Are winners in the fickle world of fashion watches born or made? That is the question WatchPro put to Peers Hardy, which has overseen spectacular growth of Ice Watches and Daniel Wellington in the past seven years, and now intends to repeat the trick with a fresh line up of watch and jewellery brands. Distributors have never before needed to master so many skills ranging from watch design, manufacturing, social media and just-in-time restocking as Rob Corder learned in conversation with Peers Hardy sales and marketing director Paul Harry and marketing manager Mary Michaels.
Mr Harry is the first to admit that parting company with Daniel Wellington last year was a wrench. But the irrepressible sales and marketing director of Peers Hardy, who masterminded the stellar rise of the Swedith watch brand over the past five years in the UK, was never going to sulk. He simply redirected his energy into finding and developing the next successful watch brand, whether that be Cluse, Paul Hewitt or another of the distributor’s portfolio.
“We did not want to walk away from Daniel Wellington, but the targets and requirements were unobtainable, so unfortunately we parted company. We did not want to, but within a very short space of time we secured distribution rights for Cluse and Paul Hewitt, which we hope to turn into the next big brands. It happens quite often that when your back is against the wall, you come out better,” Mr Harry says.
Flexibility, focus, reinvention and energy have always been key to the success of Peers Hardy. The business recognises that watch brands go on a journey — an arc — when they come to the UK. They sign up a distributor, establish a network of retailers and set about growing consumer awareness. The more successful these businesses become, the more likely they are to be bought out by a bigger group, as recent acquisitions of Frederique Constant and Olivia Burton demonstrate; they set up their own in-country subsidiaries to take over distribution; or they break with a distributor that cannot maintain growth rates that only new-to-market brands can achieve.
It was ever thus, shrugs Mr Harry, as he points out how consistent Peers Hardy has been at building the next big brand. He has a point, if you exclude Michael Kors with the power of Fossil Group behind it, and Hugo Boss, backed by Movado Group, Peers Hardy has scored some notable successes in the past decade. “When you think about the non-group brands that have made an impact in recent years, it has been Ice Watch, Daniel Wellington, Olivia Burton — nothing to do with us — and it is going to be Cluse. We are the guys who come along with the hot brands, and made those brands a lot of money,” Mr Harry suggests.
You can see the effect of a hit brand in Peers Hardy’s financial history. Ice Watch flared up in 2011-2012, driving sales up from £25 million to over £34 million. By 2014, despite the distributor diversifying and adding new brands, cooling sales of Ice Watch contributed to turnover dropping back towards £30 million. Among the new brands was Daniel Wellington, which enjoyed a similar growth trajectory to the Instagram social media platform that is credited with making it a household name. Peers Hardy, which brought the brand to the UK, had another winner, and group sales jumped back above £34 million by 2015.
When a watch brand is red hot, it also starts to contribute significantly to profits. In 2014, a year when Ice Watch was cold and Daniel Wellington was just accelerating, operating profit at Peers Hardy was around £260,000. A year later, with Wellington on fire, group profit soared to almost £1.5 million.
The other beauty of Daniel Wellington, particularly when it came to profitability, was its marketing approach. The brand was born back in 2006, but was limping along showing little sign of becoming the next big thing until Instagram emerged and the first Instagram influencers and bloggers became stars. The company’s young Swedish founder, Filip Tysander, pounced. “Daniel Wellington was smart enough to send out 1000 watches to influencers right at the genesis of Instagram, so the brand became the big thing just as the platform was exploding, and everybody wanted the watches,” Mr Harry recalls. “Ice Watch was similar. It had 5 million followers on Facebook, the largest watch and jewellery brand in the world on Facebook, from its inception,” he adds.
The boost in sales was achieved without the watch brands or their distributors investing huge amounts of money in marketing; they just rode the wave of an emerging social media platform. Olivia Burton, the fashion watch brand founded in London’s uber-hip Clerkenwell, pulled off the exact same trick, despite being founded almost a decade later than Daniel Wellington and Ice Watch.
