If you had visited any of Bucherer’s flagship showrooms in Switzerland over the Chinese New Year celebrations in 2019, you would have seen a queue of Chinese customers snaking out of every door dreaming of buying a prestige timepiece in the country they are made.
Things are different in 2020 and, when WatchPro visited the retailer’s iconic 5-storey showroom in Geneva last month, we saw more bottles of anti-bacterial hand sanitizer than Chinese customers.
These are challenging times for luxury Swiss watch retailers and brands, but the current Coronavirus crisis is an opportunity, says Bucherer’s ever-optimistic chief commercial officer Patrick Graf in conversation with Rob Corder.
A much greater focus on domestic customers in the United States, United Kingdom where a new boutique will be opened this summer in London’s Covent Garden, Germany, France and Switzerland is giving the business better balance, and growth of certified pre-owned luxury watches and ecommerce is preparing it for a very different future, Mr Graf says in this month’s Big Interview.
WatchPro: We last spoke around a year ago, which at the time was about a year after Bucherer had acquired Tourneau in the United States. The plan was to have Time Machine in New York and the flagship boutique in Las Vegas completely refurbished by the end of 2020 and most likely renamed as the first Bucherer stores. Is that still the timeline, and how is progress?
Patrick Graf: We are still on track with both projects. We started the dismantling of Time Machine after moving to a temporary site on Madison.
I would say we now expect to reopen the new flagship store early in 2021. We are going to start on Las Vegas soon. We are again going to open up a temporary store just around the corner [in The Forum at Caesars].
Both of the new stores in New York and Las Vegas will have similarities, but both are also very different. We try to bring in the local sense of place to both of them. So those are two very important flagship projects, but we have also renovated stores in San Francisco, Naples and a few others.
WP: Even though you have refurbished San Francisco, CA, and Naples, FL, you did not choose to change the name to Bucherer for either of those stores?
Patrick Graf: No, we want to wait until we have completed the flagships. If we started changing the name last year, you would have had a few stores called Bucherer and others mainly Tourneau. It would have caused a lot of confusion. Starting to introduce the name change with the flagships in the biggest cities makes sense from a publicity point of view.
WP: You have spoken before about the importance of a strong domestic customer base and less reliance on the Chinese and other tourists. I am sure your Lucerne and Geneva flagships do fantastic business with Chinese customers, and that may also be true in places like London with Selfridges and the Rolex boutique in Knightsbridge, Paris and New York’s Time Machine. Those locations must be taking a hit from the lack of Chinese travelers with the current Coronavirus situation.
Patrick Graf: Obviously there is an impact in Switzerland, Paris and London — the major tourist destinations that attract a lot of Chinese and other nationalities — as is the case with all the other luxury retailers and brands operating in these locations.
But, I also have to say that Bucherer has been growing its domestic business strongly in Switzerland and other European markets over the past two to three years.
We had very solid growth in domestic business for the past two years. That means we are gaining market share within the local markets in which we operate.
Local clientele is important. We need to keep things in balance.
WP: Your business in the United States and Germany must be less affected by the drop in Chinese shoppers than locations like Paris, London, Lucerne and Geneva, but what else are you doing to balance your business so it is less reliant on tourist spending? The situation must be particularly acute during the current Coronavirus crisis.
Patrick Graf: For example, we have put a lot of work into digital and online, which helps a lot today to communicate and sell online if people do not want to leave their houses.
We are continuously growing with innovative concepts like Bucherer Blue, which is becoming an ever more important part of the business.
We are investing a lot in building Bucherer as a brand in Europe. That again helps to strengthen domestic business.
We are investing in Bucherer Certified Pre-Owned, which you will see rolled out in more and more stores. It opened in September of last year and has been a huge success so far and mostly local business.
WP: The timing of the acquisition of Tourneau certainly looks even more brilliant today, given the strength of its domestic business in the United States.
Patrick Graf: Honestly, we could not foresee this, but lucky us. For many reasons, it was the right time to make that acquisition.
WP: Germany must also be a market where you are far more weighted towards domestic customers?
Patrick Graf: It is a key watch market and we have been growing in very nicely with domestic clientele. I think there is a lot of potential to grow the business in Germany.
WP: Can you give me any figures?
Patrick Graf: One of the beauties of being a private company is that we do not have to publish our numbers.
