David Coleridge is into his fourth decade working in the luxury watch industry and now oversees the market from his perch as UK chairman of Bucherer, the company that bought his privately owned The Watch Gallery in 2017. WatchPro’s Rob Corder caught up with the veteran who shows no sign of slowing down and is more outspoken than ever about challenges and opportunities for the industry he loves.
WatchPro: You have been working in the watch industry for over 30 years now as the founder and owner of DM London, which morphed into The Watch Gallery, and was then bought in 2017 by your current employer Bucherer. How would you describe the industry when you first started and how it looks today?
David Coleridge: The last 20 years have been all about consolidation on the supply side of our industry so that now we have six big groups. At the lower price level we have Fossil which still dominates the designer watch category, then we have Rolex, with Tudor; we have LVMH with TAG Heuer, Hublot and Bulgari, Kering with Gucci, Girard Perregaux and Ulysse Nardin; and the two biggest, Swatch Group and Richemont with around 40 brands between them.
Outside of these, there are a couple of independents: Audemars Piquet and Patek Philippe. I would think today that around 85-90% of our supply now comes from the big groups. If I went back five years, I suspect the groups would account for 60-70% and if I went back 10 years it would be 40-50%. That has been the biggest structural change in the industry.
WatchPro: It seems there are as many independent watchmakers today as there were 15 years ago, but from what you are describing, they are fighting over a smaller slice of the pie.
David Coleridge: I am sure it must be difficult for the independent brands. When we started we’d have big sales for brands like Maurice Lacroix, Raymond Weil and several others; and today you are right they are struggling for an ever decreasing part of the market.
What has evolved over the past few years as a result of the groups becoming more powerful is that our conversations now are often with the groups, rather than with individual brands within the Groups.
WatchPro: That is interesting, because the message from the groups is that their individual brands make their own decisions.
David Coleridge: No. We try to look for local solutions with the individual brands. But when, for example, we are opening a new shop and want to speak to the brands locally about it, we can discuss it in this country, but it will ultimately have to be approved by their headquarters.
Central control has really developed now. I do not know whether that is specific to Bucherer because we are a world-wide retailer. My instinct tells me that all groups have gone far more for central control than they ever did before. The Groups are putting the more senior people in at international level, and that is where decisions are being made.
WatchPro: Does that mean that conversations from Bucherer’s side are also taken at an international level?
David Coleridge: We always look for local solutions, but they nearly always need to be signed off in Switzerland by the brands. Maybe if we were still The Watch Gallery [UK-only] then that might be different, but we cannot tell. It is a great pleasure to now be one of the biggest watch retailers in the world, but it can be a double-edged sword because when people see what we are doing as Bucherer, everybody else sees that as a precedent.
WatchPro: All retailers will be aware of the politics of placing brands within new or refurbished stores. How much control does Bucherer UK have over that, and who else gets to decide what goes into your stores?
David Coleridge: Because Bucherer is in central London, there may be different hoops to jump through than if we were a smaller independent in a less ‘’politically sensitive’’ area, but almost everything we do with every brand now has to be signed off in Switzerland and agreed by their Group.
That can be a laborious process that slows things down and makes it more difficult to do things that are right for that particular store.
Many brands take a formulaic point of view, demanding space relative to their competitors, without necessarily being conscious of what works in that location. These are our shops, but there has been something of a land grab by brands, by which I mean that brands want to placed and presented in their proscribed way within our shops. Bucherer is pushing back hard against that, and trying to create a unique Bucherer shopping environment for the customer.
WatchPro: You can see that in the Bucherer store in [West London shopping centre] Westfield. You have a Rolex room and branded shop in shops for Omega and Cartier, but other than that the store is designed to showcase Bucherer rather than being crammed with furniture and facias from the watch and jewellery brands.
