe that if we can give customers this experience, our sales will naturally go up.”
Swiss label Audemars Piguet also believes in exquisite customer experiences. The luxury brand reopened its flagship boutique at Liat Towers in April after 10 months of renovation. Francois-Henry Bennahmias, chief executive officer of Audemars Piguet, notes that the normal reaction when business is tough is for people to wait until it gets better, but he disagrees.
“It is when the going gets tough that you should invest to make a difference. When people see that you are in good shape, dynamic and alive, they want to be a part of your world as well.” Although he declines to disclose how much the brand has been investing in Singapore, he says South-east Asia is the label’s No. 3 market in the world, behind the United States and Hong Kong. “Because of that, we invest serious amounts of money. We will keep investing more to sustain the brand and make sure it stays relevant in the eye of the buyers.”
Having impressive shopfronts and decor are not the only thing that labels are doing to increase positive perceptions. Labels such as Patek Philippe, Audemars Piguet, Cartier and Montblanc also engage consumers with special events. These include exclusive VIP dinners for 20 to 30 guests, overseas trips to international art fair Art Basel and occasions where customers meet watchmakers to learn more about the technical facets of timepieces. According to Bennahmias, Audemars Piguet held 23 events in South-east Asia alone last year.
Apart from lavish makeovers and cool parties, another strategy is to expand in terms of location. Luxury watch retail group The Hour Glass ventured outside the Orchard Road stretch recently, opening a store in Parkway Parade last December and another in VivoCity in May. The VivoCity outlet carries labels such as Cartier and Panerai, which were previously available only in the Orchard Road belt.
Wong Mei Ling, managing director of The Hour Glass (Singapore), says the strategy brings the retailer closer to consumers on the city fringe. “Timepieces require servicing, so we also want to be closer to where our clients live.’’ The company has 18 outlets islandwide, including those by Watches Of Switzerland, which it bought over two years ago.
The Hour Glass also has flexible payment programmes for clients as incentives to buy, says Wong. Its interest-free payment plan allows customers to spread the payment for a watch over up to 40 months. Yet the positive effects of this strategy may not have been realised yet. The Business Times reported earlier this month that the first-quarter net profit for The Hour Glass dropped 22 per cent year on year to $8.19 million.
When asked about the seemingly dire state of the watch industry, Wong says the company has the most widespread retail footprint in Singapore and plans to keep this position for the long term. “Market cycles come and go and we believe that if our fundamentals are correct, we will be able to maintain our leadership position in Singapore.”
Retailers are also selling more affordable watches. According to Euromonitor, the highest-priced segment of luxury watches saw lacklustre sales last year and, in a bid to address this, Singapore’s largest luxury watch retailers – The Hour Glass, Cortina and Sincere – increased the number of lower-tier luxury watches in their portfolios. The average unit price of luxury timepieces declined by 2 per cent last year.
This perhaps reflects what some labels such as Montblanc, Tudor and Tag Heuer have already been doing for the past few years. These brands have been becoming more popular among watch fans for their quality timepieces that fall within a lower price range.
Julien Renard, president (Asia Pacific) of Montblanc, says the label realised there was a gap in the market three years ago. “Everyone had been increasing his prices and that left a gap in the market for watches that cost €2,000 ($3,025) to €4,000. Montblanc launched collections that targeted this price range.” He declines to disclose sales figures, but says it “has been doing very well” in Singapore.
The positive outlook is shared by other big players, with most taking the view that in the long run, brands with innovative products and a higher perceived value among customers will prevail. Gregoire Blanche, regional managing director of Cartier, says: “What is specific to jewellery or fine timepieces is that you are talking about something that is… fundamentally timeless.”
Jerome Pernici, commercial and marketing director for Patek Philippe, says although times are tough now, the private Swiss watch manufacturer – led by Thierry Stern and owned by the Stern family – will continue to invest in all areas, including events, advertising and operations. “The Stern family is thinking 20 to 30 years in advance. In the short term, it will be more difficult, but we will move forward.”
This positive outlook is supported by watch collectors. Bernard Cheong, who has invested in timepieces since 1982 and has more than 1,000 watches, says he is on a buying spree. With the retail market doing poorly, the 58-year-old says now is the time to buy. “You should always buy low and sell high.” He has spent about $200,000 on at least three watches in the past few months – from watch retailers and collectors.
Chua Wei Bin, 37, director of a healthcare company, says the weakening retail market has not discouraged him from buying luxury watches because he buys them from suppliers who import directly from Europe. “A Rolex might be selling for about $13,000 here, but I will be able to get it at $10,000.”
He has been collecting watches for about 10 years, occasionally selling older watches to finance new purchases. He recently sold two watches and owns three, including one each from Panerai, Rolex and IWC. He will likely buy a new one with his year-end bonus if he finds one with a good price. “Because I know these suppliers personally, I know the products are genuine and the prices are better.”
Adapted from The Straits Times.