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HODINKEE Podcasts
The Business of Watches [026] Christopher Ward CEO Mike France
01:10:14
The Christopher Ward leader lays out the brand's ambitious retail expansion plans in the U.S.; plus Mark Kauzlarich drops by to talk about the Royal Pop launch.
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- [00:01]
A
Welcome to the business of Watches, the Hodinkee podcast, where horology meets high finance. And we go behind the scenes to talk to the executives at the heart of the watch industry. This week we're connecting remotely to the United Kingdom to talk to the head of the biggest watch brand in the uk, Christopher Ward. Mike France is the co founder of Christopher Ward and the CEO. We talk about the brand, which is kind of a 20 year overnight success story. And we focus on a surprising part of the growth ambitions for the brand in the us Retail, or rather Christopher Ward's unique way of doing retail, which is by appointment, showrooms. They've just opened a boutique in Chicago and there is plenty more to come. But first I'm joined by my colleague, senior Hodinkee editor Mark Kozlerich, and we are going to talk about the Royal Pop, the collaboration between Audemars Piguet and Swatch. Mark Kozlerich, senior editor at Hodinkee, who happens to be in Switzerland right now. And we had dinner last night. Mark, welcome to the business of watches. How are you?
- [01:17]
B
Great. I'm looking forward to turning this into a more cuisine focused podcast and we can recap our dinner. But maybe, maybe we'll do that after we talk about some watches.
- [01:27]
A
Indeed we will. And so it is Monday 18th May, and I went over to the Swatch boutique on Rue du Marche here this morning and they were open again and at 10am they were selling more Royal Pop. The Audemars Piguet by Swatch collaborations. Obviously we saw the launch over the weekend. You've had a chance to go hands on with these pocket watches, this collaboration between Audemars Piguet and Swatch. First, let's talk about the product. You've handled it. You're a pocket watch guy or the pocket watch advocate, I think, is what we say here at Hodinkee. I mean, yeah, what's your sense of this collab? It's quite interesting and in some ways unexpected.
- [02:18]
B
Yeah, there's a pun in there somewhere about being in the pocket of the deep state of pocket watches or something. I don't know, we'll have to work on that. But I think I was pleasantly surprised with the idea of AP leaning into the pocket watch part of this collaboration. I think obviously there was a rabid response when they revealed that there was going to be a Swatch and AP collaboration. And I think we can get to the response over the weekend. But the response would have been even more outrageous had it been a wristwatch. Right. So I think in a Lot of ways it was a smart thing for AP to do to hedge away from that a little bit and lean into another part of their history. It's also interesting because the brand has recently spent a record amount of money on an AP Pocket watch, the most ever spent on an AP watch, which I think was close to US$8 million last fall.
- [03:16]
A
Yeah.
- [03:16]
B
For one of their purchase, big purchase, and one that I know I was told required extra funds from the board and everything to make this happen. And so there has been buzz around pocket watch, which is maybe a whole separate topic. There's also been buzz around AP Pocket watches, but it's also just a good way to maintain a level of interest in the brand without going too close to the sun of making a royal oak and a bio ceramic case. The watches themselves I think are actually pretty impressive. There's been a couple negative comments as there are with anything about people thinking that they didn't go far enough with the quality. I think when you get them in your impressively light, they're impressively robust in terms of popping these watches in and out of what Swatch calls the cages that the lanyards are attached to. And so the feel in the hand is actually pretty solid. But then they created an entirely new movement for these watches. It's a manually wound movement.
- [04:24]
A
Yeah. It's a new System 51 manual wind movement, which is, you know, significant. Right. I mean we haven't seen this before and. Yeah. How did it feel when you were handling?
- [04:37]
B
Look, I mean, I think the gold standard for winding a watch is fleet du for simplicity. We're not getting that at a $400 price point. Right. I also think that that's one of the hard things right now for anybody is contextualizing their expectations going in to anything. You get a lot of people looking at a $5,000 watch or a 10,000 DOL watch and saying, well, it's not as good as a $50,000 watch. Well, you know, let's keep the context of what we're, we're dealing with. It's a bio ceramic, which is, you know, this watch would like to remind you is not technically plastic. It is I think 30% plant based plastic. But the, you know, the feel of the winding of this manual movement is, is actually pretty cool. It's not the, again, the most robust feeling thing. You're, you're talking about a bio ceramic crown and it's, you have to turn it quite a move, the hands and stuff. But you do get, you do get a click out of it, you can feel the wine, you can feel the tension. And then on the case back you, you have first of all sapphire crystal on the front and back, which is kind of, kind of crazy with anti reflective coating. And you can see the barrel wind, you can see this, the spring disappear in the mainspring. And so that's how you know that it's fully wound. And, and then just. I think the biggest thing that sort of blew me away is again, you're talking about bio ceramic and the, the dial is, is stamped out of the same material. You get that petite tapisserie like texture on the dial in a way that I impressed even people that I spoke to at ap. Like the, the amount of tension to detail on all of these watches, again for the price point and I think even above the price point would be really impressive. But these are still niche products. They're $400 products that are not going to be easily worn on the wrist or any, any other way. And so I think it's been kind of incredible to see the response over the weekend for, for such, such a niche watch.
- [06:42]
A
Yeah, I mean, let's talk about this. You know, I mean, I think a lot of the collective conclusions of, you know, before the launch was that, you know, this was a, you know, pretty graceful way for Audemars Piguet to do a collaboration with Swatch in that they, they were doing a pocket watch which obviously can reference royal oak pocket watches of old. And as you mentioned, there's plenty of tradition with AP doing pocket watches and without sort of, you know, as you say, flying too close to the sun here. But the launch at some 220 stores, I think it was around the world a lot of those, you know, people started lining up days and by the time the launch happened, there was a bit of chaos. There was a lot of police present in some places and at least at 20 locations, you know, from Asia to Europe to North America, you know, we saw stores being shut down and no watches being sold in the Middle east as well. We saw that at the Dubai Mall. So, you know, was this launch, should Swatch have handled this launch differently? Should they have have done it online and not in person, obviously selling these collaborations in person, making the spectacle? I mean, it's part of the messaging that Swatch has been doing since the moonswatch in 2022. But yeah, what do we make of the launch which wasn't so smooth?
