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Becoming Bucherer — what is coming next at Tourneau?

DAVID COLERIDGE_DM LONDON2

Almost two years after Bucherer bought Tourneau, we are not much closer to knowing what the new owner has in mind for the United States. In a search for clues, Rob Corder spoke to the chairman of Bucherer in the UK, David Coleridge, whose multibrand group of luxury watch stores, The Watch Gallery, was acquired by Bucherer in 2017.

In a fascinating interview, he pulls back the curtain on his relationship with the major watch groups, the lack of decision-making power in his local market and the reasons why direct to consumer sales online and in monobrand stores are stalling around the world.

It has been 20 months since Europe’s biggest luxury watch and jewelry group Bucherer acquired Tourneau, and we are still waiting for any physical signs that changes are afoot.

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Yes, Tourneau’s Time Machine in the heart of Manhattan has decamped from its Trump Tower location into a temporary space on Madison as the flagship is refurbished, but even that is not expected to reopen until Fall 2020, what with the President living upstairs making demolition a delicate process.

 

Tourneau has moved its flagship Time Machine temporarily from the base of Trump Tower while it undergoes a radical transformation. The store is expected to reopen in Fall 2020.

 

Having bought the 28-store nationwide chain Tourneau in January 2018 and organized the business under the American subsidiary Bucherer USA, the group went on to buy Baron & Leeds 8 months later, another premier jeweler that operates Rolex branded boutiques and two multi-brand stores in California and Hawaii.

It is fair to say that Bucherer is still not a recognized name to the American watch-buying public or even the watch-selling retailers with which it is now competing. Tourneau is still — politely — turning down requests for interviews and Bucherer’s head office says it will give WatchPro an update on its plans within a few months.

So to get a feel for how Bucherer may develop and what direction it will take, we turned to David Coleridge, chairman of Bucherer in the UK, a man who created and sold a major luxury watch group in the UK to the Swiss-based retail giant.

In the course of the conversation we got back more than we bargained for in a spicy encounter that showed the insatiable appetite for growth for Bucherer and got an insight into the delicate politics of working with the world’s biggest watch brands. “Bucherer is a highly acquisitive company,” Mr Coleridge replied in answer to a question on whether the group would buy more retailers in the UK, United States or elsewhere.

First a bit of background so that Mr Coleridge can be mentally placed in the pantheon of senior international watch executives. He first got into the luxury watch business 30 years ago with a company called DM London that was renamed The Watch Gallery in 2016.

There is no equivalent to the pulling power of this watch concession, known as The Wonder Room, in the United States. Since it opened in 2007, most brands will say that if you are not in Selfridges, you do not exist in the UK. The department store delivers a higher footfall of customers than any other retail space in the country, and The Wonder Room sells them watches from every major brand bar Patek Philippe — a sore point for Mr Coleridge who has pleaded to work with the watchmaker for decades.

 

 

The Watch Gallery had a second concession at Selfridges in Manchester, Britain’s third largest city with a population of over 2.5 million, but pulled out because it would not pay its way. It had two of its own multibrand showrooms in London and a Rolex monobrand boutique in Knightsbridge, where it is a near neighbor to Harrods. That store was recently expanded and refurbished and is now the largest Rolex monobrand in Europe.

Bucherer bought The Watch Gallery in March 2017, adding the portfolio of stores to 29 other locations in Europe comprising 16 in Switzerland, 10 stores in Germany, and single boutiques in Vienna, Paris and Copenhagen.

With the addition of Tourneau and Baron & Leeds, Bucherer now has a network stretching from Germany to Hawaii with around 65 stores, almost all of which are anchored by Rolex and many of which are the premier destination showroom for their home cities. This is a strategic goal that Bucherer will without doubt build on in America.

Bucherer has peerless relationships with Switzerland’s biggest brands because it has lived among them for all of its 131 years since being founded in 1888. However, Mr Coleridge has found that he still makes buying decisions independently of the retail group’s headquarters in Lucerne.

That may change as mergers and acquisitions by Bucherer, The Watches of Switzerland Group and independents consolidate power into fewer players, a process that is taking place 40 years after Swatch Group, Richemont, Kering, LVMH and Rolex/Tudor amassed into a group of powerful giants.

In the past two decades, Mr Coleridge has seen these groups get bigger and more powerful. “The last 20 years have been all about consolidation on the supply side of our industry so that now we have six big groups including Fossil Group at the volume end. Outside of these, there are a couple of independents: Audemars Piquet and Patek Philippe. I would think today that around 85-90% of our supply now comes from the big groups. If I went back five years, I suspect the groups would account for 60-70% and if I went back 10 years it would be 40-50%. That has been the biggest structural change in the industry,” he describes.

