Watch brands want more control over their destiny.
In a move that is slowly reconfiguring not only the watch industry but also retail, some of the world’s most prestigious watch companies have begun opening their own single-brand boutiques in several of the most exalted corners of the globe.
But it’s not the mere existence of the monobrand store that is transformative. It’s the rapid proliferation of these boutiques that is slowly shifting how luxe watch brands do business.
While some argue that the development has simply infused the somewhat staid watch industry with a new path to branding (and selling) glory, others argue that it will negatively impact the all-important multibrand retailers that have historically played a pivotal role in watch sales.
“The watch market is definitely changing,” said Hugues de Pins, president of Vacheron Constantin’s North America division. “The purpose of opening a boutique is to help spread brand awareness. Most of our customers want a direct relationship with the people of the brand. They want to leave the boutique with a more intellectual takeaway.”
After 257 years, Vacheron Constantin opened its first U.S. store last year, on Madison Avenue in New York, and plans to open two more in the U.S. this year.
The brand, which is also in the process of opening a boutique in Paris, is in a mini-expansion mode despite the fact that it sells most of its timepieces via multibrand retailers such as Tourneau, Wempe and Bucherer.
Vacheron isn’t the only brand expanding its retail footprint. In recent months, Hublot set up shop in New York, with IWC soon to follow, while rivals Breguet and Omega opened doors in other U.S. cities. These joined the likes of Girard-Perregaux and Blancpain, who opened stores in recent years. In Paris, Louis Vuitton and Jaeger-LeCoultre are in the process of opening new or revamped boutiques on Place Vendôme alongside recent arrival Hublot. Nearby, luxury conglomerate Compagnie Financière Richemont SA is building a luxury watch megastore in the shadow of multibrand retailers such as Dubail, Wempe and Royal Quartz.
“Multibranded stores will lose their relevance if they keep the actual business model that dates from the last century,” said Hublot chairman Jean-Claude Biver, who added that his firm, which opened a total of 12 stores in the U.S. and Europe last year, plans on matching that tally in both countries in 2012.
“We will see a certain number of multibranded stores disappearing and only those who can adapt their store, their service, their way of presenting the different brands and their offering will be able to survive,” Biver said, explaining that these retailers can change their business models by concentrating on fewer brands to which they give stronger visibility. Another strategy would be to open a monobrand store in franchise or as a 50-50 partnership for specific brands.
Tourneau chief executive officer James Seuss agreed for the most part, adding that the watch world is slowly “catching up” to the fashion industry.
Just as fashion brands like Prada and Gucci ramped up their specialty store footprints in the Nineties, watch brands are now beginning to grow in the same way.
“I think one reason is they have the money to do it now,” Seuss said, explaining that luxe watch firms are seeing success in Asia, where customers tend to shop more in single-brand boutiques, and are importing that formula to the U.S. and Europe.
In order to retain its market share, Tourneau has invested in its customer experience both online via a revamped Web site and in-store by keeping its staff updated with brand-specific knowledge.
Rolex and Patek Philippe, which will open a 13,000-square-foot boutique in Shanghai this fall, are both benefactors of Tourneau’s investment in an improved shopping experience.
The retailer has created spacious shop-in-shops or stand-alone monobrand stores for both vendors, a strategy it hopes will keep customers from shopping elsewhere. Tourneau also makes an effort to carry an array of brands that not only showcase newness but also innovation. According to Seuss, the mix of up-and-coming, smaller brands with larger, well-known ones is something today’s consumers crave
Still, even though the typical Tourneau customer is looking for that variety, Seuss is somewhat wary of the rise of the monobrand boutique.
“I can’t say we haven’t lost one single sale to a brand’s boutique. We certainly have, but it’s too early to tell,” the ceo admitted. “If every major brand opened a store across from a Tourneau store in the U.S., of course that would be a concern.”
