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Foreign.
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Welcome back to the Real Time show with me your friendly neighborhood watchmaker, Rob Knudds. Today I am joined once again by our resident provocateur David Vaucher and a returning guest for the third time on the airwaves for the Real Time show listeners, Thomas Biot of the eponymous brand bio, one of the most interesting, dynamic and forward thinking brands in the watch industry. Thomas, welcome back.
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A
What an introduction. Welcome back, Rob. Welcome David.
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B
I have obviously pestered you many times in private and professionally about the watchers and the thinking that goes in to them. And we've recorded twice together live at events in the past but this is the first time we've had you sat down for an hour long episode. And David, I know is extremely excited to get in to the nitty gritty behind the scenes because this is the first time he's had the chance to talk to you directly. I will kick things off though. I would like to say welcome again. What does 2026 hold for you at this point?
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Let's jump straight into the future where we are in the future already. Very, very interesting start of the year 2026 will definitely be for us a challenging year. And I used to lately to speak to the press or talk to suppliers or people just asking me how is it going? I am reporting that we have a problem and you have two kinds of problems. You can have two kinds of big problem in the watch industry. A is your brand is not performing well, you're not selling as it should and you have issues. That's one type of problem. We have the second type of problem which is a good problem but still a problem. We are experiencing a big growth and we close the year 2025 by almost 40% growth and we aim at a 50% growth. Trust me, it's nice. It sounds nice but it's a different game to make it happen. There are a lot of challenges linked to. I will probably be speaking about this. So it's a, it's a year of big growth. It's a year of opening the brand to the world international markets. We are, as one journalist stated, one of the best kept secret in Switzerland. And our, let's say our success in Switzerland stands. We are very much growing and still selling a lot to the watchmakers here. But we start to expand. I can make you a short list of the point of sales we have to open in the coming weeks. Name it. We just opened in Switzerland, Swiss, German. We just opened in Vienna. One of the main players in Vienna. I'm heading to Luxembourg tomorrow. We are opening in Madrid, we're opening in Qatar, we're opening in Hong Kong, Macau. And so that's, that's just in the next weeks. The, the restraint to that is that we don't have stock to ship. That's the main problem we have currently. And that problem occurs end of November because we dried our stock for Christmas sales, which is a good problem to have, but again a big problem.
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B
This is very interesting to hear that you're expanding so internationally and through a retail network as well. Because one of the things that Baio is obviously known for is it's incredible value proposition. Now the theory would be in many cases, in order to offer such incredible mechanics for such a reasonable price, you would have to crush the traditional margins that most brands would build into their product costs to enable a retailer network to exist. How have you done it? Are you having friendly agreements with retailers who take a smaller margin or have you just simply managed to perfect the production line so much that you're able to offer at that price?
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You know, the good thing to speak with professional is that you go straight to the, to the key question, how can this, how can this happen? Well, we, I, I built bayou on an experiment many times and I even heard some reproaches saying, ah, you're against trade. I'm coming from the trade. My background, 15 years is developing brands internationally. So I am, I am the friends of distributors and retailers. So I would not go or do anything against them. I just make a statement when I launch this brand is that when you buy a watch, the least you pay for is the watch. It's ridiculous, small amount usually. I don't want to hurt feelings so I'm not going to give the percent but sometimes it's not more than 10, 15%. The rest is a pileup of margins out of which the main ones are trade. That was my job by the way, around the world. So I never said I would disappear intermediaries. I said you have to work with them and master that piece. The prices we have, we have increased a little bit the prices so we're not at a percent of times two as I started beginning, but we're still a much lower percent on average as any other brands. That's why, and I'm not being arrogant here, we have in everything we do the best prices worldwide and it's not because of less quality. It's about margin compression. Now how and why do we expand internationally? Maybe the why before the brand spreads by word to mouth a lot. This is why we have A big momentum and statement here in the watch Valley, in the Swiss, French part where watchmaking is done and we sell a lot to the people from the Watch valley and even working in the watch industry because it's a word to mouth when it comes to expand internationally. That words to mouth has some limits because it requires people to meet, to gather, to show the watch. And that's why it comes in the picture to have repair centers, to have authorized centers, to have a place where people can gather and believe it or not, a place where people can