We used to fling the word unprecedented around without a second thought. Now the term has come to define what the world is going through with the Covid-19 pandemic and its impact on even the strongest businesses. Berry’s entered the crisis within days of its brand new showroom in York opening in a location where thousands of tourists normally flood the historic city. They had all stayed away on the day Rob Corder visited the store in July to meet Berry’s managing director Simon Walton, but he was as confident as ever about the group’s future after the greatest shock it has faced in its 123 year history.
WatchPro: Tell me how you felt that day when Boris Johnson stared down the camera and told the country on March 23 that we had to stay home?
Simon Walton: We knew it was coming, it was just a matter of which day so we started preparing well before we even got to lock down. We encouraged as many customers as possible to come in and pick up items, in part so that we would have as few high value items in the safes, and also from a cash flow point of view to make sure we had as much in the bank as possible.
Even though we prepared, the day itself was just shock and awe. We could not believe that all the shops would be closed and we had no idea for how long they would be closed.
We assumed we would be shut for two or three months at a minimum and so we just sat at home looking at various scenarios and working numbers out on our costs and cash flow forecasts. I probably worked harder in that first week than I have for many years just planning and planning; going through every figure.
We immediately decided and made the commitment that we would continue paying our staff in full. Our staff are very important to us and have been very loyal over many years. We knew that the business is financially strong, we don’t have borrowings and we own most of our properties. I was confident we could see it through, but you just think about the effect on cash flow on any business that might be closed for three or four months; it is enormous.
WatchPro: Do you have good systems that make it easy for you instantly access all the information you needed at that time to make the best decisions?
Simon Walton: I am very fortunate that my father is a wizard with figures. Most people take a novel on holiday, but he takes our profit and loss and balance sheet for entertainment. He broke everything down and spoke to our accountant several times per day to work out the financial implications of lock down.
Between us we worked out all the expenses and variable costs that we could take out of the business, and what we could stop. But there are various fixed costs that we could do nothing about.
WatchPro: Did you get to a point quickly when you were confident that the crisis would be survivable?
Simon Walton: I am more optimistic than my father, and he was more worried than me. I kept reassuring him that our balance sheet is strong and there was nothing to worry about. But it was such an unprecedented situation that, even with a strong balance sheet, it was still worrying.
After about two weeks, when we had that finance and accounting work done, we turned our attention to our internet business, and how we could run it safely. That is when we started to move forward.
WatchPro: And were sales at zero over that first two weeks?
Simon Walton: Sales were zero. Internet was peanuts. It was a shock to the system. We had paid our quarterly rents in March, so that big expense had come out, but we had other invoices to pay and it was a question of managing that in the best way to protect our cash flow.
WatchPro: I assume some of those invoices will have been from the watch brands. Were they helpful and supportive?
Simon Walton: Patek Philippe were excellent and most of the brands were helpful. That was one of the key jobs in that first two weeks; working with the brands and deciding how we were going to pay everybody and pay all our staff. Once we sorted all that out, we could relax a little bit more.
WatchPro: What did you think of the various ways the government supported businesses through initiatives like the job retention scheme and others?
Simon Walton: Government measures were absolutely brilliant. The furlough scheme, the rates scheme, the fact that landlords could not break leases if they were not paid, the VAT scheme; everything felt like the right measure at the right time.
I am not so sure about No.10’s treatment of everything; the fact that the borders were open and other decisions looked questionable to me. But in terms of the chancellor, his measures have certainly helped retail, and without them it would have been even more of a catastrophe.
WatchPro: Did that intense work in the early week or two come up with a plan that has stood up throughout the crisis? What have been the highs and lows?
Simon Walton: In general, yes, the plan has stood up. The fact that we got Patek Philippe deliveries from the middle of May, just as the business reopened in Switzerland, was extremely helpful, because we had customers waiting for most of those watches and that immediately helped our cash flow. Also our internet business, once we worked out a safe and secure way of operating it, got busier and that cash started to come in as well. So we were not at zero incoming cash across that period.
WatchPro: In normal times, watch brands expect their authorised dealers to take a full spectrum of products, and we all know there are some models you would rather receive than others. Did the brands you represent help you by allocating high demand pieces?