Bucherer in the UK has autonomy from its Swiss head office to make decisions on multi-million dollar refurbishments and which brands to work with, but the same cannot be said of the executives Mr Coleridge works with on the brand side. “We try to look for local solutions with the individual brands. But when, for example, we are opening a new shop and want to speak to the brands locally about it, we can discuss it in this country, but it will ultimately have to be approved by their headquarters. Central control has really developed now. My instinct tells me that all groups have gone far more for central control than they ever did before. The Groups are putting the more senior people in at international level, and that is where decisions are being made,” he says.

Mr Coleridge is too much of a politician to show too much desperation at the lack of decision-making allowed at the local level, but it is obvious that the protracted long distance negotiations are frustrating. It has led to a hollowing-out of subsidiaries at the UK level, and many have alarmingly high staff turnovers as people quickly move on once they discover their impotence.

The experience of Bucherer’s UK chairman is not unique, as any retail executive in the United States would testify. For fear of a backlash from the most powerful brands, they keep their frustration private. But Ariel Adams, founder of powerful Los Angeles-based watch site aBlogtoWatch, speaks for them. “One of the most pressing problems facing the wristwatch industry is the fact that managers and directors outside of Swiss head office cannot spend any money. The situation is so dire that at most companies (publicly-owned or independently-run), company departments are having their finances micro-managed so heavily and so arbitrarily the behavior is akin to punishing their in-country employees. If the watch industry is to have any large-scale hope of recovery, it better start spending like it wishes its customers would,” he says in one of his regular “Ask Ariel” columns for WatchPro (find Ariel’s articles online at USA.watchPro.com).

When Bucherer gets stuck into refurbishing its American stores, all hell will break loose as brands fight for every square inch of space in the new showrooms. Mr Coleridge has seen it all before and it is likely that Tourneau CEO Ira Melnitsky will need to be battle-ready when the time comes. “Almost everything we do with every brand now has to be signed off in Switzerland and agreed by their group. That can be a laborious process that slows things down and makes it more difficult to do things that are right for a particular store,” he warns.

 

 

America has often been made to feel that the extra 4000 miles distance from Switzerland means it is not listened to or understood by the watchmaking groups in the way that European peers are.

If it is any consolation, the British do not feel any different. “Many brands take a formulaic point of view, demanding space relative to their competitors, without necessarily being conscious of what works in that location. These are our shops, but there has been something of a land grab by brands, by which I mean that brands want to placed and presented in their proscribed way within our shops. Bucherer is pushing back hard against that, and trying to create a unique Bucherer shopping environment for the customer,” Mr Coleridge reveals. “As a retailer, we need to find the balance between positioning brands the way they want to be represented yet keeping our own identity and shopping experience. “The key is that all brands must be shown respect, which is fair enough, but the politics when these discussions are taking place at group level make it infinitely complicated,” he adds.

The brands should be more accommodating, after all it is retailers that are investing so heavily in creating sumptuous stores and filling them with cash-chomping stock.

“It is a really expensive business,” Mr Coleridge states. “We like big shops that could mean investing £6 million in stock, and several more millions in shop fitting. It is a really expensive upfront investment.”

The direction of travel for luxury watch retail in the UK is the same as for the United States. The biggest brands are trimming their networks so that those remaining do more business. “In the UK, Rolex today has around 115 doors. Five years ago I think it had 170. TAG used to have 350 accounts, it has around 200 now. That pattern is reflected by most brands. That consolidation is good for the retailers that survive, but the ones that lose these brands quickly have to find something else to do,” Mr Coleridge describes.

“There will be fewer shops, but they will be bigger. Brands require us to create a better environment for customers. Retailers that have responded the right way to those demands have created fantastic shopping environments that present products really well,” he adds.

Above all, what the groups want are fully branded environments, ideally monobrand stores, but it is increasingly looking like they will happily let retail partners carry the cost for creating these outlets. Audemars Piguet has publicly stated that it wants all of its watches sold from under an AP roof, and thinks it can get there within a few years. The model being offered to retail partners is joint ventures where AP owns 51% of companies run by the retailers. Rolex and Patek Philippe allow control to rest with its partners, but have exacting rules on how their watches are presented and charge for putting their own furniture into fully branded retail spaces.

That Rolex model suits Mr Coleridge down to the ground because they will not pull the rug from under him. “Rolex has never wavered from telling us that they will not open their own stores. That is the single biggest commitment they can give to us. That commitment is so important. It is the cornerstone underpinning our joint success,” he says.