- [08:21]
B
Yeah, I think it's a difficult topic. Right. I think I've seen a lot of fingers pointed online. I've seen a lot of people, I think rightfully get a little defensive about how it's reflected on the watch community. I would hate to say that the watch community takes any responsibility because I do think that there is a huge portion of this that is part of this new, sort of, not new, but new to the watch world flipping culture. The things that we've seen in sneakerhead culture and sort of this hypebeast street watch space where people line up and get in line and get pushy and try to flip coveted shoes or clothing or whatever it is. I think we're seeing that come over to the watch space and it's disappointing to see, honestly. I think the way that it was communicated in advance. I think it would have been worse had we not known that this was pocket watches. I think we would have seen a huge increase, increase in the number of people and the fighting. It really was pretty terrible scene in a lot of places. And it's not as though one country had it under control or better or worse. I mean, it was worldwide. And I think the real way, I've seen a lot of people say, okay, well what about armbands? Okay, well, at least armbands you couldn't easily get on and off and you could tell everybody to leave. But I think there's a lot of issues. The, the obvious answer here is these need to be available online relatively quickly before, before stores start selling them. I think some stores might not be able to sell them until they're online because you're just going to run into the same situation over and over. I think that's, that's the first solution. But I don't know that this couldn't have been imagined, that there would be some sort of intense response. And so I'm curious how it. It ended up going as far as it did without some sort of other plan in place.
- [10:34]
A
Yeah, no, it's kind of strange. I mean, you know, I covered here in Geneva. I covered the moonswatch launch in March 2022 and you know, there were similar tensions. There were obviously some people there looking to flip the watches. But at the same time, you know, the lineup and the crowd was full of a whole bunch of watch people that, that I recognized. And I get the sense in this case that the crowds, at least in some cases were purely there for that financial arbitrage opportunity. Obviously we see some of these pieces listed on ebay or local auction sites and into the thousands, multiple thousands of dollars or francs. So obviously there is some opportunity there to do, do that at the same time, though. Yeah, I mean, you know, Audemars Piguet is a different brand than Omega or even Blancpain. And yeah, I mean, you know, this is a brand that exists in popular culture. Plenty of hip hop stars or just, you know, famous people are known to, you know, Bad Bunny wore a royal oak at the super bowl halftime show, which I think he wrote about. Yeah. I mean, you know, this is a brand and a watch at a level than the other collabs that we've seen previously.
- [12:04]
B
Yeah, I don't. Again, what I was trying to get at is I don't know that there's a single place that you can point the finger. I don't want people to think that. I think that the watch community is responsible and we've worked people up into a lather. I do wonder. We had a lot of attention on that story and I do stand by the fact that it is newsworthy. It is. Regardless of the response over the weekend, this was going to be the biggest watch news in the world this year because it speaks to so many people outside of the watch community. And that's our responsibility as journalists, is to cover that and try to bring that perspective, which I tried to do in my second story, which was give my personal perspective on handling the watches and contextualize it for what it means for the broader world, the non watch world. I do think that it does seem like a huge portion of this unfortunate situation was really due to that non watch community. I mean, nobody that I really spoke to in the watch world was interested in waiting in line overnight for multiple nights to get a watch that they understood was not limited production, not limited edition. Maybe limited by scope of time or something. But there are other opportunities to get this and it's not that big of a deal to be fighting other people or wasting your days getting. But for a portion of the broader world who is, like you say, exposed to AP as a luxury object, not necessarily a horological curiosity, I can understand the draw and I think that is a big part of why we got here. I personally didn't expect it to be that intense. But at the same time, with hindsight, then you're immediately thinking, well, shouldn't we have expected something like this? Shouldn't the watch world, shouldn't retailers and the leaseholders and the cities and stuff been more prepared? But I feel bad for some of these people because I don't think anybody necessarily expected to be signing up for this on a random Saturday.
- [14:24]
A
No, exactly. And we'll see how this progresses. As I say, I was at the Geneva Boutique this morning 10am that's on a Monday. And you know, yeah, there was a queue again but it was fairly well contained. There wasn't police there this morning. There were lots of police there on Saturday and they were able to open and sell a few watches. Whether or not this works in other locations remains to be seen. But indeed, yeah, I mean AP has said this is a one time collab. It's not going to be an ongoing series like we saw with the Moonswatch, but at the same time it's going to be available for months and months and so there'll be lots of opportunity to buy these pieces for those who are interested. So yeah, it is certainly a newsworthy situation and an interesting situation. Anything else that you wanted to add on the Royal Pop the AP by Swatch collaboration at this point? I mean it's still early days.
- [15:34]
C
Yeah.
- [15:34]
B
I think my only real hope is that we can get a little bit of a distance from the reaction over the weekend to get back to the statement that I had in my story, my hands on story with the watch which is, I mean these are fun objects. I know some people thought that I was a little repetitive in saying that, but I really did believe it when I saw it in person and wanted to drive that home. Is that these are sort of supposed to be light hearted and fun things and hopefully with some time and some distance and some more availability and maybe changes in how they're distributed, we can get back to enjoying the fact that they're really fun and pretty creative approaches to a collaboration.
- [16:18]
A
Very well, Mark. Yeah, good stuff. Thank you so much for joining us on the business of watches this week. And now we will throw it to our conversation with Mike France, the CEO of Christopher Ward
- [16:36]
C
Foreign.
