There are still ripples being felt across the luxury watch industry from Patek Philippe’s decision to reduce its network of retail doors by around 30% this year.
Losing the prestigious brand has been heart-breaking for a number of small retailers, but many authorised dealers have more than one Patek Philippe door, so losing one or two so that they can concentrate on the best locations has been, if not welcomed, then at least understood.
It also should not have come as a complete surprise since Patek Philippe has been trimming its network for years.
Back in 2019, the company’s president Thierry Stern reminded people that the number of doors had already been reduced from 750 to 440. “So that the best ones can have more watches,” he said in an interview with World Tempus.
Before confirming to WatchPro earlier this year it was cutting 30% more doors, the number on Patek Philippe’s website was already down from 440 in 2019 to 345.
By the end of the current round of pruning, the total is expected to be closer to 250.
Mr Stern will say again this is “So that the best ones can have more watches”.
The company has consistently promised it will not significantly increase the number of watches it makes per year, which is currently estimated at around 68,000.
Instead, it wants to make more valuable watches, which is part of the reason it discontinued the steel Nautilus and replaced it with a white gold model.
There is also a masterplan to make more of its complicated timepieces, which originated more than a decade ago when the Stern family was planning the building of its $600 million headquarters and factory in Geneva.
That building opened after the first pandemic lock down in 2020 and brought together all of the manufacture’s ateliers under one roof and gave them each more space to produce some of the most exquisite timepieces on the planet, at scale.
There was also room devoted to training a new generation of watchmakers, a central tenet of Patek Philippe’s guiding philosophy that permeates everything it does, including the selection of its retail partners, who are expected to have a succession plan.
There is guiding philosophy, coupled with the clear presiding intelligence of Mr Stern, which is evident in everything Patek Philippe has done over the past decade, that goes something like this:
- Resist growing the number of watches produced, but build a company capable of making finer and more complicated watches at scale.
- This dramatically increases average transaction values so that fewer retailers can generate higher revenues.
- This engenders the extreme loyalty you see in Patek Philippe’s ‘family’ of authorised dealers around the world.
- Buying a Patek Philippe watch becomes an honour, not a right, so customers become fiercely loyal to their local authorised dealers.
- A fringe benefit of demand exceeding supply is that vintage and second hand prices rise, so the value of a Patek Philippe watch increases as they are passed from one generation to the next.
Patek Philippe is not alone in controlling supply, focusing on quality and pushing up average prices.
Audemars Piguet does the same, but it does not have such a loyal network of authorised dealers because it keeps cutting them out of the deal.
In the sort term, this means the brand retains more of the price paid for each timepiece, which has worked increasingly well under the tenure of François-Henry Bennahmias, but is beginning to fray as economic headwinds cool demand.
AP may rue the day it cuts out family jewellers with deep connections in their community in favour of off-street lounges designed to keep selling to the same pool of customers.
My money is on the Patek Philippe (and Rolex) model surviving over the decades to come.
The strategy creates a virtuous circle where the manufacturer, retail partners and customers feel special and well-treated on every step of their journey together.
What’s more, the focus on one generation handing over not just heirloom watches but also relationships to the next is so ingrained, I see it supporting Patek Philippe’s success for centuries.