London becomes world’s centre for watch sales
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Watch sales have been thriving in London in 2016, not least since Britain’s vote to leave the EU, coinciding with long-planned retail investment by brands coming to fruition. The post-referendum slide in sterling has added to the momentum and helped fill new and revamped watch shops with customers.
“The UK is now the best luxury watch centre in the western world in terms of presentation of the product,” says Brian Duffy, chief executive of Aurum Group, which owns several watch retailers. Aurum has spent £25m on its London “investment and elevation” programme, revamping its Mappin & Webb Regent Street flagship and opening a two-storey Watches of Switzerland shop in Knightsbridge over the summer. Mr Duffy expects his “Golden Triangle” of Watches of Switzerland showrooms, which also includes stores in Regent Street and Oxford Street, on Mayfair’s outskirts, to turn over £100m this year.
The data give cause for optimism, despite pre-vote predictions of trouble. Swiss watch exports to the UK were up 23 per cent to SFr327m ($336m) July-September 2016 year on year, according to the Federation of the Swiss Watch Industry (FHS). The year is looking positive, says research company GfK POS Tracking: sales of watches over £1,000 rose 19.5 per cent by value January-August 2016 on the year before.
Brexit has not stopped or even slowed fresh expansion so far. Mr Coleridge of the Watch Gallery says plans for 2017 “were formulated well before Brexit [and] we are even more positive about these as a consequence of Brexit.” His plans for 2018 assume a long-term weak pound — and consequent boost in sales from tourism.
But Mr Duffy sounds a note of caution: if prices rise thanks to a weak pound, but earnings do not, “logically this must impact consumer markets.”
Retail expansion planned before the Brexit vote is going ahead. The Watch Gallery will add 1,000 sq ft to its refurbished and enlarged Selfridges Wonder Room in the run-up to Christmas. Next year, Harrods will refurbish its Fine Watch Room, which opened in late 2011. After a quiet period of monobrand activity, thought by one industry figure to have been brought on by the recession and pre-Brexit caution, further brands expect to open boutiques next year. Both Audemars Piguet and Roger Dubuis are looking for space in London.
Before the Brexit vote, watch retailers had already been planning to expand in the UK based on the market’s growth over the past five years. According to the FHS, exports of Swiss watches to the UK doubled between 2010 and 2015. In September, the Watch Gallery added a Covent Garden showroom to its portfolio, which includes the Rolex boutique at One Hyde Park and Selfridges’ Wonder Room. “The store has already done double our expectations,” says David Coleridge, Watch Gallery’s chairman. “We expect it to turn over £4m-£6m in its first year.”
It is one of the first to open in landowner Capco’s extensive redevelopment of Covent Garden, an area which attracts 42m customer visits a year. “There was an area around Covent Garden with a working population equivalent to some UK cities that wasn’t served by a luxury watch retailer,” says Mr Coleridge. “We’ve filled that void.”
Within this success, however, there are uncertainties about different retail models. Not long ago, the debate in UK luxury watch retail centred on the relationship between stores that sold many brands and monobrand boutiques, which was uneasy as the latter were seen as a threat. After 2009, the number of own-brand showrooms in London grew quickly, reflecting the growth in Swiss watch imports and turning Oxford Street, Regent Street and Knightsbridge into watch-destinations.
According to both brands and third-party retailers, the battle between these models has cooled. “We feel little or no impact from these openings,” says Helen David, chief merchant at department store Harrods, which stocks 40 luxury watch brands. “In retail, it’s often the opposite. More competition in an area actually drives footfall and customers to a destination. Knightsbridge is now seen as a destination in London, as well as globally, for watch purchases.” According to Ms David, Harrods’ watch business is in “high double-digit growth” this year.
Patek Philippe agrees that the two types can work well together. The Geneva brand closed its Bond Street “salon” in February 2014, reopening it in a larger space next door nine months later. “The salon hasn’t cannibalised our partners’ business at all,” says Mark Hearn, Patek Philippe’s UK managing director. “It’s been a strong complementary addition and it works very well in conjunction with our retailers to assist them developing their business. To an extent, the salon is a PR operation. We are not trying to channel product and sales through the salon or to poach customers from our retailer network.”
Celine Larose, UK brand director for Vacheron Constantin, which opened a boutique on Bond Street in 2013, expresses a similar view. “The boutique has created momentum for us and had a very beneficial effect on our third-party retailers,” she says. “The two networks complement each other and I think they will continue to coexist into the future.”
Some industry figures have suggested that the third-party retail model is already outmoded. “The new generation of consumer is not buying the way we buy today,” said Audemars Piguet chief executive François-Henry Bennahmias in an interview published on salonqp.com in September. “It’s the end of the people in between . . . when the only thing they provide is being in between the client and the product. The retailer will have to adapt to this new way of playing. And it might need to be closer to the brand than it is today.”
Moreover, it is independent retailers — rather than brands or chains — which could suffer, says Mr Duffy, who claims Aurum now accounts for 46 per cent of UK watch sales by value through its network. “Independents as a class of trade are declining,” he says. “They will find it more and more difficult to compete.” Small independent stores cannot offer the service, customer relationship management and digital marketing of larger chains, he suggests.
Swiss brands agree that London’s watch shops are exceptional. “London is one of the capitals in the world where Omega is best presented,” says Raynald Aeschlimann, president and chief executive of Omega, which in the past two years has opened boutiques on Oxford Street and Sloane Street, and a shop-in-shop in Watches of Switzerland on Regent Street. “The strength of our UK business, together with Brexit, means the UK is now Omega’s number-one market in Europe.”
London’s consumers will not be short of places to shop — or at least window-shop — in the future.