- [16:41]
A
Welcome to Mike France, the CEO and co founder of Christopher Ward, now one of the 50 biggest Swiss made watch brands and among the fastest growing. Welcome Mike France, CEO of Christopher Ward to the business of watches.
- [16:58]
C
Thank you Andy and thank you for having me.
- [17:00]
A
Its now 22 year history, yeah, Christopher Ward has been a trailblazer as one of the pioneers in online direction direct to consumer sales. But in the past 18 months you're making some significant moves in retail and as we speak you're announcing a new Buy appointment showroom in Chicago. This is your seventh new retail location. Talk to me about the strategy for these retail boutiques Buy appointment only that you're doing in the UK and in the us.
- [17:33]
C
Sure. And I suppose the genesis really of these goes back a long Time, believe it or, believe it or not, in our old head office in Maidenhead, we opened a showroom in the front room back in, I don't know, 2012, something like that. Essentially the idea was that we could sell some watches in there that would pay for the rent. What happened subsequently was that and this, we're talking about a very small space. It was 356 square feet, so about the size of most people's front rooms. And it became a bit of a retail legend in that I. This is sort of probably overstating it, but I've been around retail for a while, as you know, Andy, and so I know about sales densities and it was by appointment only. And in the final year there, it probably had the highest sales density of any retail format in the uk.
- [18:34]
A
Wow.
- [18:35]
C
Yeah, I mean, I've got no absolute evidence of that, but as I say, knowledge of densities across the uk, including very high density stores like, say, Marks and Spencer, Marble Arch would indicate to me that we were right up there. And so for a long time we'd known that there was a real demand for people to come to Maidenhead, see and handle the watches physically. And we had a very, very high. It was almost 100% conversion rate.
- [19:05]
A
So if somebody came in and, well, had made an appointment, they were likely to follow through.
- [19:12]
C
Yeah, it was 90 plus percent. A lot of that, I think, was due to, particularly Declan, who was the showroom manager. He was, you know, a brilliant sort of person in the showroom. Very low pressure. It was a conversation. We gave people an hour of our time, sometimes longer, sometimes we couldn't get rid of them, but it was a very profitable exercise. And then back in 2019, pre Covid, I had wanted to expand the physical presence and at that stage I was primarily thinking about an additional London site rather than the U.S. necessarily. But we would test and then we would see whether there was an opportunity outside of Maidenhead. Then Covid happened and so those plans sort of went on the back burner. Then Belcanto happened and we got a bit busy and we had other priorities. Always in the back of my mind was the opportunity to expand the physical presence of Christopher Ward. That was also supported by. We have and still had, and still do have a phenomenal reaction at shows that we attend. Sure, we were one of the first brands ever to join Windup, which is the War and Wound series of shows in the United States, New York, Chicago, San Francisco, Dallas. Now, indeed, we were always massively encouraged by the reaction we had from our American followers. When they could see the watchers. And we, as I said back in 2019, wanted to expand it. We came out of COVID had the bel canto, came back to the idea of opening showrooms. The United States by this time was our largest market. At that time it was about 40, this is going back to early 24, about 40% of our turnover, bigger than the UK and saw the real growth opportunities for us in the United States market. We'd always had a higher penetration than most British brands in the US market, which I think I simply put down to the fact that we were probably the first brand, largely through good fortune rather than great strategy. We were the first, certainly the first British brand, but arguably one of the first watch brands per se, to understand the importance of the online community in terms of the conversations that were going on even as far back as 0506 in a subterranean world.
- [21:57]
A
And that's through your Christopher Ward forum.
- [22:00]
C
Yeah, exactly.
- [22:01]
A
Which has been sort of of an integral part of the brand's story over the years.
- [22:06]
C
Exactly. We'd come across this at that time. I mean, the phrase social media hadn't really been coined, but there was this incredible sort of level of conversation going on between watch fans and us and there were other forums around at the time. Time Zone was probably the largest forum at the time. We owe a debt to Time Zone because that's where the first major post went up, proclaiming by a Tasmanian, now professor of English literature, Dave Malone, that he discovered the best value mechanical watch world the world's ever known. Which led to the formulation of the forum. When Mike Sandler started ditching people from that forum because he thought we were paying them to post positive things about Chris Woods. We actually didn't even know the forum existed at the time and certainly I didn't know Michael. We got to know Michael very well when he realized we weren't shysters. That was an early dawning and an understanding that this community are incred. The watch community. People who are interested in watchers are incredibly passionate and interested and want to share and want to discuss and they particularly want to discuss us in many ways. That is the forum established by followers, not by us. So we knew that there was a real interest in our brand and a huge interest from our American audience. As I say, very early on, the American business, with no marketing other than this conversation going on online, became very important to us, became as big as the UK and bigger than the UK very quickly, which is unusual. But I put it down to this conversation that we were having what we also know is that when people receive our watches over the course of the last 22 years, if they've never held one and they've bought blind, if you like, online, normally the reaction is one of delight and surprise that it was better than they thought. Now they'd pull the trigger because they had read online that Chris Ward watches were decent. They had followed us. People do their research, as you well know, before they spend even. Even if we consider ourselves a high value proposition, you know, we're not cheap and you know, it's a very considered purchase and people do their research. Hence our line, do your research. But what we knew is that people had a very positive reaction to the watches when they received them, often for the first time. We also saw that, as I say, at shows across the world, but particularly in the United States. So we'd always had this inkling that we could have a direct to consumer relationship physically as well as online. And I think it's important that people understand it's still a direct to consumer relationship. We are not opening highly expensive retail boutiques in prime locations on ground floors where for many, many brands they become a marketing expense. It's a way of brand building as much as it is of making money. We wanted to continue those dialogues, have a very different sort of relationship with people. Hence by appointment only, sort out time. It allowed us therefore to be thinking about, I mean one Park Street, Maidenhead is not Park Lane. Yeah, Believe me. So we had this idea and as you know, our economic. We're very careful about our economic model. It has to deliver the profitability we require, but at a time through multiple at selling, we didn't. What. Nothing we will ever do will disrupt that. So we had to find a retail format that would allow us A the economic model, but B allow us to deliver a very different type of relationship. You know, I still go into some watch boutiques, I won't name them, but you know, the first thing they seem to look at is the shoes I'm wearing as to whether or not. And if I'm wearing churches, they'll probably, they'll probably take me to the more expensive end of the shop, you know, Right. Watch retail, luxury retail is full of that sort of. I think of it as parent child behavior. Yeah. We've always striven to have adult to adult relationships with our consumers. You know, that's why we're open and transparent about our business. Our model, we try and where we can to take down the fourth wall and allow people in because we think the magic of watchmaking is when you know more about it rather than and keeping it a mystery. But that's our strategy and our philosophy.
