From the advent of the Apple Watch, to the slowdown in China, the luxury watch industry is being buffeted on all fronts.
But Daniel Riedo, chief executive of Jaeger-LeCoultre, believes that the company, which is now part of luxury conglomerate Richemont, can withstand the pressures on the industry, thanks to its focus on “stealth wealth” rather than bling and its emphasis on the craftsmanship of watchmaking.
Sales at Jaeger-LeCoultre have slowed, he says, from the 15-18 per cent annual expansion of the past few years to 5-6 per cent year-on-year growth at present. Nonetheless, Riedo says that the company is taking a greater share of the luxury watch market.
“Country by country it’s different. Brand by brand it’s different. So for Jaeger-LeCoultre so far, we continue to grow, even if it’s not with a double-digit growth like we had a few years before,” says the chief executive.
One region where all luxury brands are experiencing a slowdown is China. For example, Burberry, the British luxury group, said recently that sales had fallen both in mainland China and, particularly, Hong Kong.
Riedo says that although demand in mainland China is down year on year, it is stable and is showing some signs of recovery. In contrast, Hong Kong remains subdued, while Macau has been hit hard by the Chinese government’s anticorruption efforts.
But some of the downturn is being compensated for by Chinese consumers choosing to spend their money elsewhere, he says. “So, it means that the sales we are not doing in China or in Hong Kong or in Macau at the moment, we are doing them in Europe, and in Europe we have some countries that are really booming,” says Riedo. Chinese tourists are bolstering demand in France, Italy and Germany.
But, adds Riedo, the standout market is Spain, where sales are up 60 per cent year on year, driven by an influx of Chinese tourists, owing to the weakness of the euro. He says that Russia has been a challenging market because of the fall in the value of the rouble, which has forced the company to introduce price increases.
Prices rose 50 per cent in December, although Jaeger-LeCoultre has since adjusted them down again as the rouble has strengthened.
“At the same time, we have a lot of good friends of the brand who are collectors, and who are really connoisseurs of what we are doing, and those collectors or VIPs, we reach them in Switzerland, in London, in other countries,” says Riedo.
The luxury watch industry is also facing a threat from wearable technology upstarts, such as the Apple Watch. However, up until now, Jaeger-LeCoultre has not seen any impact from this emerging category.
“I think that what we offer to the customer is totally different and there is a place for everybody,” says Riedo. The company is well placed, he says, owing to its heritage and its focus on craftsmanship.
“The value you associate with that is much higher,” he adds.
He cites the example of mobile phones, which are often offered free with a service contract. “So, it means that if you don’t pay for it, you don’t wait for it, you don’t dream of it. It is consumable. It is disposable,” he says.
Consequently, Jaeger-LeCoultre has no plans to introduce a wearable device of its own. Hermes, the French luxury brand, recently teamed up with Apple to offer a Hermes-branded Apple Watch.
But according to Riedo, Jaeger-LeCoultre is not considering a similar partnership. “We have no competencies in terms of electronics so far, and that is really far from our DNA. At the same time, it is really far from the artisans and artistes,” he says.
While wearables are capturing the public’s imagination, Riedo believes other trends — and changes in consumer tastes — are playing into the company’s hands. In China, he says, tastes are moving away from the most obvious or ostentatious models to more sophisticated watches.
Among some Chinese consumers, for example, demand for the tourbillon is not growing as fast as that for models with the quantieme perpetuel (perpetual calendar), which appeal to watch connoisseurs. However, much depends on the maturity of the different Chinese luxury consumers.
“The more they [Chinese consumers] mature, the more they approach our brand and the more they understand what we are doing, what kind of products we are delivering,” says Riedo.
It is a similar picture in the US, where he believes tastes are moving away from more sporty models to more elegant items, with a higher watchmaking content. Consequently, Jaeger-LeCoultre has opened six boutiques in North America in the past 12 months, taking the total on the continent to 11.
Around the world, it has 82 boutiques, split roughly equally between those that are directly owned and those that are operated by partners. Across all the global markets, the most high-end products are “still very hot”.
Women’s watches is another strong category, with the Rendez-Vous doing particularly well. The Reverso — originally created in the 1930s with a casing that could flip to protect the watch glass on timepieces worn by polo players — celebrates its 85th anniversary next year. New pieces will be released, so capacity is currently being reduced.
To capitalise on the current trends in the market, Jaeger-LeCoultre has recently released the Geophysic, a new brand for the company, including not only new models, but also a new timekeeping movement inside.
The Geophysic is positioned between the simpler Master and the Duometre and is priced between O8,000-12,000 euros, compared with the Duometre at between 35,000-100,000 euros.
The target market for the Geophysic is the 35-45 age group — relatively young consumers for Jaeger-LeCoultre.
While Riedo is not worried about the threat from wearables, he is sufficiently alive to their implications to create a watch for the younger generation.
Indeed, one of the future challenges for luxury watch brands will be persuading younger consumers to buy their models, as opposed to timepieces that owe more to technology than the traditions of watchmaking.
According to Riedo: “In between, there is a place for something classical, but a little bit more sporty. So it’s targeting younger generations who want to have something different, high-end but not at the level they cannot afford.”
Financial Times
