2020 was a year to forget for most watch brands but, for Matthias Breschan, the storm clouds had a silver lining thanks to his promotion last summer from running Rado to the top job at Longines. In a wide-ranging conversation with WatchPro’s Rob Corder, he outlined his plan to maintain a network of around 4,000 points of sale around the world while ramping up digital activity and ecommerce sales both directly with consumers and through the brand’s authorised dealers.
Swatch Group chair Nayla Hayek did not sugar coat her report into the performance of the corporation in 2020.
There was little point in concealing disappointment at the drop in sales of almost one-third from CHF 8.2 billion in 2019 to CHF 5.6 billion in 2020, but she was keen to point the finger of blame policymakers around the world rather than her own team.
“We do not blame this on management mistakes or a change in consumer behavior, but on the futile policy of total lock down,” Ms Hayek writes in an introduction to the 2020 end of year financial report.
While stores were closed around the world and much of its production in Switzerland was mothballed, the group embarked on what Ms Hayek describes as a generational change of presidents at some of Swatch Group’s brands in 2020.
One of those changes was triggered by the retirement of Walter von Känel, who had been at the helm of Longines for over three decades, and oversaw an inexorable rise in sales for the brand, which now dominates in the $1,000 to $4,000 price category.
Ten years’ ago, Longines was outside the top 10 largest Swiss watchmakers. Today it is one of only six brands with sales of over CHF 1 billion.
Stepping into Mr von Känel near legendary shoes is Matthias Breschan, who joined Swatch Group in 1996 working for Swatch Telecom before taking the reins at Hamilton for seven years and Rado for nine.
Like Mr von Känel, it is clear that Mr Breschan is focused on continuity moving forward.
“What has made Longines so strong over the past 20 years is balance; balance between classic and sports watches, balance between men’s and women’s watches. Our slogan, Elegance is an Attitude, has been the same since 1999 and is still the best expression of what we do,” he says.
Although Morgan Stanley and LuxeConsult estimate sales at Longines dropped 31% last year — worse than the industry average but better than the whole of Swatch Group — from CHF 1.65 billion in 2019 to CHF 1.15 billion in 2020, there is a strong feeling that there is nothing broken about the brand, and therefore very little that needs fixing.
Mr Breschan concedes that 2020 was very tough for Longines and the wider industry, particularly the first half of the year, but says he saw activity pick up over the summer.
“We felt it here in Switzerland where people had been forced to stay at home, they were not allowed to travel, they could not spend money in the usual way on eating out or going on holidays so there was a lot of time without spending. One of the things they could do was spend time on their hobbies, so people were looking at watches online and, when they started to feel more secure over the summer, we saw them buying,” he tells WatchPro in an interview after the unveiling of 2021 novelties.
“Remarkably, sales in August were actually up on the same month in 2019, and 2019 was a record year for Longines,” he reveals.
“The remainder of the year we saw monthly sales flat [year-on-year with 2019]. That was not enough to compensate for the first half of the year, but there was no major damage and we managed to maintain a good bottom line.”
Morgan Stanley’s report estimates that Longines sold 1.5 million watches in 2020 compared to 2.1 million the year before. Mr Breshan would not confirm the figures, now would say whether this was entirely down to the hiatus in sales or lost production. He did reveal that manufacturing capacity took until September to get back to 100% after shutting down at the end of March.
Ms Hayek’s frustration with what she calls “futile lock downs” is understandable when the impact of these and other measures to control covid are still having a direct impact on sales.
The aim this year is for Longines business to perform to the level of 2019, but with rising cases in some parts of the world, the future is far from certain.
At a global level, Mr Breshcan says sales in the first quarter will be similar to the same period two years’ ago, but the picture is mixed in different territories.
“We are seeing North America, USA and Mexico performing positively this quarter. Asian countries are doing quite well, but Europe is very difficult to predict with countries opening, closing, opening and closing again,” he describes.
Even if lock downs continue in some countries until the summer, Longines is better prepared this year thanks to a transformation of its digital activity and ecommerce sales.
“We learned a lot in 2020 about new ways of doing business. It accelerated our digital transformation and we now have corporate ecommerce sites in 18 countries with plans to expand that to 33 countries. These ecommerce sites account for 5-10% of sales in some countries, and when we add in online sales from our retail partners, we see that number increase to 25% of sales in places like the UK and United States,” Mr Breschan reveals.
