He wrote the book on Rolex and made Ball Watches a big name brand in America, but now Jeffrey Hess is using his expertise and experience to advise European watchmakers on how to treat retail partners if they want to build long term success in the United States. In an era of shareholder pressure, short termism and withering loyalty, Mr Hess insists brands and retailers should work together to help each other and serve customers better.
Jeffrey Hess needs no introduction in the rarefied circles of the vintage watch collecting communities of North America and around the world.
His knowledge of historic timepieces is so deep-rooted that he — literally — wrote the book on it in the form of The Best of Time: Rolex Wristwatches, an Unauthorized History, which he co-authored with James Dowling, Britain’s foremost expert on the Swiss watchmaker. He modestly insists there have been plenty of more in-depth books written since.
Mr Hess’s passion does not begin and end at Rolex. What began as a watch collecting hobby when he worked in the financial services industry has turned into several successful business ventures including Hess Fine Art and Hess Fine Auctions, which trade in a range of antiques including watches and clocks; he has his own retail operation, Old Northeast Jewelers, which sells a range of prestigious new watches from the likes of Carl F. Bucherer, Omega, Breitling, Bremont and Ulysse Nardin through two outlets in Tampa and St Petersburg, Florida; and he represents boutique brands including Meistersinger, Mühle Glashütte and Anonimo as their exclusive North American distributor through his Duber Time wholesale company.
WatchPro spent a fascinating week in Germany last year in the company of Mr Hess, his team from Duber Time and a number of retailers visiting Meistersinger, Mühle Glashütte and the German Watch Museum. A memorable moment in the museum was when he recognized a 19th century masterpiece German enameled pocket watch he had once owned. He knew more about the watch’s provenance than the museum director giving us the tour.
This level of expertise, coupled with the commercial success that Mr Hess has enjoyed over many decades from the buying and selling of fine watches, has made the businessman altruistic in recent years; keen to share his wisdom with collectors through speaking engagements with various organizations and museums like the National Association of Watch and Clock Collectors, but also with executives in the watch industry who he speaks with every day through his retail and distribution operations.
The current state of the watch industry in the United States is fascinating to Mr Hess because the boom this year, particularly for top tier brands like Rolex, Patek Philippe and Audemars Piguet, is generating revenue and profits that have the potential to transform the market. “With my retailer hat is on I see opportunity everywhere. Rolex is the once and future king while Patek Philippe dominates the “Fine time” sector. But brands like Breitling seem to not be content with being the lady in waiting and are putting forth an aggressive and attractive alternative to Rolex,” he suggests.
The current boom comes after two tough years in the United States. In 2015, Switzerland exported watches worth CHF 2.4 billion to the country, two years later the figure was closer to CHF 2 billion, and even that figure was flattering because watches were piling up unsold at many retailers who were prepared to keep buying from Switzerland rather than lose authorized dealer status for brands.
For an optimist like Mr Hess, the tougher times and more recent bounce back have both been opportunities, particularly as the recession for the watch business exposed some of the weaker brands and retail operations. “The growth has been encouraging,” Mr Hess says. “Changes in the marketplace have created a vacuum of sorts and the brands that survived the shakeout all appear stronger. A lot of retailers struggled as well, often paying Rolex, Patek and the Swatch Groups of the world first, making it tough on the smaller brands who were of course, paid last. We have all seen similar situations before — many times,” he sighs.
Changes in market share tend to be exaggerated during more difficult trading conditions because the strongest brands (retailers and watchmakers) can outgun smaller rivals and even devour them if they become sufficiently wounded.
Arguably, European giants Bucherer and The Watches of Switzerland Group, which had two very strong years in their home markets in 2016 and 2017, would not have pounced on Tourneau and Mayors had these businesses not been weakened by the downturn.
Perhaps it was ever thus but the shake-up of the retail market caused by the downturn has exaggerated the fact that there are two types of fine watch retailers: those authorized to sell the likes of Rolex, Patek Philippe, Omega and Cartier, and those that are not.