- [26:53]
A
That is one of your differentiators for sure.
- [26:55]
C
And we wanted to continue and indeed enhance that through physically being able to talk and show to people who are interested in our watches. But we wanted to do it in a cost effective way, non prime, where people could enjoy a, pay real attention and be able without pressure selling whatsoever to try on anything they wanted across the entire range. We're led by them, we communicate with them beforehand, they give us a sense of what they're looking at, we prepare that, but we also prepare other things. And often people change their mind once they see the width of the offer or they handle and feel our watches in the metal. So that led us to two things really. How do we establish a bigger footprint in the United States, States per se anyway. And that led me to it's all businesses about people. And I had for some time been aware of Michael Pearson, who formerly had been with Bremont, then with Wolf and
- [27:59]
A
then a legend in the, in the industry, indeed, in some ways indeed.
- [28:03]
C
And you know, when I most latterly was with Zodiac, he had also spotted does and we met mainly at shows. And I say this, this believe it or believe it not, but you know, most shows, the Chris Ward stand is the busiest. It just is the way it is. And Michael would always wander across and I would always say to him, you should come and work for a, a proper watch company, mate, you know. And eventually when I decided we were going to extend our footprint in the us I could think of no better person to lead the charge than Michael. And it was very clear what we wanted him to do. And he was very much up for that. And it was travel the US to begin with, going into more smaller venues, whether they be red bars or other watch groups of which as you will know, Andy, there are literally thousands in the United States. Yes, there are indeed. It's a big task. And this is about taking Christopher Ward to the people. And the first thing, one of the first things I said to him as well is and I want you to open our first American showroom. He lives in Dallas. Today Dallas as a metropolitan area is a top five metropolitan area in terms of watch turnover in the United States. It is in most categories of product. We already had a pretty big following in Dallas, so it seemed very sensible that Michael set up the first showroom in Dallas and it fitted what we, just what we. Peter Ellis, my co founder and I went out we trawled around Dallas. Michael had done his pre research, he had his views about where it might be. We ended up finding a north of Dallas site. You know, it's 40 minutes outside of downtown Dallas in a smallish shopping center, first floor office, lots of dentists, our neighbors, 850 square feet. The first one in Dallas decided we'd open it and test what happened. Well, what happened was astonishing, partly because of the people Michael and we employed to operate, but it was astonishing, the response was astonishing. And the sales were largely incremental. It wasn't people transferring online from online to Dallas because they lived in Dallas. These were nearly all new customers.
- [30:37]
A
And how did people find out about, I mean, how did you get the word out in this case in Dallas and then with all the other showrooms you have now in Virginia and Liverpool in the UK and New York in London and now in Chicago. How do you let people know that you're there and how it works to make an appointment? Appointment?
- [30:56]
C
Well, we of course employ, you know, some of the obvious methods, whether it be, you know, paid social, print advertising, locally, etc. But the, probably the, the prime mover of that is, is just word of mouth. People were traveling from all over the United States to the Dallas showroom, for instance. It was astonishing. But we have a quite a large database. Often what happens all or certainly is still happening is people who know our brand, who maybe purchased our brand, they'll have a circle of friends. When there's a physical location, if that person has never bought before, they'll often come with them for the first time or they'll often suggest that they make an appointment and go and check us out, which is a very powerful medium because you're getting the brand is being presented by an advocate, not by us, which is always the most powerful route to marketing. And it grows and grows and grows. And they then have friends and they then have friends and they then have friends. So it's a mixture, but it's largely driven by, I think in the beginning, in the early stages of a showroom opening, by the followers that we have who encourage others who aren't as familiar with the brand to go and see us and feel us and see that it's real as opposed to just the hype.
- [32:15]
A
And you know, and some of your information, you talk about some stats. I mean you said that generally, you know, across these six and now I guess hopefully it will continue with your seventh showroom in Chicago. But you know, you said saying that 70% of the customers that make appointments are new to the brand, then you have conversion rates of something like 60 to 70%, at least after a little while. And there are also that all these showrooms are profitable. Yeah. I mean, is this a new way of selling watches, relatively?
- [32:48]
C
I think it's a paradigm shift and it doesn't suit everybody. I think it's embedded in this, the type of brand we are, Andy, and this relationship and this engagement that we have and the fact that we engage in the type of conversation with people where they. They feel no pressure to buy and there's nothing behind glass. You know, you can. You can wander around, you can. It's very interesting, some of the differences between UK and US customers as well.
- [33:19]
A
Talk about that. What are the differences that you're finding so far in your retail experience?