experience and try the quality. Because our main challenge is that people just don't believe us because of the price they think cannot be. It's not possible, it's not Swiss made, blah blah, blah, blah, blah, blah. So we need to have touch points where people can go and see the watches and if it's through an authorized retailer that has made its due diligence and that can testify because they are professionals, that what you see is what you get and the quality announced is exactly what it is and the retailer can make make that statement. That's why I wanted to extend the distribution and start to open point of sales in key metros, in places where people can gather, because then they can see touch the watches. How do we do it? Look, from the beginning, I'm not a magician. It's just a matter of margins. I'm buying exactly the same quality movements from mainstream brands. I have exactly the same quality as top brands. I use exactly the same suppliers. So why would there be a difference? The only thing is, what do you do when you assemble the watch and you start piling up margins? So we decrease those pile up, we have less margin for anyone. But look, I'm not giving here a secret recipe, but when I speak to retailers, there is less margin. Of course, and retailers do understand why. It's because we earn less ourselves. So they understand that we're not being egoist and want to gather all the margins for us. We give a little less to the retailers. But I have just one simple question, and I know very well the retailers because I've worked with them and for them for 15 years. What is interesting to you? Margin or profit? Because margin doesn't pay bills, profit does. And profit is a very simple equation. Rob and David. It's margins times quantity, period. It's how much you make on a watch and how many watches you're selling. So my question is very simple to retailers. Are you more Interested in a 100% margin on 0 watches sold on 50% margin on 2 watches sold per year or on 40% margin on 4 watches per year. Because the key matrix here is the rotation you have in the window. The rotation means how many times your collection rotate. You have 10 pieces in the window, you sell 20 pieces per year, you have rotation of two, you sell 40 pieces, you have a rotation of four. Usually in the segment where you know, in a very high end segment, if you have a rotation of 0, 5 or 1 per year, you're lucky if you are in the middle price segment, as we more or less are, it's a rotation of two you consider as being a very good brand when you are in fast fashion in the like the brand of the moment, you hope a rotation of four. We have a rotation of four not being a fast fashion and even more in the test we had at retailers. So it reaches the window with prices never seen before. And of course consumers start to question, see the quality and buy the watch. So a little less percent margin on much many on much more watches sold makes the difference and makes the retailer very happy. So yes, for the time being I can even say that we have the luxury to be a bit picky and choose one retailer. And then, you know, I come back to a very simple process of, of the Neanderthals, I don't know if you say it like this, you know, from the ancient world, when they wanted to make a fire with a single stick wood of wood, they would put it in between the hands and start to turn it on one single point to produce heat. And this is exactly what we're doing. Instead of like many other brands in our categories, opening as many point of sales as possible and put them in competition and each one has to give away margins just to get the consumer, we choose just one, we pick the best and we work with one point of sales that we turn and turn so that it hits the window. So of course they are extremely happy because the results that they have with our brand, with my brand is extremely positive. It's a very simple recipe.
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B
A collection turn of four per year is truly remarkable for a brand in this price segment.
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And that's the least we experience.
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B
That's incredible.
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I mean the best one is six to seven, so. So that's unknown for me in 15 years working.
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B
I mean that's the benefit of your experience obviously and your pitch to the retailers is very wise as well. Would you rather have 100% of nothing or 1% of a success?
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You know, well, and you know guys here, I'm sorry, I know when people hear about watch industry. They hear watch and they forget industry, but it's an industry. And I was the guy producing, making happen the profit because I was in the sales department and I don't want to shock anybody here, but a beautiful watch is a watch that sells unless you make it just for yourself and you put it in your shelves. So I make watches that are highly sellable because they are beautiful. They are designed in house, they are assembled by hand here in the chateau, in a workshop, in house with our watchmakers and they are the best price in the world. So of course, you know, sooner or later people will know. I know it sounds a bit arrogant, I'm very sorry about this. But look, I'm proud because here what stands is our values of offering, making exceptional watchmaking accessible for each and everyone.
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B
So this is where my next question goes because you've explained very clearly the strategy. High volume of sales allows for a reduction in traditional margins, as we would say.
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Well, high volume, we're doing a 2,300 watches sold.
