LONDON — Can a slow-but-steady strategy win the digital race?
Johann Rupert certainly thinks so.
While Compagnie Financière Richemont’s chairman may not be ready to launch an e-commerce platform similar to that of rival LVMH Moët Hennessy Louis Vuitton, the wheels are now in motion to transform Cartier’s parent into a serious omnichannel player with its own e-commerce platform.
“There are so many models, portals, e-commerce sites — who knows who’s going to win?” said Rupert when asked whether Richemont’s future proposition would be similar to the 24 Sèvres web site, revealed earlier this week. “There are thousands of possibilities,” he responded.
Separately, industry sources have said Richemont has actively been hunting for “digitally savvy” people on both sides of the Atlantic as it begins putting a plan together.
In a further sign that serious digital plans are afoot, Rupert touted the nominees to the board of directors as he laid out a disappointing set of financial results for fiscal 2016-17 during a call on Friday.
The candidates are a posse of young, digitally savvy managers and tech, mathematics and engineering experts whom Rupert hopes will propel Richemont into the future in their roles as non-executive directors.
One of the young guns who’s set to join the board is Rupert’s 29-year-old son Anton. Another is the former Google and SoftBank Corp. executive Nikesh Arora. “He and Nikesh are very close friends, and they will try to translate where the world is going,” said Rupert.
High-end luxury brands, and especially jewelers, have been late adopters of online retail, due to fears about discounting and the perceived lack of exclusivity and one-to-one contact with customers.
Rupert said his eventual aim with any e-commerce project is to be top of the heap. “We’re not necessarily the first, but we intend to be the best with consumer-facing services.” He added that the online gray market was a big challenge that needed to be overcome as Richemont moves toward a more digital future.
“I suspect all the Richemont brands are available on the web, but it’s the wrong web, the gray market,” Rupert said. He added that some gray market products are so sophisticated that authentic-looking watches have counterfeit parts that only a professional watchmaker could spot.
He said a big consideration for Richemont’s future e-commerce project is safeguarding the customer. “Clients want to know that what they’re buying is an authentic product. We need to create a seamless, client-friendly environment, and they need to know they’re buying the real thing.”
In terms of an e-commerce platform for the group, he said, “Yes, we are moving in that direction and we have the visibility of where we’re going. In five to 10 years’ time we’ll have it.”
On a separate call with analysts later that day, Rupert said: “The world of online retail is moving so fast, and the client should be able to decide which [commerce channel] is most convenient for them, but I don’t want to compete against Amazon.”
Richemont has already begun dipping its toes into online retail via Yoox Net-a-porter Group, in which it has a 49 percent stake. Earlier this month, Net became the exclusive digital launch pad for the new iteration of the Cartier Panthère watch.
The Cartier deal is the latest in a recent string of exclusives that Richemont has brokered with YNAP. There are already deals in place for YNAP to sell the Richemont’s brands Piaget, Montblanc and IWC Schaffhausen.
During the call, Rupert also talked about Richemont’s landmark year of watch buybacks from third-party distributors, cost-cutting, layoffs and his efforts to reshape the company as a leaner, more efficient machine.
It was a difficult year on many counts. In 2016-17, Richemont witnessed a 45.6 percent fall in profits to 1.21 billion euros, or $1.33 billion, dented partly by a non-recurring one-off gain from the merger of Net-a-porter Group with Yoox.
Stripping out those effects, profit would have decreased 24 percent as the company chose to buy back excess watch inventories due to ongoing challenges at wholesale. Sales in the period were down 3.9 percent to 10.65 billion euros, or $11.72 billion.
Although Richemont didn’t break out fourth-quarter sales, analysts pointed out that growth slowed to 4 percent from the third quarter’s 5 percent, suggesting that recovery in the watch division remains weak.
“While we like the branded jewelry business, the watch category remains challenged in our view,” said Barclays in a report following the results.
Shares in Richemont closed down 5 percent on Friday at 81.60 Swiss francs, or $80.94.
Rupert said the company has “soberly addressed,” internal and external problems, and added that “monetary pain is being felt throughout the group as the company is being re-sized” according to the new laws of demand.
“I hate job losses, and I take full accountability for them,” said Rupert, adding that there were a total of 300 job losses at Richemont’s watch facilities in Switzerland during the year. “When you employ a colleague [at any level of the business], it’s a moral, long-term commitment, and I am distraught” at the layoffs, he said.
He said Richemont had to make some tough decisions with regard to product and inventory this year, too, and it willingly took the hit on its top and bottom lines. Sales would have fallen 2 percent had Richemont not acted aggressively to slash the amount of watches it sells to third-party distributors.
Rupert said Richemont refuses to “pump and dump,” or supply more products than the market can handle. He added that the changes the company has recently made mean the group is now a more nimble machine and better equipped to respond to levels of demand.
Over the past few years, high-end watch sales have been hit by a number of factors, including the implosion of Hong Kong as a tourist hotspot and a slowdown in Chinese consumption.
Last fall, Gary Saage, Richemont’s chief financial officer, talked about adjusting to the “new normal” in the watch business.
“Before the gifting explosion in China, we were seeing modest growth in watches. We don’t know where sales are going to be in the future, but we can no longer expect a return to growth of 20-odd percent. We’re looking at this — and all parts of the business — on an ongoing basis.”
Although Rupert declined to make any short-term projections for the business or even comment on current trading, he was upbeat about the very long-term, which he suspects will be all about more leisure time — and travel.
His theory is that the second Machine Age is dawning and that tech advances, such as artificial intelligence, robotics and manufacturing practices will change the jobs landscape considerably. Workers will have to re-train, and will also have more free time.
“What will people be doing in 15 to 20 years’ time? I suspect they’ll travel, they’ll want to visit countries, they’ll want experiences,” which makes travel retail interesting, he said.
“The Chinese are a highly, highly cultured people and they will travel increasingly. I am optimistic. Man will have more free time, and that will be spent on cultural experiences.”
As for Richemont, he has every faith that it will weather the current, and future, storms. “As long as we contain costs and do things well, we’ll continue to grow,” he said.
More From WWD: