John Henne is securing the legacy of his family jeweler in Pittsburgh for generations to come. Rob Corder discovers how building upwards has solved a ground floor conundrum.
WATCHPRO: I was interested to hear news of your expansion in Pittsburgh. What’s the plan and how has it come about?
JOHN HENNE: Twenty years ago, we moved down the street to an area of Pittsburgh called Shadyside, which is near the universities. It is within the city limits, but not in the downtown corridor.
It is about a three block commercial area with the likes of Apple, Patagonia, Gap, Banana Republic and a load of independents.
We moved to a three-storey building that gave us 2,500 square feet of retail space on the street level but almost immediately we realized we were running out of space so, seven years’ ago, I had the opportunity to buy the building we were in.
That included a bar behind us that was once incorporated into the ground floor area and gave us 5,000 square feet, which felt right at that time.
WP: Did you have Rolex at that time?
JH: Yes. In fact, I approached Rolex before taking on the building and showed them what we had in mind. Their architects and designers came in and took a look around. It is an old building, built in the 1920s, and it had offices on the first floor and apartments on the top floor.
The problem we faced was that dead in the center of the building is a stairwell and entrance to it that breaks up our retail space.
To one side of that stairwell door we have a Rolex window and people thought the entrance to Rolex was through that door, when in fact our entrance was on the other side of the building.
I was excited to take over the space where the bar was and expand the ground floor retail to 5,000 square feet with Rolex taking a big chunk and getting its own entrance. But Rolex’s Gregory Kraff [visual merchandising operations director USA] came in and had a real problem with the sight lines in the store because of the stairwell and an old chimney from an incinerator in the building.
He asked whether we had ever considered removing the stairwell. In my mind, I was thinking ‘heck no, that would be really expensive’. But he encouraged me to find out how it might look and what it would cost.
I engaged an architect to see what could be done. It was complicated because the chimney was part of the building’s structural support and so was the stairwell.
WP: What were your options?
JH: We love our location. We are in the dead centre of this neighborhood and I would not want to be anywhere else. At one point I asked the architect whether it would be cheaper to knock the whole building down and start again?
He said it would not cost a lot more to knock it down, but it would be better to remodel and retrofit what we have. We put plans together and Gregory recommended a designer, Eric Lewis, out of Baltimore, who had done a number of Rolex installations before. He came up with a plan to transform this building.
WP: You had bought the building by this point?
JH: Yes, I was receiving rent from office and residential tenants on the second and third floors. Taking away the stairwell for them would have required so much complexity with codes and permits, we decided we should just take over the whole building.
Rolex was very collaborative in this process. At one point we had a plan to move the stairwell to the front right of the building, but it broke up the space. Eric hired somebody else to look again and we came up with a way to do it that took away the stairs completely from the retail space.
Now we have a plan for 5,000 square feet on the ground floor, 3,000 square feet on the second floor and the third floor will be Google-like beautiful open plan offices for us where we will be happy to bring clients up for consultations and meetings.
It is a complete transformation and a huge investment. I would say we are investing more in this project than the building is currently worth. But I see it as a multi-generational investment.
I am the fourth generation to own and run Henne’s, but I have four sons aged 15 up to 21 who I hope will take it on from me and make this investment worthwhile.
WP: How much are you expecting to invest, all-in, including buying the building and the remodel?
JH: It was a little over $4 million to buy the building. The part of the building that used to be a bar has been redone so that we could move into it to keep the store trading while the rest was being knocked down. Getting that bar space ready for retail was half a million dollars, just to trade there for 11 months before we move out of it and back into the main floor again.
At the end of it all, I think we will have spent an additional $8 million on top of the $4 million we paid for the building. It was only yesterday I was thinking about it and realized that we were into this for $12 million.
WP: Lucky you did not have to make a decision on a number that big all at once.
JH: Exactly right. Fortunately, we had seven years between buying the building and starting this project, and during that time I was receiving rents from the offices and apartments upstairs. We were able to generate around $1.5 million in equity for the building during that time. I could not have had that if I had not bought the building.
WP: Complete the story of the troublesome staircase. Are you making it into a feature inside the store?
JH: No, we removed it completely and installed an elevator with a staircase that wraps around it. That is in an atrium that allows you to look all the way up to the second floor, so it is a real feature with a spectacular chandelier.
WP: A huge expansion and remodeling project like this always creates a challenge when it comes to allocating space to the various brands. How are you handling all of those delicate negotiations?
JH: We are giving Rolex a shop-in-shop of around 1,100 square feet on the new ground floor so that they can have meeting areas and a watchmaker within the store rather than down in the basement. Then I carved out an area of 40 x 40 feet for four other watch brands.
At the time, we had Omega, Tudor along with brands like Longines, Nomos, Tissot and Montblanc. We went to the brands to discuss how to configure the space. Omega was the number two [after Rolex] and we gave it what we thought was the best corner position.
Tudor was offered another corner, but they wanted the side where we had placed Omega.
I love Tudor, and told them how much we believe in the brand, but really wanted to keep Omega where we had them.
Tudor accepted the positions, but all they asked for was to be equal in size to Omega, which seemed reasonable to me, and was how I had planned it all along.
