The Holy Trinity? Three of the Most Important Men in the Swiss Watch IndustryBy Wei Koh
This story identifies three of the most important men in the Swiss watch industry, individuals that are most integral to the Swiss watchmaking industry and discusses the reason for their success, but also outlines the greatest challenges they face. This is an ongoing series in Revolution and in the next chapter we will discuss Raynald Aeschlimann, Richard Mille and François-Henry Bennahmias.
*All information provided by Vontobel Luxury Groups Shop based on FY2017 information.
*Watch sales share refers to the percentage of business coming from watch categories.
Thierry Stern, President Patek Philippe
Despite helming the single most worshipped, revered and sought-after high watchmaking brand, a maison that has reached near mythological level and is capable of reducing even the most jaded of watch collectors to tears of joy with the allocation of a Nautilus Perpetual Calendar reference 5740, Thierry Stern is an affable, warm and genuinely understated man. However, the full measure of his vision for Patek Philippe, including the shift in the brand’s positioning to encompass a larger segment of sportier watches — everything from the now famous Calatrava Pilot Travel Time watches, Aquanaut Travel Time, Nautilus chronograph, World Time chronograph and even the vintage-styled luminous hand reference 5320 inspired by the water resistant perpetual calendar reference 1591 dating back to the ’40s — has been a huge hit in terms of connecting with a new generation of watch consumers.
Thierry Stern, Patek Philippe
• Change (2017, compared with 2016): +4%
• Watch sales share: 100%
• Worldwide market share: 3.6%
Stern’s only problem is there are simply not enough of his timepieces relative to the massive global avarice for them. And if you want to know why in particular this is the toughest time to try to buy in a sports or complicated Patek Philippe, there is a one-word answer for this: China.
At some point, Harvard Business school needs to teach a course on how Patek Philippe became the most successful high watchmaking brand in China. To be fair, you would argue that from 1941 coinciding with the launch of the 1518 and 1526, Patek Philippe has been the single most significant and coveted watchmaking brand on the planet. The maison has been first and best in the vast majority of instances, from the first perpetual calendar chronograph made in series to innumerable horological achievements, including the first use of silicon in a traditional watch movement. And while Philippe Stern is one of the greatest watchmaking heroes of the 20th century — establishing Patek Philippe’s museum, the creation of the brand’s integrated manufacture at Plan-les-Ouates, the Caliber 89 and so much more — Patek Philippe was slightly late to entering the mainland Chinese market.
Prior to Patek Philippe, other brands had built huge followings and commercial successes in mainland China via Hong Kong. For many of them their Kowloon boutiques — where the mainland Chinese would come to take advantage of the no sales tax status — were the single best performing commercial real estate in terms of revenue per square foot on the planet. But everything changed when the Stern family came to China and set up all of two points of sales in the entire country. The maisons they built were like nothing anyone had ever seen before. Set in the most stunning historic villas such as the former home of the British Consul in Shanghai, these edifices were shrines to high watchmaking, incorporating vast service centers, a display of historic pieces, hand craft and high complications, communicating Patek’s status as the most coveted maison on Earth.
Everything around these two villas and the related communications strategy transmitted the message that Patek is the most revered and authentic Swiss high watchmaking brand that has ever been and that the maison’s primary interest was not to sell watches, but to educate the watch buying public, give them access to the brand’s history and support the watches that they had already purchased in terms of service.
This came at the perfect time when tastes were shifting in China. Says Daniel Sum of the Shanghai Watch Gang: “We acknowledge that our parents’ generation bought probably the greatest amount of watches that are in existence in the last 20 years. But we also now know that in most cases they bought the wrong watches.” The new generation of China’s elite were turning away from brands and watches that had been made specifically for that market and toward timepieces that were considered the most desirable on a global level. As Michael Tay explains, this very important “global alignment of taste” meant that traveling mainland Chinese wanted to be recognized as paragons of taste rather than be ridiculed for their horological naiveté. And they soon realized the quickest way to demonstrate one’s connoisseurship is to have the most respected watch in the world, a Patek Philippe on the wrist.