- [33:24]
C
One of the most interesting and some extent amusing ones is the Brits, by and large, they make an appointment, they're pretty clear in their own minds what they're looking to buy. As I say, they will move once we've shown them other things sometimes. But it's a conversation only and purely about watchers in the us. What's interesting is that people will arrive in the showroom and they won't immediately necessarily want to talk about watches. They present themselves and so you're engaging firstly in sometimes their life story or certainly their. Their rationale for being interested in watches. So they. They're much more open to sharing elements of themselves with us in the showrooms. So that leads to a. You have to be a good listener, you have to tell the story, of course, when it's the appropriate time, but you have to listen first and you have to judge how that person wants the story to be told to them and how they want watches presented to them. And I have to say, it's. I think this is. Well, it's not necessarily unique, but you don't have that many retail formats that are about appointments. So you've made a commitment in the first place, you've made that appointment and therefore you're not going to want to have it last five minutes. You know, it's not as quick scout around a boutique, you know, don't quite like the look of whatever's on sale, don't like looks I'm getting from some of the staff, et cetera, et cetera, have been ignored or been. No, it's. You've decided that you're going to engage and then the quality of engagement is down to us to make sure that it's what you expect it to be. So these people become I mean I, it's overstating it that they're not friends as such in, in the, in the real sense of the word of friendship. But they do feel connected and we feel connected to them. And I think one of the reasons for the such high levels of conversion that we're enjoying is down to that level of connection that the guys and the girls that run our showrooms are able to have with these people. And we discovered that there is a sort of an elixir for the sort of people that we want to employ in our showrooms. And it's not your typical watch salesperson.
- [35:52]
A
It's interesting though when you talk about that community obviously that you create and that different retail experience is your customer that you're finding that are coming to these showrooms and having these high rates of transaction. What kind of watch collector or watch experience do they generally have? And how does that translate from the UK to the us? Is it much different? But I mean are these serious collectors who know about the brand, are they buying their first luxury watch? Who's your typical customer in these retail locations?
- [36:27]
C
Typical is probably hard to pin down, but there are some trends here. In our showrooms the average transaction value is higher. There is a propensity towards the higher end of our collection. So that which we call the atelier collection, which incorporates things like the loco bel canto, the new true gmt, we tend to sell more of those in our showrooms than we do online. It's not by a factor of two or three times, but it's a noticeable shift. Interesting up the scale. Yeah, but we also do have of course people who are buying either into the brand for the very first time, but also into watch collecting for the very first time, or they're moving from quartz to mechanical or they have a very small collection and they're looking. So we have the full gamut of people but there is definitely a tendency to higher priced, more complicated watches. Ergo we probably where we almost, we know we entertain a greater number of serious collectors, if you like, in our showrooms than probably we do online.
- [37:41]
A
That's interesting. It makes sense I suppose as there's that higher level of engagement obviously and indeed a higher value product for sure. And you know, just last on retail, I mean, is this the then model going forward? Could Christopher Ward ever, could we ever see you in, in multi brand retail, traditional retail? I mean, is that out of the question?
- [38:05]
C
No. As I've said before, if watches of Switzerland want to throw into touch their, their usual margin requirements and want to Take a very small margin on our, on our watches that allows us with our level of profitability at a times three multiple, then we'll be worldwide with them tomorrow. The chances of that happening I think are relatively small. And we do think there's a pretty sizable opportunity for us to enlarge the footprint of our own showrooms. And to be perfectly honest, the type of experience that we want to deliver to our customers I don't think can be delivered by a third party party.
- [38:46]
A
And so then talk about, you know, where you, you know, strategy wise, see that increased footprint. Is it focused in the US which is your biggest market, and, and continues to grow. Do you have more room in the uk? Could you go to other markets?
- [39:01]
C
The answer is yes to all of those questions. In a sense we do see the, the, the major focus is currently on the United States and we've identified the markets we believe that we can and have a critical showroom in. All of this is born from our own cash flow at the moment. So we're, you know, we're probably talking about. I don't know. Well, I do know, but I'm not sure how much I'm going to share. But I've said it before to people, but probably we think between 25 and 30 showrooms in the US is, is maybe where we'll top it out. And you can work out the major metropolitan areas yourself where that would likely be the case.
- [39:47]
A
How long would it take you to get to that level, do you think?
- [39:50]
C
If we're opening at a rate of, you know, five, five plus stores a year, that would be a good target to go for. And some of it is, is just about our ability to manage that growth and retain the experience and the quality of what we're trying to deliver. Some of it's about finding the right sites, employing the right, all of those things. You know, fast growth is very possible as long as you've got the cash to do it. You know, they're very profitable for us. So you know, we, we, we, we would aim to open more, more rapidly if we could, but we're also conscious that quality comes first. And so I'd rather that we made sure as we are doing that the experience was as good as it's been thus far all the way through. And I've been involved in reaching retail all my life and Peter and I between us have probably opened a thousand stores. One of the scars on your back that you, you, you learn in that sort of career is you can over expand too quickly and the quality Declines if you're not careful. So we've got enough scars on our back to hopefully make sure that we don't do that.
- [41:03]
A
And have you made, have you made any, you know, missteps or mistakes so far with these six? I mean, you know, you, you. I think that the numbers you use are annual revenues aver one and a half million pounds and five million pounds. You know, have you, have you got the location or the, some of the strategy wrong in any places or. They've all worked?
- [41:24]
C
Not so far, Andy, but we will make mistakes. We will. I mean, it's, you know, there's no business on earth that doesn't have a misstep. And actually the first misstep will probably the best learning we have, but so far not. And of course we are aim not to. And I say with, with people like Michael and his team on the ground, you know, doing this, doing this remotely, purely remotely, would be much more difficult. And we're very careful in terms of. We're building a profile up of the sort of spaces and the sort of areas that we think work for us. It's different in a New York versus a, say, Virginia, and we get far more passing traffic in Green street in Soho than we will in Dallas, for instance. That's in, that's, that's pretty obvious. But we will make mistakes. I mean, and I, I actually want us to make some mistakes because we're not, we won't be trying hard enough if we don't. And I want us to try very hard. But we see this as a, one of the, one of the key vehicles for growth.