“When we were still The Watch Gallery back in 2011, we were considering opening a Rolex boutique in Knightsbridge, which was a huge investment from our side,” he recalls. “We were looking at a 15 year lease on the retail space which at the time seemed like an incredible investment and commitment for a company our size, but we knew that, while they had a Rolex boutique in Harrods and were also in Watches of Switzerland in Knightsbridge [on the other side of the street], there was no way they would open their own shop on our doorstep. We would not have done this store without that assurance.”

 

 

Having spent a decade opening their own stores, Mr Coleridge believes the process for brands is stalling and even going into reverse as the value that retail partners on the ground bring becomes better appreciated. As a master of multibrand, he would advocate that strategy but, while he was once ignored, there is growing evidence that his wisdom is now being accepted. “All of the groups could easily afford to open flagship stores, even if they were not making money. But I do not see many more being opened as from a customer journey point of view clients like to have a bigger variety of choices when shopping. Swatch Group appears to me to be reducing their monobrand retail network around the world. There are certainly more closing than opening. I think the direct selling in monobrand boutiques owned and operated by the groups has gone as far as it is likely to go,” he predicts.

And ecommerce isn’t working as well as hoped by brands either, Mr Coleridge believes. “I think that the online impact in the watch industry, except for pre-owned, is more muted than expected. Most of the brands have their own ecommerce sites where you can buy direct from the brand, but it would seem that brands sell more in multibrand ecommerce sites than they do from their own monobrand sites. We could debate why that is. It could be that retailers have sites that are more focused on selling watches while the brands’ sites are more about eulogizing the brand. If the primary purpose of a website is to eulogize the brand, then that gets in the way of the sale,” he says.

The groups may take his advice and focus more on their own multibrand ecommerce offerings. Richemont is furthest ahead on this curve now it owns Watchfinder, Net-a-Porter, Yoox and Mr Porter, however they will need to offer more than just Richemont brands, Mr Coleridge predicts. “They certainly have the expertise to develop a multibrand site if they want to, but they would have to put watches from non-Richemont brands on it to make it work for customers. Our experience teaches us that there is a certain balance and breadth of brands you need to make a multiband offer work. TAG sells better when it is sold next to Longines. Longines sells better when it is next to Breitling,” he reveals.

An added challenge for groups wanting to run their own ecommerce sites is that the market for buying watches online is not growing, but costs continue to rise. Mr Coleridge is referring specifically to the UK market, but suggests the only way to increase sales online is to earn it from competitors, and that does not come cheap. “The problem for an awful lot of companies today is that they have invested massively in ecommerce and are not making any money at it. They can hope that sales will increase and turn that side of their business profitable but, in the watch world, that can only be done by winning market share. In an overall market that is growing in low single digits, it is now impossible to sustain massive online growth as it was 5 years ago,” he calculates.

Finally, the Bucherer UK chairman has advice that is universal and will certainly be actioned by Touneau’s Mr Melnitsky and his team as they deploy the capital investment Bucherer is sure to bring. “There are three things consumers are looking for: the right range of products, an enjoyable environment in which to shop and convenience, which is about location. In order to offer the range you need the capital to buy the stock and a big enough space to present it. For the environment you need the best brands combined with the best staff who will create an enjoyable experience for the customer. For convenience you need the best locations to make it easy for the customers to visit. Whether you are a big retailer such as Bucherer or a small independent if you deliver these you are likely to succeed – but it is very capital intensive to deliver all three elements,” he smiles.

Tags : BuchererThe Big InterviewTourneau
Rob Corder

The author Rob Corder

3 Comments

  1. Great article. As a small retailer with 15 brands, we can attest to the fact that Bucherer, as a watch brand, (Carl F. Bucherer) is oe of those smoderlingly HOT brands that is poised for a BIG breakout. And not just the 25k to 50k complicated pieces. The Scuba-tec is an unsung aspect of the brand. The unheralded hero. The entry level Luxury. Looking forward to Bucherer, the retailer.

  2. This is an excellent and very informative article, especially for someone in the retail watch industry, as I am. I appreciate your efforts.. Congratulations Rob.!

  3. I found your article very interesting and insightful. While I was EVP at Tourneau responsible for all merchandise decisions from 2002 to 2012 we experienced almost all of the statements in this article. The power struggle between the retailers and the brand heads in Switzerland are constant and nerve racking for the retailer. The retailer’s investment keeps going higher and margins keep going lower while sales seem to stagnate. While I was at Tourneau we had a study done about customer experience and found that customers preferred shopping in a multi brand environment. Along this time Omega had pulled out of Tourneau and started to build their boutiques. In a conversation I had withe head of Omega I asked what he thought would happen when a customer came into the Time Machine and ask for Omega. He responded with”Well I think your salesperson would direct them to our boutique on 5th Avenue”. I couldn’t believe my ears. This was how out of touch the brands are about the end consumer. I could go on and on but I wish the retailers well in their struggles as it is always one.

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