“We have been really successful in terms of creating a brand with no marketing budget at all. It is worth highlighting that all of our success to date has been achieved with zero marketing budget. We have not ploughed loads of money into social advertising,” Olivia Burton co-founder Lesa Bennett told WatchPro last month.
Peers Hardy does not expect another brand to dominate on Instagram or any of the other leading social media platforms in the same way. The blogging and influencing community now understands the power they have, and charge accordingly. Moreover, thousand of brands use the same tactics, diluting the impact of any individual campaign. “Everybody is throwing money at influencers and social media advertising but it has evolved so much that you can never recreate what was done by the first guy,” Mr Harry believes.
That does not mean Peers Hardy is done with social media. Quite the opposite, the company is now taking the lessons it has learned while working with other brands and applying them to Cluse and Paul Hewitt, which it added to its portfolio last year. “What Cluse has managed to do, and Paul Hewitt to an extent, is find a new way of communicating through these channels, and taking it to the next level,” Mr Harry says.
A few pictures taken by a blogger on their smartphone no longer gets any traction on social media platforms, so brands like Cluse and Paul Hewitt have raised their game. For example, with pictures of people wearing a watch, Daniel Wellington’s approach was typically white, minimalist, Scandinavian. “Cluse has come along with wrist shots where you are seeing a watch in a situation where they perfectly position the watches against complementary backgrounds. They put the watches on upside down with the hands at ten-to-ten. They are just perfect wrist shots. They then test the images to make sure consumers like that particular shot, and then some of them for no apparent reason get engagement beyond any reasonable expectation,” Mr Harry explains.
More important than what watch brands are doing today on social media, is how they are looking into the future at the techniques that will continue to grow sales. “I went to see the Cluse guys when I signed the agreement and they have about 40 people of all nationalities just working on social media. They have a Chinese girl talking to Chinese bloggers, the same in America, Spain, South America. Meanwhile their digital marketers are studying the next thing. For example, lookalike campaigns. They know who has bought their watches, and they create what they call a lookalike profile that they then apply to any country around the world targeting those lookalike people who have the same hobbies, the same lifestyle. By matching one existing customer’s profile to thousands of people with similar profiles around the world, they can be pretty sure their watches will appeal and sell to them. It is amazing, and Cluse is the expert at the moment,” Mr Harry marvels.
Cluse may be doing the heavy lifting in terms of marketing the brand around the world, but Peers Hardy also works directly with retail partners on campaigns to generate direct sales. “We are finding that a lot of the retailers we work with are becoming a lot more social media savvy,” says Mary Michaels, marketing manager for Peers Hardy. “For example, Beaverbrooks is running a social media campaign for Cluse, supported by us. Nine months ago, retailers relied on brands to do that work for them. Now, retailers, distributors and brands are approaching social media as a combined effort, which helps.”
With all the current buzz around the rise of social media celebrities and bloggers, it is easy to forget that high street watch shops and jewellers remain more influential in the sales of watches than almost any other partner. Peers Hardy recognises that different retailers are especially influential because of the way they sell to their specific pools of customers. For example, Mr Harry says, H.Samuel shop floor sales assistants love pushing Radley watches, presumably because they know the fashion house’s handbags and purses, but they don’t do so well with a brand like Henry London because they don’t sell it ahead of Guess, DKNY, Seiko or Citizen. “It is independent jewellers that like Henry London, because it is a proper watch brand with a great story and a great style with today’s vintage trend. We find Henry does really well in independents because they can push it. We are generating consumer pull, but the retailer has to push, and you don’t really get that as much with a national account,” Mr Harry adds.
With the likes of Cluse using futuristic profiling techniques that the MI5 would be proud of, the changing role of distributors like Peers Hardy is to ensure that sales, support and logistics functions are just as finely-tuned. “We are very good suppliers. If you ask our retailers, they will tell you we give good service, we come regularly, we do good marketing, we have an incredibly respected sales team under Paul Halliday. We have a state-of-the-art head office in Solihull, we have finance. We are a really good distribution partner,” Mr Harry asserts. “We are entrepreneurial as an organisation. I did a presentation the other day to the sales people and one of our strengths that I talked about is our brand portfolio. It was the same presentation that I gave two years ago, but in that time about 80% of our portfolio has changed.
