New York is well populated with traditional showrooms and monobrand stores pumping out luxury watches from midtown locations around Grand Central, Madison and 5th Avenue, but look a little further afield and a clutch of innovators are disrupting the market with business models built around what a new breed of customer wants.
My first stop on a three day tour of New York retailers was an hour by train outside the city in Philadelphia, another metropolis with gleaming towers in the center and sprawling suburbs beyond. Nestled within one of these suburbs is a business park housing the four storey offices of Watchbox, one of the world’s largest specialists in secondary market and pre-owned watches.
The company’s co-founder Danny Govberg will not share turnover figures, but he has his sights set on becoming a billion dollar global business and is working on amassing a constantly turning stock of luxury watches worth $120 million this year.
Watchbox is almost entirely an ecommerce business, although it plans to also wholesale pre-owned watches to retail partners. Its offices have a workshop on the ground floor staffed by qualified watchmakers and equipped with the latest gadgets to test, authenticate, refurbish and polish watches to mint condition. They are stored in a hi-tech vault where I was shown more Patek Philippe, Richard Mille, AP and FP Journe watches in one place than I have ever seen before.
A floor above is what looks like a Wall Street trading floor where a team of around 20 buys and sells watches all day every day. The aim, as with any trading floor, is to buy low and sell high.
Ecommerce, design, marketing, logistics and administration make up the rest of the team of a company that looks more like a Silicon Valley startup than a watch shop.
Back in New York and my next stop was at Material Good in the Lower Manhattan neighborhood of SoHo. This classic regeneration district that transitioned from manufacturing in the post-war years to become a shabby hinterland between Midtown and the Financial District and has now gone full hipster, but these are hipsters with prodigious spending power.
Material Good is made for this community, and was created by a team that looks and talks just like them. Co-founder Rob Ronen came from the old world of Swiss watch brands and ran Audemars Piguet in North America for many years. His new venture sells only Audemars Piguet, Richard Mille and vintage watches from a second floor showroom designed to look like a stunning New York loft apartment replete with designer furniture and artworks from Damien Hurst and Picasso. There is no street level store frontage and I walked past it several times before noticing its brass plaque on a nondescript entrance.
This is a business that is all about building close relationships with a clearly defined community of customers. It is not a private members’ club, and is open to anybody who wants to come in and have a cocktail or espresso while chatting about watches, but it does feel like it is designed to appeal to a certain demographic. My lack of a beard, tattoos and a supermodel on my arm marked me out as an outlier to their usual punter.
Understanding the customer is also key to London Jewelers, which dominates the Gold Coast of Long Island where some of the founding families of the American economy populate the mansions and gated communities. In some ways, this is the most traditional of the companies I visited, but it has also been an innovator for its well-healed clientele.
It has a virtual monopoly on the biggest brands in watches and jewelry, and the Manhasset flagship I visited has been designed to look like a parade of monobrand stores from the outside with facades for Rolex, Patek Philippe, Cartier, Van Cleef & Arpels and Chanel. It is like Rodeo Drive, with the convenience of car parking because it is located in the uber-upmarket Americana retail park that is also home to Louis Vuitton, Jimmy Choo and Gucci boutiques.
The business was founded by Charles London in the 1920s, and is now run by his direct descendants Mark and Candy Udell, their children Scott and Randi, and their nephew Zachary. The business exploded from the 1980s onwards because of the vision of Mark and Candy who recognized the power of brands like Cartier, Rolex and Patek Philippe to define their business to the surrounding enclave of millionaires and billionaires.
Back in Manhattan and I paid a quick visit to the overseas invader, Watches of Switzerland, which first staked a claim in the US market in 2017 with the acquisition of Mayors in Florida and Atlanta before taking over top end watch showrooms in Las Vegas and, most recently opening its first Watches of Switzerland-branded store in New York. The company broke the mold with its 155 Regent Street flagship in London, and its SoHo store in Manhattan is no less groundbreaking.
It is surrounded by luxury fashion and lifestyle brands, all of which work with the fabric of the historic buildings of the SoHo neighborhood, the effect of which is as far away as you can get from the somewhat sterile glass fascias of a shopping centre. Unlike a shopping centre, which is designed to generate maximum footfall, SoHo retailers have to exert their own pulling power by creating stores that are destinations in their own right.
Watches of Switzerland does just this, with a lower ground floor housing a library, cocktail bar and watch servicing center, while the ground floor has more familiar branded zones for Rolex, Patek Philippe and over a dozen other major Swiss watchmakers. It is a stunning store, and no wonder CEO Brian Duffy describes it as his favorite in the world.
There are two significant innovations worth noting at Watches of Switzerland. First is the way the store works in harmony with its environment, with hardwood floors, steel girders and exposed brick replacing the deep pile carpets and shiny surfaces of more modern spaces. Second is not visible to the human eye, because it is the market-leading customer relationship management system that tracks every mouse click and physical interaction between Watches of Switzerland and its customers. Try to imagine Google running business development for a luxury watch shop, and it would come up with something similar to Watches of Switzerland.
Digital engagement is also central to the final stop on my tour of innovators, which was just around the corner from Watches of Switzerland at another historic SoHo landmark that houses Hodinkee. The business is known as a news, analysis and reviews website for luxury watch collectors, but has morphed from its creation ten years ago into a significant ecommerce player specializing in limited editions from brands including Vacheron Constantin, IWC and Zenith.
Now Hodinkee is moving into bricks and mortar retail, but will do so from a seventh floor clubhouse rather than a street level showroom. The company is already an authorized dealer for ten brands, which will all be represented in the store. The space is also likely to be used for seminars and collector meetings as well as providing services for podcasters and bloggers.
As well as noting the radically different business models of these five disruptors, it is also worth noting a couple of things they have in common. Every one of them is a multibrand operator, flying in the face of attempts by the likes of AP, Swatch Group and Richemont to open as many monobrands as possible. Secondly, they are all designed to appeal to a younger audience. Even London Jewelers, which could not be more dependent on old money, has a bridal jewellery room that borrows design cues from Apple stores because it wants millenials to make their first significant purchase — often an engagement ring — in their store.
It is tough for luxury retailers to thrive without the magnetic attraction of authorized dealer status for Patek Philippe or Rolex. London Jewelers and Watches of Switzerland certainly demonstrate how important these brands are to their businesses. But the other three companies I visited have found unique ways of counter-punching, whether that be through the pre-owned route like Watchbox, the intimate boutique experience of Material Good or the digital disruption of Hodinkee, which welcomes one million unique visitors to its website every month.