Five years of investment in its physical estate has seen Pragnell reach a new level of perfection at its Stratford-Upon-Avon, Mayfair and new Leicester showrooms as Rob Corder found out on a tour of the jeweller’s latest opening with managing director Charlie Pragnell.
WATCHPRO: The last time we sat together for a Big Interview was before the pandemic, which feels like another age. How would you describe business since then?
CHARLIE PRAGNELL: We have needed to be very reactive to the constantly-changing market conditions, not just during the pandemic when we were going in and out of lock downs, but ever since. As a small business, we are having to make adjustments all the time.
The pandemic caused incoming visitors to the UK to stop coming, which meant that our sales, which were approximately 30% export, went to negligible. That is, for the moment, how it remains, and the tourist tax has made sure of that.
Losing VAT rebates is extremely unhelpful to many industries because over the summer months, in particular, we would have seen visitors coming into London and other historic destinations around the country.
They travel in groups, they talk about their experiences with one another. They don’t just spend money on hotels and retail, they support the entertainment business and everything around that like banks and lawyers.
Shopping, which is the easiest to measure and is showing huge losses to Paris and Milan, is relatively minor in relation to the sum total of the economic activity lost over the summer from driving away these visitors.
The estimates made by various campaigners and lobbying groups about the billions lost because of the tourist tax omit unseen externalities and benefits that the UK enjoys from attracting these visitors.
It is hard to measure things like Britain’s soft power around the world or cooperation between business leaders in different countries. It is a huge own goal.
WATCHPRO: Even though we lost the VAT rebates before the summer of 2022, there was enough momentum to get through that season, but this year people seem more aware.
CHARLIE PRAGNELL: The measurable statistics show the growth in Paris and Milan since 2019 has been enormous in comparison to the UK. The less measurable impacts are even more important.
How do you measure deals that do not happen as a result of people not coming here. There are far fewer, but nobody can prove what would have happened. It is one of the greatest policy mistakes this government could have made when it is trying to stimulate growth in our economy.
WATCHPRO: I fear it is politically toxic to cut taxes for foreign millionaires’ shopping during a cost of living crisis and at a time when taxes are at a post-war high.
CHARLIE PRAGNELL: Yes, it seems that the political advantage of seemingly not prioritising the Bond Street shopper is more important to this government than the health of the economy. I find that scandalous.
WATCHPRO: Bringing it closer to home, how much of an impact have you experienced from the loss of VAT rebates?
CHARLIE PRAGNELL: It has affected our industry substantially. The consequence is that we remain with an almost domestic customer base and we have retained our level of sales from 2022, but it has been a challenge.
To maintain sales at that level has been entirely a consequence of our reinvesting profits into the infrastructure of the company: the showrooms, the jewellery workshops, the watch workshops in all three locations. In addition, we are investing in our stock; both watches and jewellery.
And, thirdly, we are continuously investing in our people with great training and recruitment.
WATCHPRO: Just taking the infrastructure part of that, you have doubled the size of your Mayfair boutique and we are sitting here today in your new relocated showroom in Leicester. If you are making that sort of investment and sales are flat, it must be eating into your margins.
CHARLIE PRAGNELL: We take a long-term view, and our investment today is to set up the business for where we expect it to be ten years from now.
The showroom and workshops we have built in Leicester are preparing us for a decade. If you only invest with a one year horizon, you would be a lot more cautious.
WATCHPRO: In Leicester and London, the only watch brands you carry are Rolex and Patek Philippe alongside your fine jewellery. What is your thinking for those choices when you carry a wider selection of brands up in Stratford-Upon-Avon?
CHARLIE PRAGNELL: There are some extremely good watch brands beyond Rolex and Patek Philippe and we will continue to develop our relationships with a number of them. Watch this space.
WATCHPRO: As you make these long-term decisions, are you put off working with brands that increasingly want to sell direct to consumers?
CHARLIE PRAGNELL: Those watch manufacturers that increasingly sell direct will inevitably reduce their appeal to long term retail partners. Time will tell whether customers prefer the monobrand approach.
My own opinion is that customers appreciate variety. They also appreciate different propositions and solutions. That might be a watch repair or a special occasion like a wedding that requires a mix of products and services.
In the long term, it is difficult for a business with a very singular product offering to evolve a meaningful and successful relationship with clients.
WATCHPRO: Can you do that with two watch brands in Leicester and Mayfair?