Simon Walton: Brands took the pressure off very quickly, and I felt that every order we secured was gratefully received by those brands. Even now, there is an emphasis on the core pieces, and there is no pressure whatsoever to take unusual pieces. They just want to make sure we get the sell out and we are not building out stock up.
I personally worked very closely with the brands throughout lock down, and the emphasis has been on securing those key pieces. The last thing the brands have wanted to do was put us under any financial pressure by pushing pieces that we can’t sell.
WatchPro: It sounds like a welcome attack of common sense from the Swiss manufacturers, which cannot always have been said over the years. Would you say relationships have actually improved during lock down since it has been so clear that the industry needs to work together to rebuild?
Simon Walton: I would definitely say relations have improved. The brands soon realised that with their own boutiques closed, they were grateful for any business they could get from retailers like us that were still trading. There was a lot of communication, a million Zoom meetings, and we worked together to generate as much business as we could. The brands also provided training to the Berry’s team using Zoom, and that also helped to strengthen relationships.
WatchPro: You said early on with the pandemic that you would be paying full salaries to your team. Were you able to maintain that as the months went on?
Simon Walton: We paid 100% in March, April and May. In June, we went to 80%, really just to encourage people that were coming back. We still have people on furlough, and we are waiting to see what happens as business picks up. We need to match the demand with the staff required. Unfortunately, at the moment, the demand is not there to allow us to un-furlough all our staff, so we are using the government’s help.
WatchPro: What have your team up to while they have been on furlough?
Simon Walton: Furloughed employees were not allowed to work, but they were allowed to take training so a lot of them finished courses. Our management team, our Internet team and our accounts team have been absolutely amazing. We had people going into each store on alternate days from 8am until 2pm picking things for Internet sales, packaging and dispatching them. They had to learn a lot of new skills and I cannot speak highly enough of them. Without them, the business would not have survived.
WatchPro: What has been your view of the way the major watch brands have handled product launches this year. With the big shows gone and factories in lock down, there were several very different approaches. Rolex has held up its entire programme until September. Omega and Patek Philippe have had limited launches. Many other brands stuck roughly to their launch plans and dates but did them digitally. Did any of these tactics stick out as the most appropriate for these times?
Simon Walton: It was hard to buy watches without seeing them, however much you can do online. Without seeing the size of a watch, how it feels, the colour of the dial, it is very difficult to buy. We managed, but it was not easy. With Breitling we had about 10 of us on a Zoom before making decisions. With Richemont, we had seen the watches before Watches & Wonders did their online event. We bought Pasha watches from Cartier without seeing them.
We were delighted when we heard that Patek Philippe was going to do staged launches through this year and unveiled its first pieces. The market needed that excitement. The 6007A caused issues because it is so limited and we had to upset more people than we made happy, but it caused excitement, and so have the more recent launches.
I am sure all of the Rolex retailers are looking forward to September 1 when they will launch. I am waiting for Omega, because that is one of the few brands that have not done something.
WatchPro: Do you think the brands like Rolex that have held back will do better in the long run than brands like Breitling that unveiled a lot of watches in the second quarter while shops were closed and retailers did not want to buy?
Simon Walton: The brands that were active and launched watches during or soon after lock down will reap the benefits. People want new watches, it keeps the market interested, even if it is just PR and marketing.
A great development this year has been the way brands have been announcing watches and delivering them immediately. They were creating demand online with their announcements so that we were selling them straight away. The watches would get to us quickly and we could send them out and get paid.
That is a big improvement over the days when watches were launched in March but would not reach us until several months later, by which time the demand had almost disappeared. That was crazy. Launching watches and getting them into the hands of retailers and customers immediately is, for me, the future. I expect Omega will go that way. Even Patek Philippe did it for the 6007A and it worked brilliantly.
WatchPro: I thought the launch by Tudor of the blue Black Bay Fifty Eight was a great example of that. Dealers had the product and the promotional material before Tudor went public. Journalists had been given units to review and David Beckham was ready to splash with it on Instagram.
Simon Walton: It worked fantastically well. Brands create the excitement, the supply is with us and we can start selling. We have all got stories of watches that are launched but don’t arrive for months, by which time a customer that initially wanted one has changed their mind. That has to change.
WatchPro: With internet and direct sales during lock down, what level of business were you able to maintain compared to normal?