Industry analysts predict that once consumers switch to shopping online, they rarely return to physical stores. But the luxury watch category may prove an exception because of the energy going into ensuring the brick and mortar showroom experience is a delight, whether that is in a monobrand store owned by the watchmaker or a partner’s multibrand.
“We will see how this evolves,” says Mr Breshan. “We expect ecommerce to continue to grow, but brick and mortar stores will recover and we are strong believers in brick and mortar. It is important for our image and is the best emotional expression of what we do. It is important that we are part of people’s social life through stores,” he insists.
Around 90% of all sales for Longines in 2020 were through retail partners, a higher proportion than a year earlier because so many directly-owned stores in major cities had to close.
Mr Breschan concedes that a lock downs and a lack of tourists flocking to the likes of London, New York and Geneva has a major impact, but does not want to make any dramatic changes to Longines’ network of retailers as things reopen.
“Worldwide, we have around 4,000 points of sale, and just 68 monobrand stores after we closed six in Hong Kong. There may be some consolidation among points of sale for our partners, but we do not plan to expand or reduce the number. What we want are great locations for monobrand and partner stores,” he suggests.
Longines is less reliant on tourist spending than Swatch Group’s ultra-luxury brands like Breguet, Blancpain and Harry Winston, but domestic spending in city centres has been hit during the pandemic, with the likes of New York and London worst affected by the tightest and longest-lasting restrictions.
Mr Breschan thinks this business will take time to return. “Domestic customers will return to cities first, but nobody knows when tourism might return to the sort of levels we saw in 2018 and 2019,” he shrugs.
In the meantime, Longines and other Swatch Group brands want the cost of operating from the world’s most expensive retail areas to fall.
“We want our city centre stores to be elegant, but we cannot afford to do that with the extremely high rents that were being charged. Landlords need to be flexible in working with businesses like us. We have had successful negotiations with landlords in some countries, but others will not even enter conversations about rents. It is different from one country to the next,” Mr Breschan says.
An important skill to running any business is to only burn calories on what you can control, and for Longines that means producing exceptional watches at attractive prices.
The 2021 line-up is, to put it mildly, conservative, with incremental improvements, additional colour combinations and the occasional new material used for a strap or case.
A steady as she goes approach is smart strategy, particularly for a brand like Longines that has so many great references in its current and archive collections.
Mr Breschan appears to have inherited his predecessor’s penchant for continuity over radical change, but that does not mean it is standing still.
“Swatch Group has the advantage of a strong industrial base and we never stopped our research and development last year,” he reveals.
“But what has made Longines so strong over the past 20 years is the balance between classic and sports watches and a 50/50 split between men’s and women’s collections. We have had the same slogan: Elegance is an Attitude since 1999,” he adds.
In some ways Longines’ role within Swatch Group is like that of Mercedes fleet cars compared to the company’s Formula 1 racers. Longines is luxury but accessible, embracing modern innovations like silicon balance springs and making them available to middle class customers.
That is not to say Longines has not been a pioneer.
As Mr Breschan reminds us, the company has 190 years of history and been innovators throughout that time. “We introduced the flyback movement, the GMT movement, the rotating bezel. We recently found out that we were the first to have waterproof pushers on a chronograph,” he says.
There is also no need to get radical with completely new collections because the current crop is performing satisfactorily. A big push for Spirit pilot watches was a success last year, and Mr Breschan says other core ranges are gaining momentum.
“Spirit was exceptional,” he tells WatchPro, “But we also saw four other collections bubbling up in 2020: our Legend Diver, PrimaLuna, Dolce Vita and HydroConquest watches.”
Like last year, the launch of 2021 novelties and the media interviews had to take place at a distance. Swatch Group reportedly used to spend around $50 million across all of its brands when it presented at Baselworld, so digital launches save a considerable amount of money.
Will Longines ever return to major exhibitions? Not likely, Mr Breschan replies. But he does want to return to physical events. “At Swatch Group, we do not miss Baselworld. The whole way the fair was organised was obsolete,” he records.
“We need to find new ways to present novelties. We should do this throughout the year and in different countries. We need to be flexible. We want to have quality meetings, not the rushed 20 minutes we did [at Baselworld]. Without the pandemic we would have been travelling to different countries to present our novelties. We are selling an emotional product. We need to present them physically. It is not the same without physical contact,” he concludes.