CHARLIE PRAGNELL: You are forgetting our jewellery. Patek Philippe, Rolex and our jewellery are enough to help us develop rounded relationships with our clients throughout their lives. We can offer different products and services for different occasions. Every touch point is an opportunity to develop stronger and stronger relationships.
What I am comparing is our offer as a jeweller with watch brands opening monobrand boutiques. Monobrands are very limited in the solutions they can offer to customers.
WATCHPRO: Let’s move onto the opening of this showroom in the centre of Leicester, right across the street from your previous position on Market Street. I hope you will forgive me for saying that as I walked up the street, it does not feel like an obvious location for a prestigious jeweller of Pragnell’s stature.
CHARLIE PRAGNELL: For a couple of hundred years Market Street was the most prestigious in Leicester. What we have seen with a number of towns and cities in the UK is that an out-of-town shopping centre, anchored by a big department store, pulls a lot of the retail traffic away from historic centres.
We believe that trend is reversing at quite some pace because those anchor department stores are struggling to compete with online retailers like Amazon and are closing.
Without those anchor department stores, the business model of those out-of-town shopping centres does not work.
A lot of them were build in the 1990s and are looking very tired now. There is no appetite for reinvestment and there are record vacancies that make them unappealing places to shop.
We are seeing a revival in a number of city or town centre shopping areas, to which incidentally brands like Rolex and Patek Philippe have remained loyal. Perhaps they saw this coming.
Many shopping centres are insolvent already. Many will going into administration in the coming years. The exception will be the very large centres: the Westfields, Blue Water, Trafford. It is the smaller ones that opened in the nineties that are struggling.
Added to which is the fact that a lot of local councils are giving permission to convert what are currently commercial first, second and third floor spaces, many of them vacant, into brand new premium apartments that will attract great residents.
A third reason I believe in the revival of these city centre streets is that the government has to address retail rates, and I think they are going to within the next budget or two.
It is extraordinary that physical retail is subject to the current levels of taxation when we employ so many more people than online retailers.
Physical retail also creates a sense of community and economic externalities for a city centre, which online retail does not.
Why then is physical retail paying the highest taxes? It should be precisely the other way around.
WATCHPRO: It feels to me, and I would be interested to know if you agree, that Rolex and Patek Philippe are engineering a balance between very large retail partners like Bucherer, Watches of Switzerland, and family-owned independents like Pragnell. I have a theory that Rolex buying Bucherer was a way to limit the size and power of both Bucherer and Watches of Switzerland, which would have dearly loved to buy Bucherer.
CHARLIE PRAGNELL: I will not speculate on why Rolex acquired Bucherer. However, I agree it is important to maintain a balance between major multiples and family-run independents. The multiples provide a very good standard of consistency while the independents provide longer term personal relationships with customers and collectors.
We are able to provide more of a human touch that is increasingly valued in today’s world of technology and artificial intelligence. The value of artisanal skills or creative invention are important for every global brand. AI, I believe in the longer term, will reduce the value of replaceable human skills and services.
Conversely, personal relationships, creativity, conversation, craftsmanship, tailoring; these elements will be increasingly valued because they are distinct from the machine.
The vast majority of people I know appreciate human contact and relationships. That is true in every single industry. By having more family-run businesses, the brands retain a greater link to customers who want these things.
WATCHPRO: Are you planning to become part of the Rolex Certified Pre-Owned programme?
CHARLIE PRAGNELL: The CPO programme is an inevitable evolution and required in order to set a suitable benchmark of quality for pre-owned watches from Rolex and other brands that may follow them in the future.
For the moment, we have been focused on developing our own estate. We only opened in Mayfair five years’ ago and doubled the size of that boutique last year. We doubled the size of our Stratford location in 2019.
We have now acquired this building and moved into this Leicester property with this new store and the jewellery and watch workshops. Next year we are looking at improvements again in Stratford-Upon-Avon. That will be five years of substantial estate development.
WATCHPRO: And you have not been standing still when it comes to your watch offering. Over the past few years I have seen you become one of the leading jewellers for independent watchmakers.
CHARLIE PRAGNELL: We are always looking at watch brands. We have taken on Laurent Ferrier, Ludovic Ballouard, Bernard Lederer and Greubel Forsey.
We are the only representative for these watchmakers in the UK. The point that I am making, in answer to your question about Rolex CPO, is that we have a lot on.