Simon Walton: We were doing about 20% of what we normally take, and we were very pleased with that. The delivery from Patek Philippe in May helped enormously because they are expensive watches.
WatchPro: There is a sense right now that the top five or six Swiss watchmakers — Rolex, Omega, Cartier, Longines, Patek Philippe and Audemars Piguet — have the momentum to carry them through, but almost everything outside these billion dollar brands is likely to find it very tough. Is that your sense as well?
Simon Walton: At the moment, yes. There are certain brands continuing to do very well, and there has been a polarisation of demand in recent years for certain brands. That is truer than ever. There are certain brands that rely on overseas tourist demand, and they are certainly missing out.
WatchPro: How has your business performed since non-essential retailers were allowed to reopen on June 23?
Simon Walton: It varies across the country. I was in Newcastle the other day and you would never have known we are still living with this virus. Nottingham has also been particularly busy. Other locations like York and Windsor, which rely on tourism, have been fairly quiet.
Leeds as a city has been fairly slow to return to any sort of normality. Footfall is well down. All the office workers that would normally be in the city centre are working from home, there is no traffic on the roads. It is a very different city.
WatchPro: Did you reopen all of your stores as soon as you were permitted to?
Simon Walton: Yes, we started with shorter hours and have gradually extended them. Most of the stores are still closed on Sunday, apart from Nottingham, and most stores are closing at around 4pm because traffic tails off. We review it on a weekly basis as sales tick up.
We are really reliant on new watches being delivered for our best local clients that are on waiting lists, and we are also managing to sell some good jewellery pieces to those same clients. That leaves us a long way short of pre-Covid trading.
WatchPro: We are sitting in your new boutique in York, which has a triple-A position on the main walk up to the Minster, but as we look out of the window, the square and the streets below us are very quiet on a day (July 21) when it should be teaming with tourists, particularly from China. We have to assume this summer is a write-off, but do you think the Chinese will return in 2021?
Simon Walton: We are hoping and praying they will be back next year, but a lot depends on Covid. We are also still at the beginning of a political dispute with China, so we are worried about whether tourists will be allowed into the UK, or visas will be limited. We are also concerned about overseas students staying away.
Berry’s was established in 1897 and we think long term. We opened the shop in York, not just for this year or next year, but for many years to come. We invest for the future. This is a family business and I have an 18-year-old son who is showing an interest in coming into the business, so we hope in a year or two things will be back to normal.
WatchPro: What sort of changes that we have seen through this crisis could become more permanent?
Simon Walton: I think ecommerce will continue to grow as people become more confident. I had a Zoom meeting with the heads of Cartier in Switzerland, who have been amazed at the level of sales from the UK because it is very different to the rest of Europe. We are much more advanced in shopping for luxury watches online.
So that will grow, but nothing will take the place of shopping in the luxury environment that we offer in our stores. I still believe that will remain the bigger percentage of sales into the future.
WatchPro: There has certainly been little evidence that online sales were about to ignite in the UK before the pandemic; there has been virtually no growth of ecommerce for two to three years, according to GfK. So, while there has clearly been a spike during lock down, I suspect sales through physical stores will come back quickly, not least because you can’t buy Rolex online.
Simon Walton: We are already seeing a drop in internet sales, and we are only in July. As people get more confident about coming out to the shops, they will want buying a watch to be a moment to remember.
WatchPro: My concern would be that brands could jump to the wrong conclusions on this. Having lost sales through all their own boutiques and authorised dealers, they will not want to be as exposed again and will ramp up their own ecommerce businesses.
Simon Walton: Most of them have done that already. I think the biggest lesson the brands should take away from this is that they need to focus on local clients. All around the world, be that Switzerland, Hong Kong, London or New York, we do not have visitors flying in to shop, so local customers become critical.
I think there will be more sold online and there will be more focus there from the brands from a marketing and selling point of view, but I remain convinced that the future of luxury retailing is bricks and mortar.
WatchPro: One of the barriers to brands and their authorised dealers selling more online is that the secondary or grey market offers so many brand new watches at significant discounts. Once online, customers are only a click away from these sites where they can get a discount that you are not permitted to offer.
Simon Walton: That does make it hard. We had it this morning with a guy finding a watch online with a 20% discount and he comes in and asks us why he should buy at full retail price. I am sure the grey market did huge business over lock down.
