Jean-Claude Biver officially retired from front line duties as CEO of TAG Heuer and head of LVMH Watchmaking Division earlier this year, but it has in reality been five years since he began handing increasing responsibilities to his team, in particular Ricardo Guadalupe, CEO of Hublot. He now tours the world acting as an ambassador for the entire Swiss watch industry, which he feels has the potential to double in size over the next two years. Hot from handing Mr Biver a Lifetime Achievement Award at this year’s WatchPro Awards, Rob Corder caught up with the inspirational leader at Dubai Watch Week for a chat.
WatchPro: One of the hottest topics in the industry today is scarcity of some models, which are selling at way over retail prices on the secondary market and have huge waiting lists, and the oversupply of others, which are being discounted on the grey market. What is your view on how this is affecting the market?
Jean-Claude Biver: It depends on the magnitude. It is fantastic to have copies of your watches coming out of China. If you do not have copies, you should be worried. But it is a drama if you have too many copies. I remember how happy I was when I first saw copies of my watches coming from China. It means they had detected us and were copying our watches because they thought we were a success.
It is the same with waiting lists. Finally, there is a waiting list. We have been working for 10 years to get to the point where there are waiting lists and we are finally there.
Both can be seen as positive, but the magnitude is the problem.
If a waiting list is five years or more, that is not good. If copies are ten times bigger than your own production, that is not good.
It is like wine. It is good to have two glasses of wine, but to have a whole bottle is bad.
WatchPro: The magnitude is now so bad when we look at waiting lists, they are not really waiting lists at all because average customers can never get to the top of them.
Jean-Claude Biver: Ten years is not a waiting list. In that time, a few people on a list will have died, another few might change countries, a few more might be bankrupt, others will not be interested any more.
WatchPro: It is not real in another sense. A waiting list to my mind is like at a McDonalds so I order my food and get a number. When my number gets to the top of the list, my food is ready and I collect it. Waiting lists for watches are not working that way. There might be 2000 people on a waiting list for, say, a Pepsi, but only 200 are regular customers and those are the only people with a chance of getting that watch. The rest will wait forever.
Jean-Claude Biver: That is certainly another problem. The waiting list is bad if it is longer than 2-3 years. Then it depends what product. If the waiting list is for a $2 million grand sonnerie watch, everybody will understand that they are very scarce and will take time. But a waiting list for a steel watch that retails for £8,000? That is questionable if it is more than a few years.
At the end of the day, the customer is the boss and the customer will decide. Maybe one day the customer will shift his taste and want to buy gold watches that look very simple. Then what do you do with your waiting list for steel sport watches? Everybody will cancel their orders.
WatchPro: Customers are in charge, but they are being misled, particularly if they are not experts in watches and might be buying their first piece as a gift for a special occasion. These are the people we want to be attracting because they will grow the market. If they cannot ever get the watch they want, it is a bad experience and they may go and buy a car or a holiday instead.
Jean-Claude Biver: I think 2-3 years is OK.
WatchPro: We heard yesterday from Ahmed Seddiqi & Sons that they have waiting lists of up to 12 years for certain models.
Jean-Claude Biver: I cannot see how you can have 12 years.
WatchPro: The real problem is that there is not really a waiting list at all. Out of 2000 people supposedly on a list, there are 200 that are highly valued and valuable customers, and these people can buy any watch they like. Everybody else is being misled they will ever get the watch of their dreams. The related issue is that, when you have such huge demand for certain watches, it is driving up prices to incredible levels on the secondary market. What is your view of how this is affecting the industry in a broader sense?
Jean-Claude Biver: The more we talk about watches, whether that is waiting list or auction prices, that is good because we need to sell watches to people that do not buy watches. It is good because we are in a startup industry.
Think about this calculation: we have exports of Swiss watches worth CHF 21 billion per year. But LVMH as a group is doing CHF 50 billion turnover alone. They do the turnover in five months of the entire Swiss watch industry. Either LVMH is a giant or the Swiss watch industry is small.
Before saying who is the giant, you need to check what is happening in Silicon Valley. Apple makes $22 billion profit every quarter, so in three months Apple’s profit is the same as the turnover of the entire Swiss watch industry in a year. If you compare the Swiss watch industry to LVMH or Apple, you can conclude that it is really a startup. It is very small.
Let us assume Rolex makes one million watches — that could be wrong by 10-20%, I do not know — and assume they are sold in roughly 100 countries. That means one million watches divided into 100 countries or 10,000 watches per country, if they are all considered equal size. Think about 10,000 watches in a country like China with a population of over one billion people, or America with over 300 million people. Goddamn, it is nothing. So we can really say we are a startup industry.
The good news is that, because we are so small, we have huge potential to grow provided we can still convince people for many reasons: history, beauty, emotion, to buy watches. If we can achieve this, the industry will double in size in 20 years. Any talk about the watch industry is welcome because anybody talking about a startup is good for the business. Talking about Apple doesn’t make any difference, but all talk about the Swiss watch industry is good.