WP: One set of figures we can all see is from The Watches of Switzerland Group and, while we do not have trading results since the end of October [results to the end of January have been published since this interview, click here], it is notable that there has been very little effect on its share price since Coronavirus started. The share price is still close to its high since the company went public last year. So, despite having significant stakes in people continuing to travel and spend in their London flagships, investors do not seem that spooked. I wonder if that is because the greater limit on sales and profits is not on the demand side, but the supply side. A dip in demand from one set of customers might let them work through waiting lists more quickly for another set of customers who are desperate to get their hands on hot watches from Rolex, Patek Philippe and Audemars Piguet?
Patrick Graf: I cannot speculate how the share price of a competitor is influenced. It seems that the stock market likes what WoS is doing, though.
WP: The global market for Swiss watches is facing a number of headwinds this year. It seems that watch brands and groups are improving their control of supply and better matching it to demand in the right parts of the world. But Richemont, LVMH and Swatch Group are public companies with shareholders that want to see sales and profits maintained. It will not be easy for them to simply dial down sales into retail this year if the watches are manufactured and sitting on their balance sheets.
Patrick Graf: Again, I would not want to speculate about what is on any market player’s mind. All groups you mentioned are very professionally managed groups who have been in this business for a very long time.
WP: You certainly seem like a glass half full person, so I wonder if one upside to the current crisis is that retailers like Bucherer in Europe and the United States might get better allocations of the hottest and hardest to buy watches? Could there be more Daytonas, Nautiluses and Royal Oaks coming our way?
Patrick Graf: I think that we are still right at the early stage of this situation. So far I can see that most of the brands are taking a long term view. There might be a little bit more product available for everybody, but I do not believe we will go back to a major over-supply situation.
WP: How have you managed over the past year or two with the massive demand for what I call unicorn watches; the steel sports watches from Rolex, Patek and AP that have massive waiting lists and are never in windows?
Patrick Graf: A lot of people would like to hear me moan about this situation, but I cannot. It has a positive side because it has generated so much interest and curiosity about the watch industry. We see young people today suddenly taking notice about certain watches and brands. It is exciting. It is the Hermes Birkin and Kelly effect.
We get tons of e-mails every day from people trying to convince us to sell them one of these watches. Some of the calls are really funny, but we take it very seriously and we try to respond to everybody in the right way.
It is frustrating when you cannot make a sale, but we need to learn as an industry to be creative about the way we sell because there are alternatives – even from the same brands — that we can show customers.
If you just let people walk out of your store disappointed when they cannot get the specific watch they want, it’s not ideal. We have to be creative and find a way to keep them. Our people are more experienced with this situation today, and they are getting better at finding very personal solutions to get customers looking at other watches and other brands.
WP: Excitement may be one part of the story, but disappointment is another. The chief commercial officer at Ahmed Seddiqi and Sons in Dubai — your equivalent in that very successful luxury watch retailer — said at a forum that there are people on ten year waiting lists who have no chance of ever getting the Pepsi or Daytona they want unless they buy a lot of other watches while they are on the list. That cuts off a path for new customers to ever get the watches they are excited about.
Patrick Graf: That is not how we handle waiting lists. It’s a very complex and difficult topic. You don’t want to frustrate potential customers. Our store managers are doing a very good job at finding individual solutions.
WP: Tell me about your certified pre-owned business. We know it is massive in the United States at Tourneau; I have spoken to a number of Tourneau store managers who say pre-owned is like having a second biggest brand after Rolex in their stores.
Patrick Graf: It is fascinating in the US and we expect it to go the same way in Europe. Demand is increasing for pre-owned and vintage, not only in watches but other product categories. Look at what The RealReal is doing in America, it is transforming the market for second hand fashion.
I am convinced this is going to keep growing for many good reasons. It is cool; it is like bargain-hunting, although some pre-owned watches sell above retail prices. Younger people think it is cool because they want to wear something that is completely individual. It might be a watch from a particular year that means something to them.
Younger people are much more interested in sustainability for fashion and watches. They think it is nonsense to buy clothes and wear them only once. The world is changing, retail is changing, and the way people buy products is changing.
As somebody that joined Bucherer three and a half years’ ago [Mr Graf previously spent over a decade working in airport retail], I am surprised that it has taken the watch industry so long to recognize the potential of pre-owned.