There is a price point of up to £5,000 that we do particularly well with online. Anything above that and people want to come into store and have the confidence and professional advice we bring. Under £5,000, people certainly have the confidence to buy Breitlings, TAGs and Omegas, and that price has risen from £2000 to £3000 over the past few years, and could continue to rise.
WatchPro: Geopolitics and restrictions on travel could reshape the entire global watch market. Last year, Swiss watch exports to mainland China represented less than 10% of the total value, but Swatch Group sells over 50% of its watches to Chinese customers at home or abroad. If all of that 50% is sold within China, it will decimate the retailers in the major global cities. Even if these retailers can stimulate domestic demand, they won’t be able to get the watches because they will all be heading east.
Simon Walton: Your question says it all and I don’t have an answer. I listened to a speech by the current president of Cartier recently, and it was all about the politics and disagreements going on in the Arab world, China, Brexit. We just have to look at it long term. The lesson we have learned is that we cannot rely on tourist. I remember Mark Hearn [former UK managing director for Patek Philippe] saying to me ten years ago: “Do not rely on overseas tourists, because they might not come”.
We are in a position where we have a good local client base, and that is going to our focus for the next few years. Whenever tourists do come back, that will be the icing on the cake.
WatchPro: Let’s focus on domestic customers then. Do you think their behaviour and tastes may change? For example, might it be unfashionable to be buying luxury Swiss watches at a time of so much hardship for the country?
Simon Walton: We have seen two things, a bit of pent up demand spending from wealthy clients who have been locked down unable to spend a penny. There are others that have looked at luxury goods and are now deciding they can do without them. We have seen a number of people that have not been able to book their usual holidays, and are instead coming to us to treat themselves with watches or jewellery. That is fuelling sales for us at the moment.
My father always said that wealthy clients often walk on water during a crisis. He has seen many depressions and tough times, and somehow the luxury watch and jewellery always finds a way. He is confident we will come out of this.
WatchPro: You have been in a period of significant investment with the expansion and refurbishment of Albion Street in Leeds, opening in York, adding a Panerai floor to your Victoria Quarter store in Leeds, etc.
Simon Walton: Yes, we have been investing massively. We are constantly trying to improve on our current portfolio of shops. We have spent to make them larger and more luxurious and people enjoy that environment. We are not competing with little jewellers down the road, we are competing with shops in Dubai and New York.
WatchPro: You entered this crisis with a healthy balance sheet and you own six out of your ten retail properties. Others may not have been so strong, which might create opportunities in the coming months if they run into trouble.
Simon Walton: We hope so. I came into this business in 1989 when there was a recession, and over the next ten years we opened a shop every year. It was chaos, but there were opportunities. I think there will be opportunities again and, unfortunately, the strong will survive this and there will be a sorting out of the marketplace.
WatchPro: You have a very broad cross section of brands, particularly if we include Owen & Robinson. Is it still the right thing to offer so much choice?
Simon Walton: We do have a broad spectrum, but we are always trimming, particularly at the lower end. We are very strong with Patek Philippe, but we always want to be a multibrand business. Some of the brands we have are targeted at overseas visitors and do not have such a strong following locally, and we hope tourists will come back for those. We have seven or eight key brands that generate 80% of our business, and that is the same for every multibrand retailer in the country. We do like to carry one or two unusual brands, and we like to take a variety of brands from a group like Richemont because it makes us a more important retailer for them.
WatchPro: It is a number of years since you lost Rolex. Do you consider that to be a life sentence or could you ever get Rolex back?
Simon Walton: We will see. That is a very good question. Nothing is forever. We all make mistakes in life. We have started with Tudor here in York just before lock down and we are hoping to start with them in Nottingham in October this year. That is a major step forward to be working with the Rolex/Tudor company and we are delighted with Tudor; it is a great brand and Rolex is just the most magnificent organisation to work with.
WatchPro: What do you think the rest of the year will be like?
Simon Walton: I don’t have a crystal ball. We are praying for no further national lock down. It is a worrying time because viruses tend to spread in the winter and we are dreading a lock down ahead of Christmas. We are working to get back to normal trading as much as we can. We hope footfall continues to build and the economy improves. We are looking forward to all the new watches that are coming our way, and we will just keep working as hard as we can to clinch every sale that is out there.