A decade later, it explains the now insane secondary prices being paid for watches such as the steel 5711 which changes hands at a 300 percent markup. This would explain why the most consistent performers on the auctions seen are Nautliuses and how the 3700/1A went from a $20,000 to a $100,000 watch in two years. Simultaneously, Thierry Stern has been extremely successful at bringing a new sporty dimension to Patek Philippe and it is specifically this segment that has enabled him to strike a huge chord with an all-new generation of consumers. Patek Philippe is now a brand for all lifestyles. Everyone from rappers to hedge funders to the most august conservative professionals and hard core watch connoisseurs. That is something remarkable.
What is Stern’s biggest challenge? To overcome the fact that Patek Philippe’s watches are now one of the most actively traded asset classes in the world. Why? I’ll put it to you this way. In the 1960s in the United States a certificate of deposit for between one to five years at the bank would yield you three to five percent interest. In the ’80s, in the middle of an economic crisis, this percentage tripled, but today, if you put your money in the bank you get less than one percent return. This has emboldened a new generation of wealth to invest in all manner of appreciable assets from vintage Porsches, to rare monopole Burgundy to watches. And with the high premiums related to secondary pricing of most sports model Patek Philippes and high complications, the trading frenzy continues to mount. Patek Philippe has always been cautious about who it allocates its most desired models to. Now, with the secondary market actively identifying ways to hype the value of certain models, such as Tiffany double signature Patek Philippes, you have what is becoming a dangerous game of consciously inflating values. For my friend and watch collector Gabriel Benador’s perspective on the Tiffany Stamped Pateks, please read his interview here.
Jean-Frédéric Dufour, CEO Rolex
Many of us first met Jean-Frédéric Dufour following his tenure at Chopard, when he was tasked by Jean-Claude Biver to turn around Zenith watches. And many people forget what a massive and seemingly insurmountable challenge he had to face. This was following a period where LVMH Group had decided to push Zenith back into the spotlight as a brand rather than a movement manufacturer. And the man tasked to do this was a colorful character from the champagne industry named Thierry Nataf. Nataf’s initial collection of Open Heart watches were brilliant, featuring dials that revealed to the world the fast-beating 5Hz oscillator of the El Primero in a form of technical branding. But from there things quickly went sideways, culminating in a launch featuring Nataf being brought in from Dubai’s desert on a bed carried by bare-chested male porters, where they launched a non-functional watch named the Zero G. Simultaneously the designs of Zenith had become increasingly outré and with Nataf’s departure, it was Dufour’s task to turn things around.
Jean-Frédéric Dufour, Rolex
• Change (2017, compared with 2016): +6%
• Watch sales share: 100%
• Worldwide market share: 14.1%
This he did very ably by reconnecting Zenith with its past and its technical values. Many people also forget that it was Dufour who correctly predicted the return to a new classic age after the hyperbolic bluster of the millennium’s first decade.
Appointed to Rolex, a career move that had him essentially assuming the mantle of the single most important man in the watch industry, Dufour made the transition with class, adopting the correct self-effacing but steadfast character required of a Rolex CEO in the post Patrick Heiniger era. There are some who’ve complained to me of how Dufour was once easily reachable by phone or email but no longer so. But my response is, “What do you expect? He is the CEO of Rolex, the single most powerful entity in watchmaking. Did you expect him to still meet you for a chai latte if you want to have a whinge about Zenith?” In my encounters with him in his capacity as the head of the mighty green giant, I’ve never found Dufour to be anything but classy. It’s additionally important that you have a man heading Rolex who is from the same generation as the current Rolex customer. This generation alignment is important in general across the watch industry because previous to this, you essentially had a bunch of old white dudes who thought they knew what consumers in their 20s to 50s wanted.
But like Stern, Dufour has one problem: It’s become a challenge to access Rolex’s most popular models at retail. It’s a bigger issue for Rolex than Patek Philippe, as the scale of Rolex’s business is much larger. It was recently fed back to me that there have been some eyebrows raised at Rolex’s headquarters that I don’t wear any of the more recent Rolex models. Well, to be honest I love them. They are some of the best damn watches and greatest Rolexes that have ever been made! Hell, I’d love to wear the ceramic bezel Daytona, a root beer GMT Master II or the white gold, blue-dialed model or the steel Pepsi edition. Not to mention the Rainbow Daytona and a huge host of Rolex’s other watches.