David Coleridge: And the new enlarged Covent Garden store will be the same, even more so. We want to create a Bucherer environment, not 10 independent areas for each brand. I love Watches of Switzerland on Regent Street, but it is almost like a mini shopping mall. That is the epitome of how the brands would like to be presented. I think Watches of Switzerland would do that store differently today. As a retailer, we need to find the balance between positioning brands the way they want to be represented yet keeping our own identity and shopping experience.
The key is that all brands must be shown respect, which is fair enough, but the politics when these discussions are taking place at group level make it infinitely complicated.
WatchPro: Accepting that the groups have more power than ever before, do you think the acquisitions we are seeing on the retailer side are a reaction to that and some attempt to move the balance of power back in your direction?
David Coleridge: I don’t know if it will move the balance of power, but certainly consolidation on the retail side will happen as it is a really expensive business. We like big shops that could mean investing £6 million in stock, and several more millions in shop fitting. It is a really expensive upfront investment.
In the UK, Rolex today has around 115. Five years ago I think it had 170. TAG used to have 350 accounts, it has around 200 now. That pattern is reflected by most brands. That consolidation is good for the retailers that survive, but the ones that lose these brands quickly have to find something else to do.
There will be fewer shops, but they will be bigger. Brands require us to create a better environment for customers, and I agree with Brian Duffy who is always saying that we do better shops in this country than anywhere else in the world. We need to thank the brands to a certain extent for being so demanding. The retailers that have responded the right way to those demands have created fantastic shopping environments that present products really well.
WatchPro: It is so competitive in the UK compared to the likes of France, Germany and the United States.
David Coleridge: I believe there are 16 Rolex accounts in London and I think 23 or 24 Omega accounts inside the M25. That makes it incredibly competitive, which drives up standards. The only city that has more in such a small space is probably Hong Kong, which again has turned it into a hugely successful market, the biggest in the world — current protests notwithstanding. It is just phenomenal.
WatchPro: Where do monobrand watch boutiques fit into the market? Do you think we will continue to see more of them? Will it be retailers that develop them on behalf of brands or will the brands own and operate them?
David Coleridge: Very publicly Audemars Piguet intends to be a retail-only brand that is not stocked in multibrand shops, although they may open monobrand stores with partners like us as joint ventures.
But AP is perhaps the exception to the rule. I don’t think many mono brand boutiques are profitable. Brands like Jaeger-LeCoultre have around 75 boutiques around the world, but do they all make a profit?
WatchPro: How do you react to watch brands that open their own stores?
David Coleridge: It is their right, but it is bound to affect how we support them as it impacts the profitability of our stores.
Rolex has never wavered from telling us that they will not open their own stores. That is the single biggest commitment they can give to us. That commitment is so important. It is the cornerstone underpinning our joint success.
When we were still The Watch Gallery back in 2011, we were considering opening a Rolex boutique in Knightsbridge, which was a huge investment from our side. We were looking at a 15 year lease on the retail space which at the time seemed like an incredible investment and commitment for a company our size, but we knew that, while they had a Rolex boutique in Harrods and were also in Watches of Switzerland in Knightsbridge, there was no way they would open their own shop on our doorstep. We would not have done this store without that assurance.
All of the groups could easily afford to open flagship stores, even if they were not making money. But I do not see many more being opened as from a customer journey point of view clients like to have a bigger variety of choices when shopping. Swatch Group appears to me to be reducing their monobrand retail network around the world. There are certainly more closing than opening. I think the direct selling in monobrand boutiques owned and operated by the groups has gone as far as it is likely to go.
WatchPro: Do you think the big groups like Bucherer, Watches of Switzerland and Wempe will squeeze out independents from the luxury watch market?
David Coleridge: I don’t think so. In the UK there are 150 good independents in the premium watch space and – I’m sure that will reduce over time as the brands consolidate their distribution but many will continue to succeed.
WatchPro: Three to five years ago, the chatter emanating from the big groups, certainly the message that shareholders wanted to hear, was that they would increase their direct to consumer sales because they kept more of the margin of each watch they sold. That chatter seems more muted or uncertain today and I wonder whether it is proving far more difficult to establish direct sales channels and, at the same time, retail partners have adapted to develop much more exciting branded environments for the watchmakers?