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B
It's still very relatively speaking versus the production capacity I suppose is what I mean. But one thing that still costs money and people forget about when they have the watch on the wrist is communication. Now you're expanding around the world pretty much at once, simultaneously hitting new markets, key markets, the markets you believe that you will have success in, the markets you have established partners within. How do you go about making sure that your communication is relevant to the new areas that you're entering when you must have to operate it on quite a shoestring?
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Well, if you look at it through the prism of money and how much it cost, don't blame the marketing. Marketing is a small portion of what consumers pay when they buy a watch. The biggest toll comes from the distribution. It's not about hearing about the brand, is how you buy the brand and where you buy it. That what takes most of the cost. So that's why we started this conversation speaking about distribution and not marketing. Now still marketing is, is an investment for brands. Look, you know, when I launched my tourbillon I made a bet. I launched it at a very provocative price in Swiss frank. It was about 4,000 Swiss franc at early stage convert it to euro or US dollar, it's roughly the same. Let's say it's insignificant price for 100% Swiss made tourbillon. And I stayed and I stand to my statement. My guess or my bet was that it would be such an amazing price that it would do the marketing. And it did. So why am I Saying this is that at a certain point, the impact of what we bring to the market, to the coast creates a lot of interrogations and people start to question, ask, how is it possible, et cetera, et cetera. And that alone replaces a lot of marketing investment that we should be doing. The good thing about it is that in our case, the money returns to the consumers buying my products because they buy at a lower price. Whereas when you pay a lot in marketing to make them aware and convince them, they are paying to be convinced and ultimately they pay the watch much more expensive. So again, it comes down to one key, or let's say one bar, how you said it in English, one destination. That is my quest is how can I reach my consumer's wrist with the best possible price? So I just want, not touching anything
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C
about quality, of course, and I just want to confirm. So Swiss Made, just for the listeners, Swiss made is usually 60% of the value. So it's not 100%. But your tourbillon is 100% Swiss made product, based on what you said. Is that, is that correct?
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The answer is yes. And you need three things to be able to add the label Swiss Made. And if you don't have the label, it means it's not and it's legally overlooked here. You cannot by constitution use Swiss Made if you don't respect three criteria. 60% of the value in the watch should be made in Switzerland, the movement should be Swiss, and assembling and quality control should be carried out in Switzerland. We respect those three criteria for all our watches. We go further for the tourbillon and we have 100% of everything being Swiss made.
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C
So that's amazing. And it brings me to a question. It obviously it works for you if you're the first mover with this pricing model. But do you feel, is there any fear at all that you might be somewhat cannibalizing on this idea of a Swiss watch? You're devaluing the very thing that you're selling to people. That's the first question. And second is, have you lost any friends because of your approach to how you're doing business?
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The answer in both questions is yes. I would not call someone a friend. If I have lose him because of this move, then it's not a friend. That is envy or frustration. Look, yes, a tourbillon is the holy grail in the watchmaking. On the chess, it's the king or the queen. So I came up with this and it's not again, a cheap tourbillon. The heart of the Tourbillon is Atocalpa for those who know. And it's the higher level and quality of Atocalpa and this you find in the most premium brand in the world. And of course somehow it sheds a light in the industry where people start to ask is this possible first and if it is, then how come am I paying so much for other brands Now I don't have to answer that question. I leave the other explaining why and how. And there are in some cases of course very clear explanations on, you know, all the decoration made by hands on the materials you may use on, you know, there are several things that would explain the rest. I let the other brands make their podcast. Definitely it created some frustration, some questioning. I was under investigation. There are journalists that even went to China to find evidences that I would be a liar. You find the answer on the main medias here in Switzerland saying if Bayeux is not Swiss main, then the main brands of the Valet Joux and the others are not either, are either Swiss made because they are producing exactly in the same plants. And I have proof for that. So the debate is not now if yes or not everybody understand and acknowledge that yes, we are 100% Swiss made. And, but, but you know, I don't, I don't fear at all that I am in some way harming the industry because those who wants to go for the big names and big brands are going there anyway. They're not impacting by my brand. I don't see that the big four have decreased their sales. On the contrary, it just opens up to a public that considered buying one day, or let's say dream one day of getting the Holy Grail and couldn't reach that dream because of Bayou. Now some people, yes, were refreshed, waiting, some saying that I would, you know, I would devaluate a product because I could bring it so at so affordable to the market. Again, I don't think and for me the definition of luxury, you know, in the industry, luxury is more seen as something exclusive and the exclusion factor, because exclusive comes from exclusion is usually the price. I don't feel that luxury should be exclusive because of the price. That's my quest. I think luxury is, is about something different, is about being close to the brand, is about establishing a relation here. You know, you may hear during the podcast, ding dong, many customers come here. I meet them, I spend time with them. You have, I can bring you with the video, someone assembling his own watch. That's service we offer here. People sits on the desk with a watchmaker and they do the assembling themselves. This is luxury to me. But I want to desacralize the luxury as being something that you cannot afford. And I'm sorry, I may look a little bit, but I come from La Chaudefond, which is a proletarian city. This is where we make watches. We know what means to work. 1,000 US dollar euro or Swiss franc is a lot of money for a lot of people, let's be honest. And I know lately the industry is aiming at those 1% very, very healthy people that can spend over 100,000 on a watch. Good for them. I definitely support and I definitely thank them because they make that industry shine. But there are a lot of people that wish they could access to very beautiful watchmaking. And my quest is to give an answer to those people. The other have no problem selling tourbillon at 4, 10 times the price that I do. They find their public good for them.
