Audemars Piguet intends to become the first major watch brand to sell 100% of its watches from monobrand stores, and expects to complete the move away from multibrands within five years, possibly even sooner. That does not mean completely cutting out partnerships with existing retail partners, but they will have to create boutiques, either through franchises or joint ventures, with the AP name above the door as the company’s chief executive Francois-Henry Bennahmias explained to WatchPro when we met at SIHH.
What is it that privately held companies like Rolex, Audemars Piguet and Patek Philippe have that publicly traded businesses Richemont, LVMH and Swatch Group do not? Sometimes the answer appears to be a desire to look long term and plan for the future rather than be directed by the demands of faceless shareholders that care less about taking difficult decisions today that are needed to build value long into the future.
Family values don’t always help, but in the case of Audemars Piguet they appear to be fundamental. The current major stakeholders in the company, chair and vice-chair Jasmine Audemars and Olivier Audemars, are both fourth generation members of the same family that founded the watchmaker in 1875. The company’s chief executive François-Henry Bennahmias has been in the business for 20 years. He has a hyperactive, gregarious, personality that might not fit with a more corporate atmosphere, but at Audemars Piguet, he is seen as a rainmaker with a vision for how to keep a 144 year old watch brand relevant in a rapidly changing global market.
The most far-reaching decision that Mr Bennahmias has made in the past five years has been to back out of wholesale distribution of AP watches and sell only direct to consumers. This has been highly controversial since many of the watchmaker’s major retail partners have invested huge amounts of time, energy and money into building the Audemars Piguet brand to their customers. Now AP wants those customers to itself.
Audemars Piguet sales hit €1.1 billion in 2018 from production of 40,000 watches Mr Bennahmias revealed at SIHH in January. Half of the watches were sold under an Audemars Piguet roof last year, he added in an on-stage Q&A. The longstanding move towards all sales being sold directly to consumers, entirely cutting out multi-brand retail partners will be complete within 3-5 years, Mr Bennahmias later said to WatchPro.
That will not necessarily spell the end of relations with international groups like Watches of Switzerland, Bucherer or Wempe, but these partners will have to open either franchised AP stores or joint ventures, Mr Bennahmias says. These large groups are increasingly comfortable opening monobrand boutiques on behalf of major watchmakers including Rolex, Omega, Breitling and even A. Lange & Sohne in major cities.
Even today, multibrand retailers are being asked to provide data on every customer sold an Audemars Piguet watch. It is not yet mandatory, but the brand is offering to double the length of the warranty a customer is given on its watch if they hand over all their personal information. Before long, AP will know as much about its customers as its retailers.
Multi-brand partners are also being marginalized when it comes to Audemars Piguet’s big product announcements. CODE 11.59, the biggest watch collection announcement by AP at SIHH, will only be available in its own boutiques.
The watches will go on sale in February, but there are only 700 units across 13 references being released at launch. It is expected there will be 2000 available world-wide by the end of 2019. British customers will get a shot at buying one when the watchmaker opens an AP House in London this year, most likely in April or May.
Limiting distribution can light a fire under the secondary market for luxury watches. This is seen around the world with Rolex, where thousands of retailers that cannot secure authorized dealer status with the watchmaker trade instead in pre-owned or grey market pieces. The same is true for Patek Philippe, which has even fewer authorized dealers and makes only 70,000 watches per year to go around all of them.
The secondary market for Audemars Piguet is already hot in places, and tightening distribution could make it even hotter. Many of its most popular Royal Oak models are sold on sites like Watchbox and Truefacet at above their recommended retail prices because they have sold out too fast. Models from the ladies’ Millenary are usually trading at considerable discounts.
“I always say that the secondary market is a mirror of who you are,” Mr Bennahmias describes. “It is extremely important. If you buy a watch for $40,000 and two years later it is worth $12,000, you are not going to buy so many watches from us anymore. Today, everything is public; everybody knows everything. We know the dynamics in the car industry where the secondary market has been working for decades. It is only just beginning in the watch world,” he adds.
