[dropcap size=small]W[/dropcap]ord on the street is that several watch brands will lose their chief executives this year, the result of natural attrition but more likely due to unsatisfactory performance. So how might a chief executive who wants to stay in the job keep it?
Looking at the bosses who are widely regarded to have done well in the recent lean years is instructive. At Cartier, Cyrille Vigneron took over just a year ago, but is credited with buying back excess watch inventory – some US$300 million (S$425 million) worth, reputedly – particularly in Hong Kong and China. The move encouraged retailers to order new products, while trimming supply to the grey market.
That, combined with more affordable products like the steel Tank Americaine launched later in 2016, seemed to have helped revive Cartier’s watch business. Cartier is the biggest division of its parent company, Richemont, which also owns brands like IWC and Panerai. So, it was no surprise that the Geneva conglomerate announced improved results late last year.
Another noteworthy strategy was instituted by Francois-Henry Bennahmias when he took the top job at Audemars Piguet in 2013. Back then, the slowdown in demand for luxury watches was still a barely discernible shadow lurking around the corner, but Bennahmias nevertheless moved quickly.
He reduced retail prices on the brand’s gold and platinum watches, by almost a third in some cases, instantly making Audemars Piguet tremendously competitive against its peers. At the same time, he cut the dealer network, while channelling more affordable and lower margin steel watches to the brand’s own stores.
Despite complaints from retailers who were left with inventory of reduced value and clients who had bought watches at earlier prices, the moves put Audemars Piguet in a good position. Last year, and also the year before, it was one of the handful of luxury watchmakers to post positive growth.
“LAST YEAR, AND ALSO THE YEAR BEFORE, AUDEMARS PIGUET WAS ONE OF THE HANDFUL OF LUXURY WATCHMAKERS TO POST POSITIVE GROWTH.”
The overarching principle guiding such strategies, whether at Cartier or Audemars Piguet, is recognition of the fact that the world is oversupplied with luxury watches. There are too many in distribution channels, and too many being made. Reducing supply – cutting production, retail doors and so on – while boosting demand by investing in marketing and distribution is a healthy long-term strategy.
The watchmakers doing the necessary now will be set up to prosper long into the future, as will their chief executives.
Read more of Su Jia Xian’s incisive commentary at his website, WatchesbySJX.com.