The problem is I can’t get them without either calling in a big favor or paying a massive premium to acquire one. And that is a frustrating situation which eventually has me giving up, buying something else, or even acquiring a less obvious older Rolex. And why is that? Why is it that walking into a Rolex boutique and asking for a steel Pepsi on the jubilee bracelet feels like trying to scavenge food from a depleted supermarket five years into the zombie apocalypse? It’s that same five letter word: C-H-I-N-A.
I find it amusing that there are still some people scratching their heads and wondering why Rolex sports models of any kind are unavailable at any authorized dealer or boutique. I’ve heard theories that because of the relaxation of work dress codes men are eschewing the traditional dress watch for sports models. And there is some credence to that. However, the two biggest factors that you cannot find any sport or steel Rolex anywhere is that — as Mike Tay explains, for the first time we’ve had a total global alignment in watch tastes.
People want the same things across the world and most importantly in China. For many years other brands had optimized their first-mover advantage in China. But today the Chinese are fully aware that Rolex is unilaterally and universally considered to be the king of sports watches. Does this mean that they will shift away from Omega? Not necessarily. On a global level, Omega is considered a highly desirable and relevant brand, thanks to the work of its amazing CEO Raynald Aeschlimann. But the Chinese will also want Rolexes. And unlike in America, you don’t have to convince any Chinese consumer to own more than one watch. It’s practically a part of our DNA.
The second reason, as expressed by Tay, is that since 2011 coinciding with Gian Riccardo Marini and through to Jean-Frédéric Dufour’s reign, beginning in 2014 at the helm of the most iconic brand in watch history, Rolex has absolutely been on fire from a product and marketing perspective. It has been making some of the best watches in the history of the brand. The ceramic bezel Daytona 16500 LN with a subtle tip of the hat to the 6263 Big Red, the steel Pepsi GMT-Master II, the Root Beer and the Rainbow Daytona are some of the most desirable luxury products (transcending the watch category) on the planet.
Rolex has also been extraordinary in the way it has sublimated multiple generations, reconnecting in a huge way with a younger market (which was not necessarily the case 15 years ago). It’s reached across a multitude of demographics with everyone from horolophiles like Ben Clymer to celebrities like Mark Wahlberg, Ellen DeGeneres and Adam Levine — who wore a Rainbow Daytona, a pink Stratocaster and little else at the Superbowl Half-Time Show this year.
But at the same time, success has been a double-edged sword for Rolex, with many customers becoming frustrated by the endless wait lists and constant “out of stock” replies from boutique staff. This is exacerbated by the fact that pretty much any model you want is available on the secondary market on platforms like the Richemont-owned Watchfinder at a hefty premium. Collectively, this could create a perceived arrogance related to the attitudes of staff as well as watch owners, the implication being you need to be wealthy enough to pay the premium to own such a watch. The balance between desire and frustration is the issue that Dufour needs to solve.
Jérôme Lambert, CEO Richemont Group
Jérôme Lambert is a both a man I admire immensely and someone who, at several moments in my life, seemed determined to kill me. I don’t mean that euphemistically. I mean physically kill by simply driving me to the brink of exhaustive annihilation. And for those of you reading this who work directly under him? Respect, my sisters and brothers. Respect.
Want an example? I once flew 40 hours from Singapore to Buenos Aires for a Jaeger-LeCoultre watch launch. Arrived at the airport and was brought straight to a polo match. Then had a presentation of the new watches. Went back to the hotel, checked in. Came downstairs for the welcome cocktail. Had dinner, then was invited to a salsa lesson. The next morning I was told to rise at five a.m. to be downstairs by six a.m. Took a bus to a private airport. Got onto a plane for Ushuaia, the southernmost region in Argentina. Got off the flight and was brought on a boat for a ride during lunch. Got off the boat and went for a nature hike. After the hike, I was transported to a cocktail with a second presentation of the new watches. Had dinner. Went back to the airport and got on the plane for Buenos Aires.
