TAG Heuer will not be measured on whether it can chase down Rolex in the UK over the next few years, but on whether it can strategically grow sales through ever-stronger relationships with its retailer partner network. Working with partners to develop the best possible positions for its furniture, upgrading to larger shop-in-shops and ultimately to branded boutiques is a proven recipe for retailers and the watch brand to increase sales and profit says Rob Diver, managing director – Europe, for TAG Heuer, in conversation with WatchPro’s Rob Corder.
WatchPro: How do you describe the way your network of retailers can help TAG Heuer and TAG Heuer can help its retailers?
Rob Diver: We have always been very focused on working with retailers. We do not have any flagships of our own, and we will only have one in the UK, the store opening on Oxford Street, in November. Any other stores we have, we want to be in partnership with retailers. Our growth is dependent on the quality of the relationships we have with our retailers. Mr Jean Claude Biver [LVMH head of watchmaking], has repeated that time and time again.
The growth he has managed with the business over the years has been achieved because of great quality partnerships. We want that to continue.
WP: I interviewed Mr Biver at Baselworld this year, and he essentially said that he would go wherever customers go, and help them shop in whatever way they want to shop.
Rob Diver: Yes, and the retailers are going that way as well. It is not a race for who gets there first. It is about providing a great quality product at a great price that resonates with somebody. If we create those products, how we get it to them is secondary. If we have great relationships with retailers then the journey is shared.
WP: I accept the importance of the products, but how they are sold is so critical these days in terms of reaching customers online and in store and providing expert guidance in the right environment. Working with retailers to create theatre in store and online is the key.
Rob Diver: Yes, but there are two parts to that. First is the relationship with the retailer and how well they are trained, how knowledgeable. You can’t do anything without retailers knowing exactly what they are doing. We have great online training platforms for retailers. We have courses that we send people on. We send people to Switzerland on training courses, and all of that.
But then there is the other interaction about making nice exciting places where people want to shop. The days of customers going into a tired old jewellers are gone. People won’t go there. The jewellers that are smart are leading the way with great quality store fit outs, with experiences, with events. Those are the ones that are going to win. Of course you have to combine that with great activity on the web and ensuring that the whole thing matches up, but smart people survive, and we hope and acknowledge that the majority of our retailers are smart people that we want to work with.
WP: Being what I would describe as a tier one brand means you are working with tier one retailers. They are naturally going to be the smart people that work in that way.
Rob Diver: Yes, but there are also some tier twos that are challenging the tier ones because of the quality of their staff and the quality of their operations. It is always healthy to have competition. As much we have great quality partners, we want them to be kept honest; we don’t want anybody to be complacent because as soon as you become complacent it is already over.
WP: Do you see the composition of your channel changing over the coming few years?
Rob Diver: It will change. In what way, I do not have a crystal ball, but I know enough to be sure that it will change and we will have to react quickly.
WP: It is hard for any business to compete against Rolex, which has just posted staggering results in the UK, but you are broadly fighting over the same window space, the same corner positions, the same square footage and investment in stock and furniture as Rolex when it comes to retailers.
Rob Diver: I am not sure it is a battle we are going to start taking to Rolex. You have to be slightly pragmatic in this industry. Probably 75-85% of our distribution has TAG Heuer furniture in their stores, whether that be a back wall, or a big area. We have a fairly high penetration of display, which gives somebody a feeling of being in TAG Heuer.
But obviously with Rolex, you saw the size of their numbers, they are going to demand the king’s space along with Patek Philippe. But we are not trying to be Rolex and Patek, that is not us at all. Our attributes are about accessibility, value for money, youthfulness, contemporary, cool; that is us. We do not want to fight against those brands, they are away and gone.
WP: I am interested to see the positioning and presentation of brands within a city and within certain stores, and then see how they are performing. Leeds is a good example where you are in the right shops in the right location on Commercial Street where Beaverbrooks is running a monobrand store. How does that sort of presentation perform?
Rob Diver: Everywhere we invest in increased visibility it works. There is a multiple, which I am not going to share with you, but we know that if we spend X on a corner, then it gives you Y percentage growth. We do not do these things for vanity, we do them for commercial reasons. You are also in an environment and market now where the big brands want big spaces and if you do not fight your corner for space that is logical and reasonable, then we are not doing our job.
WP: I guess retailers have their own algorithms that calculate what profit will come from which brand if they give it a certain position or space.
Rob Diver: Of course, and unfortunately they do not have elastic windows or elastic stores. We have to work within constraints and we have to ensure that we nurture and nourish relationships that we have with our partners. It is not a time to be dogmatic, it is a time to be pragmatic when it comes to getting the right space.
WP: The story of the past year has been about how the devaluing of the pound has driven up sales, particularly for luxury watch shops in London that sell to tourists. Do you feel you have been well-positioned in London to take full advantage?
Rob Diver: Our business model is based on being a domestic product bought predominately by domestic consumers. We are not as relevant and reliant on tourists as many other brands. The higher the price point, the more reliant watch brands typically are on tourists. Our share of the London market and our reliance on the London market is less because we cover the whole country.
What that gives us is a smoothly growing business, rather than a business with great peaks and troughs that are typical for brands that rely on different communities coming and going.
As much as we might not get the peaks, we definitely do not get the troughs. So, if the Chinese change the rules or the Americans or Japanese stop coming, it does not make much difference to our business. That makes it a lot easier to manage from the perspective for forecasting, stock holding and everything else.
WP: How would you describe TAG Heuer’s business performance in the UK right now?
Rob Diver: Business is good, it has been good for many years now. For the last three years, as we have done our work with Mr Biver on a little bit of repositioning, exciting products and exciting new platforms.
Of the major players, we have the more entry-level price positioning, and there are always more people moving up in price to our level than there are moving up above our level. That means we are always in a good position.