Audemars Piguet said in January last year that it wanted to develop a certified pre-owned watch strategy so that it was always standing behind the authenticity and quality of the second hand watches being bought and sold. Seizing control of the secondary market is far from straightforward when it comes to pricing. It is awkward enough if a customer finds that an Audemars Piguet watch they paid $40,000 for one day is worth $12,000 a year or two later, but imagine the reputational damage if it was an Audemars Piguet store that offered such a disappointing trade-in price.
Like with the car industry, Mr Bennahmias thinks that some depreciation in the value of pre-owned watches will be acceptable to customers. “The good news is that when you have bought a product, you are less sensitive about its value because you have used and enjoyed it,” he suggests.
“Let’s say you have bought a watch for $40,000. With a bit of negotiation you managed to get a deal to buy it for $35,500. Two years later I might offer you $25,000, so just over a $10,000 spread. Are you bothered when in your mind the purchase has already gone, it no longer has an emotional effect on you. It doesn’t matter anymore. It would matter if I offered you $12,000, but people will accept that there is a price for using the watch for two years,” he continues.
The announcement that Audemars Piguet was moving towards controlling the secondary market for its watches was big news at the start of 2018, but a year later little has been heard about it. Are you still moving forward? WatchPro asked. “We are still testing the waters,” Mr Bennahmias replies. “We have done it in Switzerland, and we are starting it now in Japan, Singapore and New York. We are learning so much, so it is not a matter of how fast we are going to launch, it is about how perfectly we have to launch. It is not as easy as people may think it is. There are many complications putting this together. Are we going to do it ourselves? Are we going to do it with somebody else? Are we going to sell pre-owned through our stores, or will it be internet-only? There are many questions, so while we are trying answer all of those questions, we are testing, testing, testing,” he adds.
As well as the issue of pricing for second hand watches, there are also legal difficulties with watches traveling around the world and most countries having no formal rules for things like duties on pre-owned goods. And the watches will all need to be checked, authenticated, refurbished and cleaned before going back on sale. “I will need a lot more watchmakers. I cannot say to a customer who comes in with a watch to trade-in that I will get an answer to them in four months. No, it needs to be instant. I need to accept your watch in the store without even opening it and tell the customer it is worth between $17,000 and $19,000, and see what the customer says. If the customer agrees to the price, I then need to talk about whether they want to put the trade-in price towards buying another watch. There are so many things that need to be put in place. It is very complicated,” Mr Bennahmias sighs.
He may sound a little defeated, but giving up is not in the nature of Mr Bennahmias. “We are going ahead, no doubt,” he insists.
CODE 11.59 designed to crack the youth market for Audemars Piguet
Audemars Piguet hosted 120 guests in the Musee Atelier to celebrate the launch of its Collection CODE 11.59 a few days before press and retailers got a glimpse of the 13 reference line at SIHH in Geneva.
Jasmine Audemars, Chairwoman of the Swiss-based firm’s board of directors, thinks the CODE 11.59 represents how the brand is pushing limits in watchmaking. “At Audemars Piguet, we constantly challenge ourselves to push the limits of craftsmanship. Endowed with a strong spirit of independence, we proudly own our roots and territory, daring to combine precision and creativity,” she explained. “Faithful to our legacy, we continue to evolve by preserving and rewriting traditions. 11.59 is ahead of the game, constantly on the brink of tomorrow,” she added.
The CODE collection, which stands for Challenge, Own, Dare and Evolve, consists of 13 references with calibers all developed and manufactured by AP. A fully integrated chronograph is among the calibers that will be used in the new line.
The CODE 11.59 will only be sold through Audemars Piguet boutiques, which is probably the only practical solution because just 700 pieces will be ready for the February on-sale date. By the end of the year, AP hopes to have 2000 made.
Reaction to the new line from the press and watch bloggers was far from enthusiastic, Audemars Piguet CEO Francois-Henry Bennhamias admitted in an on-stage Q&A at SIHH. “Reaction of people seeing the watch just on screen has been very mixed. Some people love it, some hate it,” he said. “The good news is that the younger generation is loving it,” he added.
Prices without sales taxes for the CODE 11.59 range from CHF 25,000 for the three-hand automatic up to CHF 39,500 for the chronograph and CHF 69,500 for a perpetual calendar. Flying tourbillon, skeletonised and supersonerie versions are CHF 129,000, CHF 175,000 and CHF 295,000 respectively.