Aurum Holdings’ private equity owners pressed pause on the sale of the business at the end of last year and gave the group’s chief executive Brian Duffy the green light to run the business for for revenue growth and profit. Any future owner will acquire a company with over $1 billion turnover and more Rolex agencies in the United States and Britain than any other rival. With a roller-coaster 2017 behind him, WatchPro editor Rob Corder sat down with Mr Duffy to find out whether 2018 will match last year’s white knuckle ride.
Aurum Holdings expects to be a billion dollar business in the coming 12 months, according to the group’s CEO Brian Duffy. “If you take last year’s turnover of £565 million, convert that to dollars makes $735 million. Add $170 million from Mayors; add on this year’s growth and the new opening in New York, we expect to get to $1 billion this year. That level puts you in a different league,” he calculates.
It is notable how the company has already shifted into measuring its success in dollars rather than pounds. The UK will contribute three-quarters of the forecast $1 billion in sales, but the greatest opportunities for growth are on the other side of the Atlantic.
The forecast may already be a little out of date. WatchPro met with Mr Duffy in September last year, and again in December, to discuss the group’s US expansion. At our first meeting, the acquisition of Mayors had been announced along with the opening of the first American Watches of Switzerland in New York’s Hudson Yards.
By the time we reconvened in December, a plan to open a second Watches of Switzerland in the Soho district of Manhattan was confirmed for this year, and it was revealed that Aurum Holdings would be taking over most of the luxury Swiss watch retail space at Wynn Resort in Las Vegas.
Without any additional expansion — and Mr Duffy is already on record saying Watches of Switzerland will open at some point in California — Aurum Holdings will have more luxury Swiss watch points of sale than every group in the United States except Tourneau. Mayors in Florida and Georgia, which Aurum acquired for $105 million, gives the group 17 prestige jewellery and watch stores including 15 Rolex agencies.
Within the Las Vegas Wynn Resort, Aurum will operate a multi-brand Watches of Switzerland, an enormous mono-brand Rolex boutique and two other as-yet unnamed mono-brand Swiss watch boutiques. Add the two Manhattan Watches of Switzerland stores and the 17 Mayors showrooms and the group in the US will have 23 points of sale across the country. Only Tourneau, with 28, has more.
The scale matters, but more important is Aurum’s experience, expertise and energy. Plus it has an appetite to back its vision with investment thanks to its private equity owner Apollo Global Management. “Apollo is fantastic shareholder for us and has been very supportive of our strategy. Apollo has understood our aims, engaged with it and ultimately financed it,” Mr Duffy describes.
Like every private equity owner, Apollo will eventually exit from its investment in Aurum. The business was close to being sold in 2017 but, with the American expansion only just beginning, Apollo felt the timing was not right. “Apollo feels, correctly, that we have so much going on now, particularly the big launches in the US, that they want to see that through as owners and then re-look at the situation. We are delighted that they will be staying with us for this future period,” says Mr Duffy.
Aurum’s network of 23 US stores will be supported from the headquarters of Mayors in Florida, which in turn will draw on the systems and skills of the group’s UK offices in London and Leicester. Every store and every ecommerce platform will be plugged into Aurum’s global SAP intelligence systems that track sales in minute detail.
Most stock management systems track inventory and sales based on SKUs and brands. The Aurum system goes further, with every item catalogued with design information such as the colour of each watch’s dial, its strap, case material and size, etc. It know so much about what has been bought that it can accurately predict what will sell in the future.
“I once heard a quote from a footballer who was asked why he was so good. He said that he always seemed able to anticipate where the ball is going. That is a good analogy for business; we need to be able to anticipate where consumers are going and how they want to be informed and served. I like to think that this is what we are doing,” Mr Duffy explains.
“This helps us deliver a much higher level of satisfaction both online and within stores. It is all tied together. You need the technology, you need the expertise, you need a presence wherever consumers are looking to research or shop. If we can predict trends, this gives our buyers a great advantage, so we hopefully start in a better place than others. In addition, our scale, our systems and our ability to move stock around, gives us an edge,” he adds.
A second pillar of success is Aurum’s obsession with its customers’ experience, whether that is in store or online.
The retail landscape is changing dramatically, with footfall declining in the shopping malls where most of Aurum’s stores are located in both the UK and America. “The trend is for mall traffic to be down, and in addition more of the traffic that is going to malls is focused on socialising rather than shopping, but our answer to that is to make our stores destinations; to have as much exclusivity as possible and to deliver the best customer experience,” Mr Duffy insists.
The process of buying a luxury watch is also changing, with customers spending months researching different brands and models online and in stores before eventually making a purchase. “We are very focused on driving up online transactions, and also bringing people into our stores,” says Mr Duffy. “The number one starting point for people looking to buy luxury watches is online. Brands do a great job talking about their history, their heritage, they describe the technical details of watches. The products lend themselves to great photography that looks fantastic on screens.”
But when it comes to the point of purchase, Aurum wants to ensure customers click to buy on one of its websites or come into one of its stores. The retailer has no intention of letting watch brand’s websites or directly-owned boutiques close the deal. “It is very important that, as customers do their research, we are able to talk to them about who we are, what we do, and how we want to welcome them into our stores. The fact that we are transactional as well is increasingly important. We offer a 360 degree service. Customers can research the brands online, they can shop with us online or they can come to one of our stores,” Mr Duffy stresses.
Apollo will now own Aurum through the upcoming phase of the international group’s development, wagering that the American market will provide a significant growth story at a time when the UK’s recent surge begins to slow. The potential, Mr Duffy says, is incredible. “The US market has really big potential. If you look at the macro numbers for Swiss watches on a per capita basis or even on a per capita basis of only high net worth individuals, you would conclude that the market is under-developed in the US. If you look at the penetration of Swiss watches against other luxury goods, you would again conclude that the market is under-developed. And if you look at the situation with distribution, you see that in major cities, particularly New York, you will see that there are far fewer points of sale than the size of the market would suggest to us,” he says.