- [42:34]
A
That's interesting. And so at this point, I presume it's still quite a. Can you give us any sense of your overall sales, what retail accounts for
- [42:45]
C
last year we're headed towards the 50 million mark. That's pound sterling. So this year, the financial year we're in now, which ends next March, I mean, long way to go. Who knows what happens in any one financial year these days. So if you, if you're able to predict that, let me know, will you, Andy? Will do, yeah. Thank you. I don't want to live through another 2025. And you can only have so many liberation days, can't you? So we feel fully liberated now, I have to say. So subject to the geopolitical climate and tariffs and the ever changing landscape that they provide us all with, we would expect having had a fairly existential threat. I mean, this is quite serious stuff now, you know, 25, when on April 2, we saw Switzerland on the board that he was holding up with a very large, I think at that stage it was 30% that he was going to impose on Switzerland. It turned out he imposed 39%.
- [43:59]
A
Turned out to be 39, which is
- [44:01]
C
on top of the 5% that already existed. But overnight, because we're a direct to consumer brand, we didn't therefore hold stock already in the United States. Everything from day zero was going through at a 44% increase in price or we absorb all of it, in which case we go bust very quickly. Existential threat to what was then 50% and rising above business.
- [44:29]
A
And so, yeah, you had to make some moves in terms of your structure in the US and you changed the way that you distribute the watches there and going through your own entity so you're able to utilize transfer pricing spot on.
- [44:46]
C
I mean, we were fortunate enough and that we'd set up CW Inc. A long time ago. If we hadn't set it up, we wouldn't have been, you know, there's a chance we wouldn't be here today. Literally, it's that big a threat it posed to us. But the finance team, our cfo, Joe Keach was magnificent in this and he and the finance team, you know, worked through how we would move a lot of the cost base, genuinely we were thinking about this anyway, to the US Move a large chunk of the profit towards the US which allowed us to affect a cost plus as opposed to a full selling price that would attract duty. And then we have a very close relationship with dhl. In fact, we're one of the top two or three exporters by value into the United States from the UK because all of our watches come from Switzerland into the UK to be distributed across the world. So we've always had a very close relationship with them. They magnificently. And we'd been working with them on a bulk shipment, break it down in the US into individual parcels, process with them for about 12 months. But we had to accelerate it rapidly and we managed to do that in the space of a month, something that would normally take another six or seven months to have got to that position and fantastic support from them. And so that reduced the distribution costs as well. So a whole melange of activity, the like of which, which I don't wish to go through this year because it was incredibly time consuming, energy consuming and cost consuming.
- [46:32]
A
And just to be clear, so what percentage do you think now retail accounts for your sales and what's the goal? And then we'll continue to talk about maintaining your profitability margin because You've raised prices this year as well?
- [46:50]
C
Yeah, yeah, for the first time in two years and by an average of around five and a half to six percent over the course of two years against a market backdrop, probably averaging over the same period, price increases on like, for, like, products of probably 15 to 18%.
- [47:14]
A
What were the, I mean, if you can be specific, what were the specific sort of drivers pressures there? Was it the, Was it the. Frank. Just inflation in general?
- [47:23]
C
Is it tariffs, Currency exchange moved against us, as you know, so that was a good, a good portion of the 6% then there. Inevitably, over the course of two years, our supply base, who had absorbed a lot of potential cost price increases with us that they may have applied to other people because our volumes were going up. So you very kindly reminded me that we reached the top 50 in value terms in terms of Swiss watch brands. In volume terms, we're a, you know, we're about 26.
- [48:04]
A
Right. So about 40,000 watches, is that right?
- [48:09]
C
Yeah, this, this, this year it was just about 43, 44,000. Current year will breach 50. So, you know, and on some of our larger platforms, such as Trident, such as Sealander, we're talking serious numbers now. So in terms of our supply base, we're working with them, but I mean, they. We spent a lot of time in the recent past sharing with them our plans and our plans for them within our plans. And, you know, there aren't that many, many watch brands that are able to project growth at the rate that we're projecting a. To have achieved growth over the past three or four years that we've achieved and also to potentially project growth. You will know only too well. I mean, it's one of my big concerns for the industry in general. Whilst values are going up, volumes continue to decline. That is potentially an existential threat of its own for the watch industry in Switzerland, because if the supply base vanishes, there is no industry. And so I think it's a very major concern.
- [49:21]
A
I saw you a couple of years ago, you just made the investment in Paluzzo, 20% stake, and they're a sort of component supplier, metal machinist manufacturer. How has that investment worked out in terms of your supply chain and your components acquisitions? And is it something we might see more of?
- [49:46]
C
Yeah, I mean, we couldn't, for instance, have launched the Loco in the way that we were able to do so without Paoluzzo's help. We've got things in train at the moment that may not come to fruition until late 27, early 28 that they're heavily involved with or involved with us on.
- [50:08]
A
So.
- [50:08]
C
Yeah but relatively speaking they're a fairly minor part of our entire supply chain and it's sharing with and working with those suppliers that has really enabled us to keep our. And the fact that we are this high growth watch brand at the moment, fingers crossed. And the level of consistency we don't flip from supplier to supplier. We're very loyal in an industry that you know, isn't always the that way and feast and famine as you will know over the years is, is, is one of the real bugbirds of any supply base and any supplier and the watch industry has a tendency to overload when things are good and then find itself hugely overstocked and then contracts get cancelled and of course nobody. That's not the way, the most efficient way to, to run a supplier. Yeah, a manufacturer. So we try as best we can to be consistent, to be open and transparent with our suppliers and they have been enormously helpful. They understand what we're trying to achieve in terms of the value proposition. But event, you know you have to be fair with people and they have their own margins to work towards but you know to have, have a overall price increase on like products of 6% over a two year period when cost inflation, whether it be through currency or material cost increases or labor cost increases I think isn't bad.
- [51:50]
A
No doubt. And so you're you know part of that strategy is being very sort of open and clear and sort of forward planning with these, your suppliers and in terms of your growth growth. So I think Morgan Stanley suggested that you had 50% growth in sales from 2024. What kind of growth are you projecting and is that number correct?