Timing is everything, so in terms of the Certified Pre-Owned offering, we have looked at it, and for us it is a question of when, not if. It is important for us and Rolex that the timing is right.
WATCHPRO: You certainly do have a lot on, but you must recognise the opportunities in certified pre-owned because you have just opened a store specifically for second hand watches in Stratford-Upon-Avon.
CHARLIE PRAGNELL: Yes, it is a small shop opposite our existing showroom in Stratford-Upon-Avon. We have found that pre-owned watches is a growing part of the industry, as many of your articles explain.
It is one of our largest brands. We are fortunate to have a good number of long term, experienced watch specialists, which is important when it comes to buying pre-owned watches over the counter.
We also have sufficient expertise in understanding the vintage watch market, because we have been buying and selling watches for a very long time, having partnered with Rolex and Omega since 1954, and having been one of Patek Philippe’s longest-serving partners in the UK. That has built up our experience with these watches and that really helps.
WATCHPRO: Aside from Rolex and Patek Philippe, you appear to be reshaping your line-up of watch brands do that you have less reliance on brands from the big groups and more of a focus on the artisan independents. I wonder whether that is part of a conscious move to position Pragnell as a destination for the rarest and most precious watches and jewellery, and whether that also shapes your thinking on the pre-owned and vintage watches you buy and sell?
CHARLIE PRAGNELL: The indie space is interesting, because I think that is a growth area for the industry in the long term, hence our relationship with those brands I previously mentioned. There is an increasingly discerning watch collecting community that is growing and becoming increasingly discerning.
Collectors of wine like to try a vintage that they have never tried before. The wine industry has been going a very long time and that evolution of understanding the taste, feel, history and evolution enriches the whole experience. With wine and watches, the expertise of customers is only going to increase. That is what keeps it interesting for us and our customers.
WATCHPRO: Does it concern you that the trend or story arc for indies is that many of them struggled unappreciated for decades, then they have suddenly become red hot with multi-year waiting lists. That demand was in part generated by the hard work of partner jewellers like Pragnell, then just as you start to see the benefit of all that graft, the brands decide to go direct to consumer and cut you out. We see this with F.P. Journe, which is opening its own boutique in Mayfair and cutting out partners like you.
CHARLIE PRAGNELL: This comes back to what I was saying about the difference between monobrands that can only do one thing and full service multibrand jewellers like us that have many ways to maintain and build relationships with customers over time.
You cannot build relationships in the same way if you only have one thing to sell. That is a fundamental problem with boutiques.
WATCHPRO: F.P. Journe makes fewer than 1,000 watches, MB&F fewer than 500 and they cannot come close to meeting demand. What is the point of opening a boutique if there is little or no product to sell?
CHARLIE PRAGNELL: There is a much greater bandwidth in our relationships with customers. You are right that, if you are watchmaker that only sells through its own shops, that is a very narrow band of communication, particularly when they have very low volumes of watches.
We will see in the long run, but my feeling is that all watch brands need independent representation in order to develop that rounded relationship with customers.
WATCHPRO: Brands could contrast the personal touch you bring with their ability to reach customers directly in ways that were not possible 10 years ago. They can communicate directly with clients through social media and draw them into their orbit.
CHARLIE PRAGNELL: True, but do customers trust what they are being told? You can use the internet to research any medical condition you may have, but you are still going to want to see a specialist.
WATCHPRO: Audemars Piguet is close to achieving its objective of every watch being sold from a boutique, run directly or as a franchise. I wonder whether that model will continue to work as demand across the watch industry cools and they are less visible than the likes of Patek Philippe with its retail partner network.
CHARLIE PRAGNELL: I think Audemars Piguet will want to work with family-run jewellers in certain parts of the world. It is a fantastic watch house. Its strategy has always seemed quite extreme, and there is an inevitability that things may settle into a more balanced distribution position.
WATCHPRO: The brand has become London-centric, although Watches of Switzerland Group is opening an AP House in Manchester. Is that sort of franchise model something you would consider?
CHARLIE PRAGNELL: It is not an invitation we have yet had.
WATCHPRO: You’ve described investing in your estate and raising standards across the business. Are you at the end of that cycle?
CHARLIE PRAGNELL: We are evolving Stratford next year. We will bring a lot of the detailing of Mount Street into Stratford, but it will have to work within what is a 500-year-old Tudor building that Shakespeare himself used to frequent. That is a wonderful dynamic that cannot be replicated elsewhere.