Luckily for Tourneau, this isn’t the case. In general, larger retailers won’t be as impacted as their smaller counterparts because they have more retail space to carry a multitude of brands. Those brands include independents like Frédérique Constant, which sells its timepieces only in multibrand chains.
According to Ralph Simons, global commercial director of Frédérique Constant, his brand isn’t yet at the stage where it’s able to open its own boutique.
“The monobrand boutique is a living billboard for the brand. Maybe in two or three years we could imagine having them in the U.S.,” he said. “But now, it’s not the right way for us.”
Part of the reason, Simons explained, has to do with the fact that Frédérique Constant is a smaller, independent, family-owned operation and opening a monobrand store is an expensive endeavor.
“It’s easier to get a return on investment with retailers,” he offered. “We would have to sell a higher number of watches if we owned a boutique.”
For most small brands, competing against other labels that are backed by large, dominant parent companies such as Richemont, LVMH Moët Hennessy Louis Vuitton and Swatch Group is challenge enough.
That unequal balance of power is difficult for independents to overcome as well as for smaller multibrand stores.
“For independent retailers, which like many other professions are a disappearing breed today, change is under way. We were the bankers of the brands; now they want to be their own bankers,” said Laurent Picciotto, owner of Paris-based fine watch retailer Chronopassion, which is located on Rue Saint-Honoré.
While Chronopassion’s revenues have remained stable due to a healthy mix of larger and smaller brands, the company faces a problem of supply, at a time when capacity shortages are causing many watch firms to drip-feed their creations to the market.
“The monobrand boutiques obviously get priority in terms of delivery times, and they also absorb the bulk of exclusives and limited editions, leaving the rest of the retail network with, at best, a few crumbs or, at worst, nothing,” Picciotto said. “When two retailers meet today, it’s all they talk about. A few years ago, it used to be they compared sales. Now, all they do is wallow in mutual complaining.”
That complaining will likely only get worse. Steps from Chronopassion, the expansive, tourist-laden Place Vendôme is getting a retail facelift.
Louis Vuitton is preparing to open a jewelry and watch store at 23 Place Vendôme in June, a move it hopes will draw international tourists more used to whizzing through the historic square on tour buses.
“One of our founding principles at Vuitton is that we don’t outsource our relationship with our customer. That is the ground rule, and visibly other brands have also been inspired by this idea,” explained Hamdi Chatti, Louis Vuitton vice president for watches and jewelry.
“Whatever happens, I think there will be changes over the next few years, whether it’s direct retailing by brands, or a different kind of service offered by multibrand stores,” Chatti said. “Certainly, the retail sector is undergoing a period of great change, not only on Place Vendôme, but in Paris as a whole.”
Also in Place Vendôme, Jaeger-LeCoultre will reopen its newly renovated store this summer. Located at 7 Place Vendôme in the 17th-century Hôtel de Villemaré, the brand will be expanded from one floor to three floors. Stretching into the neighboring space at 9 Place Vendôme, the store is set to balloon to 5,400 square feet from 430 square feet.
The brand is also adding 10 to 15 stores worldwide annually and plans to have 45 units by the end of 2012, said Jaeger-LeCoultre ceo Jérôme Lambert. He identified three key drivers for the trend toward monobrand boutiques: customer expectations, shopping habits and urban growth in emerging markets.
“We are following a trend that is not limited to the watch sector,” said Lambert. “Consumers have gotten into the habit of buying in monobrand stores. People who over the past 30 years have become used to buying their sweaters at Zara, their computers at Apple and their cars at Renault or Mercedes are extending this behavior to other products.”
Lambert noted that in the world’s top five or 10 urban centers, where rents are sky-high, competition for retail space is likely to weed out the weaker players. But elsewhere, he expects multibrand retailers will be able to coexist with larger competitors, including monobrand stores.
“There is a transformation under way, and this transformation entails an evolution, but I don’t think there is a single solution,” he said. “I think it will be more a question of affinity, and this affinity derives from the capacity of retail partners to be specialized, to be selective and to take the initiative.”
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