I took that back to Omega, telling them that I had fought for them to keep the space they wanted ahead of Tudor. But they said they could not be the same size as Tudor. They had to be larger. They said it would reflect poorly on them if a much bigger brand like Omega had the same space as Tudor.
I took the discussion all the way up to the president of Omega USA. In the end he said no and we could not resolve it, which means that Omega will have no representation in the whole of Pennsylvania at the end of this year.
It’s a shame, and I think they are cutting their nose off to spite their face with this battle, but they feel it has to be that way in a store with Rolex and Tudor.
We are going to have the very finest retail environment in the whole of Western Pennsylvania. Omega was offered the second-best position in our store, but they chose not to take it. That’s a shame.
I even wrote to Nick Hayek Jr., CEO of Swatch Group, and explained the situation. He wrote back with a cordial but curt response essentially saying, “change is good”.
Of course, whether Henne Jewelers is working with Omega or not in this great new store will not make a huge difference to the brand or to us. We will both continue to be successful.
WP: It is fascinating to get a glimpse into how this horse trading works and what the red lines are for both you as a retailer and for a brand like Omega.
JH: I have heard of at least four or five instances of this same type of thing happening in the past year or two with Omega.
WP: What I hear more of is Rolex and Patek Philippe fighting for equal space with retail partners. I can understand why Omega would want to have higher billing than Tudor as things stand today, but it is a big decision to walk away from a jeweler like Henne that has been in the city for 130 years, is investing $12 million into a massive upgrade, knows the city’s customers inside and out, and has a fifth generation waiting in the wings to take over. Where did you end up with the other brands?
JH: We have spoken to different brands and ultimately Tudor will take the position we had allocated to Omega. We are adding TAG Heuer and Grand Seiko with Montblanc taking the fourth bay so we can offer pens, gifts and watches from them.
WP: How have you organized the space over the two floors?
JH: It is going to be watches and fine jewelry downstairs. Upstairs we will have bridal because we always want to be able to make an engagement ring a first major purchase for our customers that leads to a lifelong relationship.
We are calling that whole second floor our bridal boutique, and it will include a secure outside deck so people can look at diamonds in natural light.
WP: What is the timeline for the whole project?
JH: We started over two years’ ago with planning and we moved into the bar space in January this year so we could start on the main floor. We hope to be back in the new space in November. We will then refit the bar so that it matches up with the rest, and that probably won’t be completed until January.
WP: For those that do not know Pittsburgh well, tell us a little about the city and the watch scene there.
JH: I have lived in Pittsburgh my whole live, and I am the fifth generation of the family from here. My wife’s family was born and raised here as well, and we love it.
The city has certainly had its challenges, but right now we are seeing a real resurgence, particularly around healthcare and technology. Carnegie Mellon is one of the foremost institutions in the States.
Google, Apple and all sort of other technology companies have opened here because of the proximity to Carnegie Mellon and the University of Pittsburgh. There are a lot of new people coming to the city.
I remember a recent conversation with a couple who moved to the city. I asked them what attracted them here and they said that, because they can work remotely, they could be anywhere in the country. They chose Pittsburgh because it has so much to offer, it is close to New York and Washington DC, and is very affordable.
I keep lines of communication open with Patek and continue to update them on our project, but I think we need to see how things settle after the current changes and approach them at the right time.
It is a small city [population around 300,000], but we have three major sports teams, a world class symphony orchestra, the arts, the universities, but we still have a small-town feel.
We have been challenged because so many people left in the 1980s when the steel industry collapsed that we were becoming a city of older people, but that is turning around now.
WP: Do you suffer from the pull of the bigger cities close to you? I am thinking in particular that brands are focusing their investment in triple-A locations, and pulling out of more marginal locations as they reduce the number of doors they have.
JH: If you look at what Patek Philippe is doing, Pittsburgh falls below their threshold at the moment for a presence. We have tried to get Patek over the years. In fact, about 30 years ago Orr’s bought Hardy & Hayes, which was a Rolex/Cartier/Patek dealer. Orr’s had previously lost Rolex in the late 1990s.
I happened to call Patek Philippe around that time and got Hank Edelman [former chairman] on the phone and made the case that there were other options like us that he could work with in the city.
Patek pulled out of Hardy & Hayes and held off making a decision for a year on where to go next. I think I was too young at the time and did not know how to make the approach in the right way and to read the politics in the industry.
Ultimately, they decided to stay with Hardy & Hayes and Orr’s. It was not that they did not think Henne was good enough for Patek, they even asked me whether I thought Pittsburgh could support two doors, but I said that it probably could not.
Fast forward to a few years’ ago, and Orr’s lost Patek Philippe for reasons specific to their relationship, and not as part of the current purge.
I keep lines of communication open with Patek and continue to update them on our project, but I think we need to see how things settle after the current changes and approach them at the right time.
I believe Pittsburgh is a market that would be good for Patek. We have a lot of old money here with families familiar with the brand. We love their slogan about not owning a Patek Philippe watch, but merely looking after it for the next generation. That chimes with me and my family, and also for a lot of longstanding families in the city.
That is the long answer to your question. The short answer is that I think Pittsburgh probably falls just below that threshold that would encourage Patek Philippe to come back in. For every other brand, this is a very important market.