WatchPro: Startup industries are typically chaotic, changeable, mistakes are made and brilliant ideas come out. Is that part of what you are describing as well?
Jean-Claude Biver: We are not a startup in terms of our organisations. We were industrialised decades ago. Omega made its first manufacture in 1897, so we have experience from an industrial and management point of view. We are a startup from the distribution and sales perspective. And, because we are startup, we allow artisans and independents to grow. Independents cannot exist in the mobile phone or car industries. But we have 10-20 independents appearing and dying like mushrooms.
WatchPro: If you talk about the 40-plus years you have been in the industry, how would you describe the state of the market today? Are we on the right path?
Jean-Claude Biver: We are on track to double in size in 20 years because more and more professionalism is coming into the industry and the learning process of the groups, which bought many brands, is coming towards the end. The watch industry is not the same as other industries and these groups have discovered that we are not such a well-structured industry in terms of sales, marketing and distribution.
Big groups think that if you have been performing well in the car industry, cosmetic industry or fashion industry then you can be transferred into the watch industry and the same rules will apply.
But it is not true. We are still artisans and start-ups. More and more people are understanding this today, and if they handle the brands in the right way then they will really get the profits out.
I was speaking to somebody earlier who observed that we change CEOs in the watch industry every three to five years. And if we do not change the CEO, we change the sales managers in different territories so that the manager in the Middle East moves to China and the president of North America moves to Switzerland. All of these moves are extremely bad because in luxury you need stability and personal relationships.
That is why I am more successful today than ever, because I have been in the business for 45 years and people trust me. This trust cannot be built up in three years. You lose it when the guy gets a promotion to another country or another company. In luxury this is negative.
WatchPro: That problem is the most acute in countries outside Switzerland because the relationships need to be even more personal.
Jean-Claude Biver: Of course. Luxury is about personal relationships, shaking hands, eye contact and eating together. Luxury is about proximity. If you do not travel once per week, you are not doing your job.
WatchPro: Ricardo Guadalupe at Hublot and Julien Tounare at Zenith are certainly racking up the air miles. Not to mention Stephane Bianci at TAG Heuer touring the world to launch all the Monaco special editions this year.
Jean-Claude Biver: Exactly, and Jean-Frédéric Dufour at Rolex. These people travel like hell. They understand. They are fantastic.
WatchPro: Are the groups working strategically towards keeping people in the same positions for long periods so that they can build up the personal relationships you describe?
Jean-Claude Biver: No. They work on career objectives and the people in the field share those career objectives so that, after three years, they are asking to where they can be transferred. They want an upgrade from a small market like the UK to a larger market like the USA. The HR departments will work towards making those career moves happen for them.
WatchPro: What does that do to you as a CEO in Geneva? Are you motivated to take care of the best people so that they do not look for other roles within the group or even leave altogether?
Jean-Claude Biver: That is the nature of people. That is the risk. For employees, there is always the risk that a new manager will come in and decide you are not the right person anymore. A new manager comes to Tottenham Hotspur and decides the striker does not fit with his vision of the team. That is the risk for the player.
You must always know that people are free and as you grow them, there is always a risk that they will leave. If you know that, and the guy is really precious, then you put special effort into making sure he or she does not leave.
WatchPro: This is an important issue because many of the retailers I speak to today do not feel they have the same personal relationships with executives at the brands that they once had. They feel so much power is being centralised in Switzerland that they cannot work as effectively together in their own markets.
Jean-Claude Biver: The brands are responsible for that. If you look at Hublot and before that at Blancpain, you never saw that happening. The best examples are my own people. Some of them have been working with me since 1979; Ricardo since 1986. I keep people because I know that my team is responsible for my success.
Should I be, for any reason, interested to make my own brand, I would say no for many reasons, one of which would be that I do have a team. My team has split. Ricardo is here, Jean-Frédéric is there. So, with whom can I build a brand? My team is gone. And I do not complain that I have lost my team because I am 71-years-old.
I say to my wife, I will be lost if I try to make a brand because I do not have my team. And I do not want them to come back because I cannot pay them. I cannot ask Jean-Frédéric to come back to me.
WatchPro: You could always buy a brand, which comes with a team.
Jean-Claude Biver: The brand I could buy is not necessarily a good brand and not so well managed. If it was well-managed, I would not be able to buy it.
WatchPro: There is a price for everything.
Jean-Claude Biver: Yes, but if you buy a brand at 10x profit, which is a normal calculation, and the brand makes one million in profit, then it is not  such a great brand. You can see, if you go with the 10x multiple, then you very quickly end up with very expensive price tags for a private guy to buy.
I must realise that my time has gone and I should be happy with what I have achieved. I enjoy spending time around the watch industry because I will not retire from my passion, but I have retired from my job and responsibilities.
Mr. Biver is an inspiration in the watch industry. Long live the King! Legend!
Mr. Jean Claude Biver, the most inspirational business leader since the invention of timepieces themselves….