- [52:18]
C
Yeah, since 20. I mean we've more than trebled in size since 22 and whilst the last financial year will not show the same, it's obviously still going growth but because of the tariff situation that we've discussed, you know that, that, that deflated the, our American cells for a while. They're now back and stronger than ever. So this year we will get back to our normal, we hope our normal cells trajectory. Certainly the, the launch only a week ago of the new Sealanders, if that's anything to go by that's a really great start to the year. But you know, as I say you can't a, you, you can never be sure these days what's going to happen but if, if it's a stable, a relatively stable environment then we would expect a, a very strong year again this year. You know with the, with the US market being more than 50% of our business.
- [53:18]
A
Hmm, interesting. Interesting. And I mean, yeah, I mean, what's your sense of the US market? It's where the growth is. It's where all the brand or many brands are focusing their attention these days. What is your sense of the strength of the US consumer and the growth in premium watches?
- [53:40]
C
I mean, for us, and I know reading other people's reports, and it's an incredibly robust market and still growing. I think the worry I would have for the American market is what happens to AI businesses and crypto. So a lot of growth, particularly the high end of watches, I think is being driven by those in the tech industry where salaries, bonuses, shares, et cetera are fueling huge purchasing patterns. Also crypto for us. Well, so I wouldn't want that necessarily to happen for the entire industry if there was a deflationary element to AI shares, which I personally think will happen at some point. I think most.
- [54:39]
A
You're not alone in that, in that prediction.
- [54:42]
C
No, exactly. I don't think he marks me out as some sort of seersayer particularly. But let's assume that at some point, who knows when. But at some point there's going to the bubble. If it doesn't burst and if it's not a dot com situation of the turn of the century, then I think it will deflate, or it should. It will deflate. I think that will have an impact for us that may be beneficial conversely, because people tend to buy down the scale. I would be particularly concerned if I was a brand that had been hiking prices significantly in, at the hyper luxury level, which I frankly, frankly, again, as we discussed in terms of volume, I think is reaching levels which need to be seriously looked at. It was one of the trends that I picked up in watches and wonders you mentioned earlier. You know, it's, it's. I look at some watches, I know we know you know roughly the cost of these watches. I, I don't know where some of
- [55:49]
A
the prices, prices come from in terms of tariffs. Are you accounting for the, you know, the 10% or the 50? What are you paying right now actually? Is it, is it, is it 10%? Is it 15%? 15. Yeah, 15. And then are you trying to get that refund for what you did pay into that following the Supreme Court ruling? And how much might that be?
- [56:14]
C
I won't tell you precisely, but it's in the millions, it's in the million. Yeah. So we. And about, I think in the first day, we. And another 358,000 companies applied and that was the first day. Yes, we are. And in fairness to the administration, at the moment, everything seems to be as they said it would be. We have had no refunds. Nobody's had any refunds yet. But the program process is working exactly as they said it would. And unless something or somebody changes something, which is always possible, we, under many, many hundreds of thousands of other businesses are hopeful that the damage, some of the damage that was done last year will be undone by the repayment of some of these things. But the costs we incurred, never mind the tariff cost, the costs we incurred as a business to do what we had to do to survive during that period, I. E. A. The lost sales, because it doesn't account for the sales you lost.
- [57:19]
A
Of course.
- [57:20]
C
Yeah. Your prices go up 40%. You, you, you know, I'll tell you exactly what that meant to us in, in, in that period, we were roughly taking about $90,000 a day. Yeah. And it went down overnight to $10,000 a day.
- [57:43]
A
Wow.
- [57:43]
C
Yeah.
- [57:43]
A
After April 2nd. Yeah. So that is indeed an existential threat. And when did it recover and by how much?
- [57:51]
C
The biggest drop was from July when he applied the full amount. And that's when we triggered all of the exercises that we spoke about earlier. And so for around about, about a month or five weeks or so before we got everything in place. And we were then able to go back to around about, you know, 2. To exactly the 15% which had been applied previously and the sales recovered pretty much to where they'd been before. That four or five week period was serious stuff. And that's why, as I say, the team here and partners like DHL were magnificent. But that's what we were contending with. And that's what I, I think most people have. No. And why would they have no concept of what those decisions being taken in, in D.C. were having on business like
- [58:45]
A
ours, on certain industries? Indeed. Yeah. And it was, as you say, it was existential.
- [58:49]
C
But I'm pleased to say, you know, the sales, once we did what we did, recovered almost immediately and have continued to grow. So as I say, we'll take the hit. Some of it will hopefully get back this year, but we'll take the hit in the last financial year, but recover that and more, we hope, this year.
- [59:08]
A
And so negative growth then in 2020?
- [59:12]
C
No, no, no, no, no, no, no. Still positive. It's just not to the level it was the previous two years and the US Grew double digits. So, you know, I mean, so interesting. But not the level that we Heard that we were headed towards and likely to achieve it undermined that, but still growth and growing very, very, very rapidly at the moment.
- [59:38]
A
And as I say, yeah, I mean, can you give us a sense then, you know, in terms of your long term strategy, how much you, you know, you think that retail, your, you know, very specific, by appointment only retail will account for your sales. As you say, it's higher, higher purchases generally in those, in those stores. Yeah, yeah.
- [60:01]
C
It depends over time entirely, as we said before, how many, how many of these stores were able to open. But we've got, we've got a couple of staging posts that are important to us. I've long said, I think Chris Ward is a quarter of a billion pounds sterling brand just waiting to arrive at that point. Now that's going to take a, a little while. But the first staging point is 100 million so around about 140 million US and we would hope to be hitting that 100 million within the next two to three years.
- [60:41]
A
Okay. From around 50 million now.