“What you can say is that our flexibility is a strength. Nick Baker, our MD, is an entrepreneur. Our chairman is an entrepreneur. I am a bit more structured, having worked for 20 years at Seiko, and I have brought that to the business,” Mr Harry describes.
This infrastructure, expertise and experience is put to work across a portfolio of products that include brands that Peers Hardy directly owns such as Henry London; licensed brands including Orla Keily and Radley; brands where the company only has distribution rights including Cluse and Paul Hewitt, and a private label business that uses the company’s manufacturing contacts in Asia to make products on behalf of retailers or fashion houses.
Peers Hardy wants to maintain all four businesses, and this gives it strength because when one sector falls, as happened with the loss of Daniel Wellington from its distribution division, another one rises, as the company experienced last year with the strong start made by Henry London.
“We want a combination of our own brands, because that is where we believe we will have longevity: designed, manufactured and distributed by us, hopefully globally. Then we have distribution brands, which are for the UK only. Thirdly, we have licensed brands where we use our design expertise and our factory connections. That is a little bit more profitable, partly because we don’t have to spend a huge amount on marketing because if you are paying a licensing fee, then you expect to be working with a relatively strong brand that has an audience,” Mr Harry expands.
Radley is a case study of how Peers Hardy works with licensed brands. Radley is a household name for its handbags and other leather goods, so Peers Hardy extends the brand into watches and, most recently, jewellery. It designs the watches and jewellery in the UK, and manufactures in Thailand. “We are very happy with Radley. We have had a license for four years and we have just renewed for a further five years. Radley is our first foray into jewellery licensing,” Mr Harry reveals.
Flexibility and responsiveness to market conditions are critical. Mr Harry admits that, after a record year in 2016, business this year has been tougher, particularly in the second quarter. That will all be forgotten if the all important pre-Christmas trading period is strong. “Really it is all about Q4. Right now, people are operating so hand-to-mouth, that you don’t get sell-in unless you are getting sell-out. You have to be ready on your blocks in October/November time, ready to get product in within a week,” Mr Harry explains.
The difficulty is knowing what is going to be hot in Q4, and preparing the entire supply chain to deliver it just-in-time. Distributors no longer take orders for the year in March and deliver the watches in October. “For example, H. Samuel now has a quarterly stock plan,” Mr Harry describes.
The market for watches priced at under £500 has been in decline since the Michael Kors spike in 2014. That decline has levelled out this year, and there are hopes that the market has found a floor. For growth to return, Mr Harry thinks consumers need to fall in love with watches again as stylish, authentic and precious accessories. “Henry London is tapping into a desire for vintage watches, but in some ways it is too sophisticated for the younger market … they are not really appreciating the fine craftsmanship and design that goes into Henry London,” he muses.
“I would like to see a more discerning consumer, but we have to deal with the world as it is. If people aren’t buying as many watches at the moment, or they are buying a particular type of watch, then we need to continue educating people about the beauty of watches or try to sell them something else, such as jewellery,” he adds.
2016 was a record year for Peers Hardy, with sales of £35 million beating the previous best performance of £34.4 million in 2012 when Ice Watch was at its peak. 2016 was also the group’s most profitable year in its history, thanks to the successful roll out of Henry London around the world.
2017 is shaping up to be more difficult. Cluse and Paul Hewitt are on the rise, but sell-through of Henry London has not met expectations, so restocking of international channels is patchy. Thankfully, the much broader portfolio under the Peers Hardy umbrella gives the group a shot at maintaining sales. “Having just finished our best year ever in 2016, we would like to have our best year ever again, but I think 2017 is going to be flat at best,” Mr Harry concludes.