David Coleridge: I agree. The brands have online and monobrand stores. I think that the online impact in the watch industry, except for pre-owned, is more muted than expected.
Most of the brands have their own ecommerce sites where you can buy direct from the brand, but it would seem that brands sell more in multibrand ecommerce sites than they do from their own monobrand sites.
We could debate why that is. It could be that retailers have sites that are more focused on selling watches while the brands’ sites are more about eulogising the brand. We certainly know that the fewer clicks customers have to make to buy a watch, the more watches they will buy. If you make customers click ten times to buy a watch, you will sell substantially less than if you only make them click five times.
If the primary purpose of a website is to eulogise the brand, then that gets in the way of the sale.
Clearly Richemont has enormous expertise in ecommerce now it owns both Net a Porter and Watchfinder, so we wait to see what they will do with it. They certainly have the expertise to develop a multibrand site if they want to, but they would have to put watches from non-Richemont brands on it to make it work for customers. But for the moment they still insist that all websites must be tied to a physical store, so let’s see what happens next?
Our experience teaches us that there is a certain balance and breadth of brands you need to make a multiband offer work. TAG sells better when it is sold next to Longines. Longines sells better when it is next to Breitling, etc.
I genuinely do not know how ecommerce will evolve, but at the moment there is nothing to suggest brands selling direct to consumer online from their own sites can replace multibrands such as us.
WatchPro: Brands could buy the entire first page of a Google search, or they can continue to provide coop funding to the likes of Bucherer so that you can pay to be on that opening page. If a brand like Omega chooses to, it could make it very difficult for multibrands to appear at the top of searches.
David Coleridge: It is an interesting question. Rolex tries to own that first [Google] page and works with the likes of us to achieve that.
Five years ago, if you searched for Rolex, you would get a mixture of pre-owned and unauthorised retailers. If you Google Rolex today, the entire first page will either be Rolex or its authorised retailers. That is because we are all investing together to own that front page.
Rolex’s approach has been to not sell online — and I have no idea whether it will ever sell online — but it has taken online every bit as seriously as any other brand and has done more than most to protect its position through initiatives like working with authorised dealers to close out that first page of Google.
That was a decision made by Rolex, and I thank them for this, that they want their business driven through their authorised network of retail partner stores. They thought that was a better route than allowing authorised dealers to sell their watches online or competing with our stores by selling online themselves.
By not selling online or allowing its authorised dealers to sell online, Rolex supports every one of its authorised dealer location, whether they are Bucherer or an independent in the countryside.
The problem for an awful lot of companies today is that they have invested massively in ecommerce and are not making any money at it. They can hope that sales will increase and turn that side of their business profitable but, in the watch world, that can only be done by winning market share. In an overall market that is growing in low single digits according to GFK, it is now impossible to sustain massive online growth as it was 5 years ago.
WatchPro: When the biggest watch brands and groups are calculating whether to stick with wholesale distribution or sell direct to consumers, you are suggesting that selling direct through either ecommerce or building their own stores is not only loss-making today, it will always be loss-making.
David Coleridge: That I cannot predict, however in a UK watch market worth around £1.5 billion I do not think the brands will open more monobrand boutiques because they need them to make money and there are very few places left where they could go profitably. Online, I really do not know. Can any of the groups come up with a successful multibrand watch proposition? I have not yet seen any evidence to suggest that yet.
I think the future for large scale multibrand retail, which is what we are at Bucherer, is brighter than at any time in the last ten years.
WatchPro: How is business right now?
David Coleridge: Because we are London-based, we sell a lot to tourists. Brexit has been very positive for sales – because every time the pound goes down our sale goes up. I was in the West End last night and I’m pleased to say it was flooded with tourists. Tourists are flocking in because the pound is cheap, and they are all spending when they get here.
WatchPro: That is interesting, because the data from GfK suggests that watch sales in London are down year-on-year in the first half of the year.