Luxury watch brands and retailers thought pre-owned was a dodgy and shabby part of the business. Now you look at how we do pre-owned in our Zurich and Geneva galleries, it is beautifully executed.
We have more people these days walking up to our pre-owned floor on the fourth floor than any other floor of the store. It is a social area, we celebrate the watches. Ordinary people walk in and just want to spend time talking about watches.
That is important. It brings a lot of excitement and storytelling about watches.
WP: A side effect of the rapid development of the pre-owned watch business by companies like Chrono24, Watchbox and Bob’s Watches is that they have brought transparency to prices, which rise for the most popular watches, and fall for the least. This must be a challenge for a business like Tourneau that will find it difficult to sell a particular watch at full retail when it knows that the same watch, unworn with box and papers, is on Chrono24 at 30% less. And now, you could be the company offering a one year old version of a watch in one part of a Bucherer store where you are asking full price for it in another part of the store.
Patrick Graf: Yes, prices are much more transparent now that the CPO business is so well-developed. This is the nature of digital market places. Demand is defining prices in the CPO market, but brands can control them by developing brand equity. It is brand value first, that is key in our industry.
WP: Do you think there are too many watch brands today?
Patrick Graf: I believe that long term we will see a reduction in the number of brands. We have started to reduce the number of brands we sell in the US. The flagships in the past had 80-plus brands, this is difficult to maintain in the future. We to make sure that we position Bucherer with a certain product strategy and profile where our customers expect us to be competent
WP: I have to say that walking into the lower ground floor of New York Time Machine before you closed it, there were a vast number of brands that I would not associate with a Bucherer store in Europe.
Patrick Graf: With our US team, we are evaluating our best brand mix. In the end customers demand will show if we are right.
WP: Where do you stand on the debate about the future of major trade fairs in Switzerland? As we speak today, and this conversation may be overtaken by events before it is even published, the talk is all about whether Coronavirus will force them to be cancelled this year [the shows were cancelled just a few days after we met], but I am actually talking about the much longer term story of decline, particularly of Baselworld since Swatch Group withdrew. Where should we go from here?
Patrick Graf: I think that this industry will benefit from platforms where everyone interested comes together and shares the excitement and the freshest visions. It seems that the best way to do this is by joining forces to create powerful and attractive events for professionals and aficionados.
WP: I have done a survey of UK retailers and they overwhelmingly say they want to travel to Switzerland just once to see all the brands. They do not like the way groups are going in separate directions and dragging them all over the world when they need to be in their shops. Another interesting finding of our survey is that they do not like the idea of simply being told about new collections by e-mail. They want to attend events where they can see and touch the watches. The survey shows that, if the Swiss can get their act together, the desire to come to a major global show is as strong as ever.
Patrick Graf: I think that this is great news. I agree it is important to see and feel the product. And it is important to meet the passionate people driving progress.
WP: Here in Switzerland, is there a sense that Bucherer is at the table and listened to when the brands are planning how to present their new watches? Are you listened to by the brands and exhibition organizers?
Patrick Graf: No. These conversations are between the exhibition organizers and the brands. We are not involved.
WP: I find that incredible. Where would these shows be and where would the watch manufacturers be without the support of retailers?
Patrick Graf: As a Swiss company we are physically very close to all watch brands, so for us the situation is a little different.
But, I believe that brands and retailers share the same view about the exhibition situation. Many of the brands think that we have missed an opportunity to reach out directly to our customers with these big shows. That would benefit everybody.
WP: What do you see as the key challenges and opportunities in the coming year and beyond for Bucherer?
Patrick Graf: We are optimistic. There are a lot more opportunities than people might think. The key will be to continue bringing innovation and excitement to this industry.
I can’t be more specific in this interview for obvious reasons, but we spend a lot of time thinking about what the future will look like and what we as a group need to do to stand out and differentiate.
We want to get closer to the consumer with fresh ideas like the Bucherer BLUE collection that has become a hallmark for people looking for truly exceptional products and experiences.
WP: The Swiss watch industry has been stuck at around the CHF 20 billion annual turnover for several years now, but Jean-Claude Biver told me last year that he thought it could double in the next 10 to 20 years. What do you think?
Patrick Graf: I would agree. It is dependent on us as an industry — retailers and brands together. I might not say that the sky is the limit, that might be a little too high, but I would agree with what Jean-Claude has said.
There is a lot more potential and we just have to learn how to unleash it.