- [60:43]
C
Yeah, yeah, well it's 50 million sterling. You know, hopefully we'll grow beyond 50 million this year which as I say looks, looks likely provided everything, everything remains reasonably stable. And of course because most of the sales, as we said earlier from our showrooms, are incremental, then the more we can open, the faster we can open them successfully and profitably and manage them whilst delivering the same quality of experience that will determine, determine essentially how we go. But we're still growing online as well. It's not as if, because it's product first, it's always product first with us. And I've got the benefit of knowing what the pipeline looks like and I have to say the product development team, I'm more excited now than I've ever been.
- [61:41]
A
Well, that's interesting. I mean, because you've done some beginning back with the Belcanto, which I think we would both, you have certainly said, I mean, absolute game changer for the brand in terms of, you know, visibility and sort of people looking at the brand and what you could do. You've just, you know, you followed that up with the Loco. There's been, you know, the true GMT that you did earlier this year, bringing, you know, a flyer GMT to, you know, in house, to the line and then you've, you know, refined and updated the Sealander collection. Yeah, I mean, you know, where will, you know, give us a, a sense of where you're going in terms of product? Should we expect more of the Belcanto sort of game changer? Kind of products or upgrades and shifts to existing wines.
- [62:36]
C
Both. We constantly want to surprise ourselves and therefore hopefully surprise our first followers. It's both ends of these spectrum are equally important to us. I mean we have, you know, Sealander acquires us more new customers in absolute numbers than any other arena. You know, the Sealander GMT is our number one recruitment tool, if you like, into the brand and you know, that's why it's such a, Last week was such an important launch for us, even though it's what most people, well, is at our entry level. But as you know Andy, we've talked about it before. We set up on a, not on the usual model. We don't play by the same rules in terms of range construction or pricing construction or platform construction. We're able to move from entry level Sealanders through to highly sophisticated complications and we want to continue to push at both ends. So you know, we've got, and we've got, in development in, we've got some astonishing things if they come to fruition ultimately at both ends of the scale particularly I think the next, I think there are this, this, this autumn we'll see some really outstanding launches. I'm very, very optimistic about this autumn and as I say, as we look at 27, 20, 28, there may be and I, I don't want to be a hostage to fortune here because you just never know. But we've been working on something for two and a half years now that if we pull it off, you know, we'll be one of, hopefully could be one of those moments again. But hey, you know, we'll, we'll, we don't. But I, I, honestly, I, I am, it is a very exciting time and just genuinely, genuinely and I've been around a while, you know, I can't remember feeling as excited and as positive about anything, not just in Christopher Ward's world, you know, since 2004, but in my entire career. I'm more excited now about what we have ahead of us than anything that's been delivered so far.
- [64:57]
A
Product wise. Indeed. That's quite something. And I mean, yeah, when I think about your average price point, just to understand and I think Morgan Stanley estimates around 1300 Swiss francs.
- [65:09]
C
Pretty good. Yeah, they're pretty accurate. Morgan Stanley.
- [65:12]
A
They're pretty good. And so am I right. While continuing to deliver the value proposition of not costing more than three times your cost, we will expect some higher priced, higher end complications and models in the future. You'll be moving upscale at some entities of the spectrum.
- [65:34]
C
Yeah, absolutely. You know, so, but also expect some, you know, enhancements of, of entry level as well and new products at that level and mid level as well. It's the, it's the, it's the automotive model. It's not the, you know, we don't know which lane we're in sometimes because we don't recognize the lane. So we'll swim in any lane we want and I think that's one of the freedoms the brand has that many brands particularly those that are in larger groups just don't have. They can't swim outside their lane. We delight in swimming outside our lane and it seems so far some people also like us swimming outside our lane as well.
- [66:22]
A
And last thing I mean then would you ever consider a sub brand or at either end, end of the spectrum or do you want everything to exist within the Christopher Ward name?
- [66:35]
C
The answer is no. You know, if we're our brand is it's hard enough to build a single brand and be true to it over time and keep focused on it. It is possible to develop sub brands within our platforms. We have the sub brands if you, you like that matter to us under this Chris Ward umbrella. So Trident has become a, a very recognized dive watch brand in its own right. Sealander as an adventure watch brand. You know sound through Belcanto is, is, is something that you know, we've begun to own. We've become, I'd like to believe, renowned for case construction, you know the, the light catcher case. We very early on, you know, back 10 years, 11 years ago now, we, we decided that we wanted to really become expert at case design and do something that the industry wasn't because most of it is slab sided and very little time and attention which is a cost issue. And I understand it, I understand why people go slab sided but we chose the, we chose to in zoom zig when others zagged on on that sense, you know, loom. We're becoming renowned for our Lumiere collection. Our approach to luminosity and watches which is one of the key things that watch fans love about any watch. We work with a small family owned business that, that has developed and has the pattern on loom that only very few brands are able to use. We're one of them. They choose to work with us. You know, they also choose to work with Patek. So at our, you know, at our sort of price pointing and our sort of mid luxury level if you like. You know, I think we've become the leaders of, of the pack in terms of luminosity in watches. And there are many things that, that I think we, we can if we're brave. Cause I think we're absolutely at our best when we're at our boldest, as Tony Blair once said about new labor. But I believe it to be true of us when we're at our boldest, we're at our best. And we've got some bold. We're working on some really bold stuff at the moment, which is why I'm so excited. There's more ahead than behind, that's for sure.
- [69:04]
A
Great. Well, you know, I've taken up an hour of your time, really. I have a million other questions to ask you, but I think this was a good focus discussion on Christopher Ward. And we wish you the best of luck for this year.
- [69:19]
C
Thanks, Andy. And again, thanks for having me.
- [69:22]
A
It was my pleasure. And that's the business of watches for this episode. We hope you enjoyed. Please head on over to Hodinky.com where you can join the discussion and leave any comments or questions about this episode or the business of watches in general. Who knows, we might even answer your question on a future episode. Thanks for listening and see you next time. Sam.