David Coleridge: We are up 13% year-to-date, on a very good prior year. Of our top ten brands, eight of them are comfortably up on last year, and the other two are down only about 2%. Growth has been strong across the board. It is a very nice picture at the moment.
WatchPro: Do you think there is any danger that the industry damages itself through the consolidation of brand control by the groups that you have described and by the acquisitions that are creating global retail giants? It strikes me that the direction of travel is going to squeeze out both independent watchmakers and independent retailers, and I cannot see how that can be good for the long term health of the industry.
David Coleridge: We are constantly looking to expand both organically and through acquisition and I do not see that this will damage the retail side of the industry in any way; in fact I think it will enhance the consumer experience which must be good for the industry.
There are some fabulous independent retailers that I expect will still be successful in ten years from now. Look at what Lunns is doing in Belfast and Laing’s are doing in Scotland. Will consolidation be good for the overall health of the industry? I do not know. Ultimately consumers will decide, there is still plenty of choice for them.
There are three things consumers are looking for: the right range of products, an enjoyable environment in which to shop and convenience, which is about location. In order to offer the range you need the capital to buy the stock and a big enough space to present it. For the environment you need the best brands combined with the best staff who will create an enjoyable experience for the customer. For convenience you need the best locations to make it easy for the customers to visit. Whether you are a big retailer such as Bucherer or a small independent if you deliver that you are likely to succeed – but it is very capital intensive to deliver all three elements.
Our philosophy in our concession at Selfridges has always been that if customers cannot find it with us, they will not find it anywhere else in the country. That applies to the number of watches we offer from a particular brand and the overall number of brands we stock. That is not a bad start point but there has to be some editing because there are so many brands and so many watches. The skill is in getting the editing right. So the range is absolutely fundamental and any retailer that cannot offer the right range will not succeed.
There is a direct correlation between turnover of a store and the volume of watches on sale. The quickest way to increase sales is to have more watches on offer.
WatchPro: The hot topic right now for retailers is how they get their hands on the most desirable watches from Rolex, Patek Philippe and AP; the unicorn watches as I call them. Do you agree with Brian Duffy who told me recently that he expected retailers that invest the most and play by the rules, as we see in the UK, to get preferential treatment when it comes to allocations?
David Coleridge: There is a direct correlation. If you create the environment that delivers the customer experience the brands want, they will reward you with more support. There is also very little grey market in the UK. All that certainly helps.
It feels to me like the grey market is being replaced by the pre-owned market. If you want to buy a Rolex Daytona now, you can buy one instantly on any number of pre-owned sites. It will cost you a great deal more than the new one. But while your unicorns are very visible, they are not the main value part of our market. Day-Dates, Datejusts, where the supply is good, are the core of the business and are growing. Similarly AP steel models are a very small part of the overall value.
WatchPro: When you plan for the opening of your larger and re-located store in Covent Garden, do you plan with the brands to make sure you have great stock on the day you cut the ribbon?
David Coleridge: For the One Hyde Park Rolex boutique which we refurbished in May in the months leading up to the re-opening, we held back a few gem-set models.
The expanded Covent Garden will probably open in February next year and again we will make sure we have some special pieces so we can make a splash. Our aim is always to have the very best assortment of both brands and products. I am sure the brands will eke out a little more supply.
WatchPro: Does Bucherer in Switzerland help at all?
David Coleridge: No, it is all local. When we were bought by Bucherer, I assumed that within a few years we would do all our buying centrally as a group, but that is not the case.
WatchPro: What are the key differences or advantages of being part of Bucherer compared to the days when you were independent?
David Coleridge: Not owing the bank any money!
One of the greatest changes has been offering Bucherer Blue watches. Collectively, that is a mega brand for us, easily a top five brand. Consumers love them. It will be interesting to see how that develops. We don’t have a Rolex Bucherer Blue watch yet, but we can dream.
And as I said earlier strategically we are constantly looking to expand and have the resources to do so when opportunities arise, and that is very exciting.