Notably, none of Mr Hess’s businesses are authorized dealers for Rolex or Patek Philippe, although his vintage watch business more than makes up for the gaps.
This year’s shortage for the hottest new Rolex models means his pre-owned business is booming and there is a trickle-down effect on other brands that he works with. “Retailers, including mine, should focus on other appealing brands like Carl F. Bucherer, which is poised for a breakout, and even the revamped Ulysse Nardin. These are fantastic alternatives for retailers,” he suggests. “At the boutique level, Mühle Glashütte, MeisterSinger and Anonimo are all great options,” he adds before quickly declaring his interest because he distributes the three brands.
Duber Time, Mr Hess’s distribution company, was founded off the back of his relationship with Ball Watches, and at its height the watchmaker had around 200 doors in the United States. A series of missteps from the brand has soured that relationship, but more recent additions of Mühle Glashütte, MeisterSinger and Anonimo are proving worthy replacements.
“Ball made some unusual decisions that created quite a sad story,” Mr Hess says euphemistically. “But Mühle Glashütte is on fire and finally getting the respect it has always deserved. Meistersinger continues to out-design most in its segment, racking up scores of design awards. And Anonimo, with new vigorous ownership and Aldo Magada at the helm, it is on its way and has an incredible following,” Mr Hess describes.
The key with lesser-known brands like these is that they have strong stories and unique product lines that retailers can sell. It also helps if they are likable, trustworthy people to work with, Mr Hess stresses.
Trust is an operative word in this context, and Mr Hess is furious at brands that build up their reputation and market share off the back of hard work from retail partners and then stab them in the back by selling direct. Brands that will make inroads are those that have a reputation for true partnerships, not lip service,” he says.
“Margins are thin,” he continues. “I speak to very large jewelers groups routinely and am an activist of sorts on this issue. Most retailers are still very wary of watches in general and particularly of those brands who screw retailers. Many larger Swiss brands have started to recognize this and are slowly going back to the true partnership angle again,” he adds.
In addition to forging long term relationships with retailers, Mr Hess has additional advice for watch brands based on the current popularity for fitness trackers and smartwatches. “Exploit this boon in new wristwatch wearers,” he suggests. His argument is that there is a massive new market for younger customers that for a time turned their back on wearing anything at all on their wrists. If their first experience is with a Fitbit or Apple Watch, so be it. Traditional watchmakers need to make sure they become customers when they get bored of counting steps.
However, these potential new customers will be lured to only a handful of brands unless they are shown alternatives.
“Watch brands must advertise,” Mr Hess demands. “I am a huge believer in this. This is how I made Ball a success. Other brands should take note. Advertising may take many forms today: social media, digital, sponsorship, print, events — it does not matter as long as it is effective. But without advertising from the smaller brands, they will only lose to giants like Rolex and Omega,” he states.
A final wish as we enter the New Year is for watchmakers not to over-produce again, as they did during the Asian downturn. The glut of watches forced into the Asian (and to an extent American) channel has turbo-charged the grey market so that authorized retailers that have invested in watch brands are competing with unauthorized dealers across the world offering cut-priced deals via secondary market platforms like Ebay, Amazon and Chrono24.
Grey market is even more of a problem for distributors like Duber Time because they need to promise territorial protection to retail partners in return for their loyalty and investment. In the age of globalized retail this is becoming more difficult, but brands like Meistersinger and Mühle Glashütte work well because their distribution is contained and does not leak over-stocked watches onto the secondary market in the way that the biggest brands do.
It is encouraging to see distributors like Duber Time continuing to invest heavily in buying stock, promoting it to retailers and advertising the hell out of them in order to stimulate demand. In an era when a lot of distributors refuse to make this sort of investment, Mr Hess is doubling down. “All three of our current brands are in growth mode, and we are speaking with several other brands that we hope to bring on board this year as well,” he reveals.