At three a.m. Isabelle Gervais, the head of communications for Jaeger-LeCoultre, tapped me on the shoulder and said: “Jérôme is ready for you to interview him.”
Jérôme Lambert, Richemont Group
• Change (2017, compared with 2016): +5%
• Watch sales share: 41%
• Worldwide market share: 13.5%
We spoke for two hours, and as the plane touched down at five a.m. he looked at me and said, “Wei, shall we go for a run?” So, I went running with Jérôme Lambert, who runs really, really fast. It took all my remaining energy to not throw up midway or simply start weeping as I neared cardiovascular failure. Came back to the hotel exhausted with just enough time to shower, check out, have breakfast and get back onto another 40-hour flight, where I collapsed in catatonic exhaustion from my 48 hours with the man who is the CEO of the Richemont Group, so overwhelmed was I by his seemingly endless source of energy.
My point is that with Lambert at the helm of Richemont, you can only expect his foot to be firmly planted on the gas pedal with the idea of creating greater distance between the group and its competition. He is like Sugar Ray Leonard in his prime. Brilliant and relentless and will swarm you with such a dazzling combination of combustive shots before you see them coming.
And where does Richemont Group have first-mover advantage? In luxury e-commerce with their €2.1 billion revenue, YOOX Net-a-Porter juggernaut which accounted for a considerable amount of the group’s growth in FY2017. Never one to be satisfied with mere organic growth, the group is poised to post exponential growth through its joint venture with Alibaba group signed last October.
While luxury groups like to paint a picture of global success, what they don’t tell you is that the biggest luxury consumer engine in the world is China and China alone, taking into account all the watches purchased by traveling Chinese along with those purchased back home. These account for the vast majority of purchases worldwide. Add to this Alibaba’s stellar record with E-Commerce, posting sales of one billion dollars in under 90 seconds of its last Single’s Day, which ended with a record of $30.8 billion. The sky is the limit for Lambert and Richemont. Richemont under Lambert is also the very first luxury group to take a dominant position in pre-owned luxury watches with its purchase of Watchfinder.
Interestingly, this gives the group immediate access to watches from Rolex, Patek Philippe, Audemars Piguet, Richard Mille and Omega, which Watchfinder acquires through pre-owned channels. And though these are sold at premium, it also means they are able to offer consumers the very same hotly contested models such as the Rolex Daytona, Patek Nautilus 5711, Audemars Piguet Royal Oak Ultra Thin or Richard Mille RM 011 that are almost constantly out of stock at authorized dealers or the brands’ own boutiques. Integrating these models with the new offerings from the group’s brands would create the world’s most comprehensive array of luxury watches in existence.
One of Lambert’s challenges is that aside from Cartier and Van Cleef & Arpels, which can be considered jewelry brands more than watch brands, he must improve results across the board with his fine watchmaking brands. He’s already taken great steps by appointing intelligent and dynamic CEOs such as Chabi Nouri and the brilliant Catherine Renier. He describes Jaeger-LeCoultre as having been lost a bit in a maze: “With Catherine, she’s found the line to lead the brand back into the light.” Looking at the stunning array of modern classic timepieces on display at Jaeger-LeCoultre’s booth at the 2019 SIHH, I can only agree.
Other brands that impressed me big time at SIHH were A. Lange & Söhne, IWC and Vacheron Constantin; hats off to their CEOs Wilhelm Schmid, Christoph Grainger-Herr and Louis Ferla. Panerai is reuniting with its own military heritage with the Marina Militare, while Roger Dubuis seems to have found its perfect audience in its tie-up with Lamborghini. Indeed the strong collective showing demonstrate that Lambert has managed to overcome challenges both within and outside of the Richemont group. One brand that still requires remedy is Baume & Mercier, which is a shame because the “value” category of Swiss watches represented by Longines, Hamilton, Oris and Tudor is one of the most exciting today. But knowing Lambert, expect everything within the group to fall into alignment quickly as he moves to stage even more impressive innovations in the year ahead.