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C
I love all of that. It almost, and I say this seriously, it almost like brings a tear to my eye because it's something that we've been talking about a lot and there's a lot of societal ramifications that go along with it. And you're really the first person to have articulated these ideas around exclusivity and pricing. And I want to get back to something that you said and I want to take a little bit of a roundabout way. So there's an expression in French called esprit Cartesian, the Cartesian spirit. And I can just tell that you have that in how you talk and how you run your business. And it seems to me like you would have a metric for every single step in this watch kind of production and selling process. And what I'm getting at here. So what I'm getting at is that when people think about starting a watch brand, because that's what a lot of our listeners dream of, they think of the watch and they forget the industry. So how much of your approach is just straight math versus some of your passion going into these products? Can you quantify that in any way?
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A
Thanks. I love the question and thanks for asking. Look, you understand exactly my speech. You have to go to the roots of this brand, which is visible 6 years and visible or under the ground 251 years now because the Bayeux family has been active in the watch industry in the state of Neuchatel, which is, let's say, the heart of the watch industry in Switzerland, where we produce things by 1775. I started this Brand out of mistake. Believe it or not, it wasn't my intention at that time. In 2017, I quit a job as vice president of an international watch brand and I started as a consultant and I was consulting for independent brands, fashion, high end, etc. But I started teaching, doing lectures at university and I started my own academy which I post now. It was called Watch Trade Academy where I taught international watch distribution to hundreds of executives from the watch industry, out of which many has launched their own watch brand. I was explaining them how you sell a watch because nobody's explaining you this. Everybody teaches how to spend the money, but nobody explains you how to earn the money. So my quest was it was almost mathematical because as an industry, the price you pay in a store is the result of a lot of operations, margin, intermediaries, marketing. It's a lot of money that everybody takes apart. And ultimately you have the watch on your wrist as a customer and you pay a lot of money so that a lot of people can eat great. And I rationalized this. So at the beginning I did not even wanted to launch a brand. I had an approach, let's not go too much into this. But I was questioning two business model. The Commerce, which is what you and I know as the regular stores. You go there, you find someone welcoming you, you try to watch you buy it. This thousands of year old trade system is extremely good in terms of experience, but very costly. Two thirds of the price you pay is not the watch, is how you buy it. And then came the digital component to it, the E Commerce, which put the E in front of Commerce, which is the online sales, which theoretically cut intermediaries and you buy directly from the brand to the end consumer through the store, E Store and this is in your pocket on your phone. That has cut drastically margins of intermediaries. But the problem of this, if it's very good in terms of margins because brands recover, the margin loses completely the taste of experience. It's dry, as cold as the pixel of your phone. So you have no experience. So the first one is under optimal because it costs too much and the second one is under optimal because it has no experience. And the first one is very costly. It's a factor of seven from the production cost to your wrist and that's the least you can have. Then if you go to high end, it's 10, 15 or even more. So from the price you pay to get the product and what you pay as a consumer, it's a multiple of seven. The E Commerce has the ambiguity of you don't have any visibility unless you let people know. So you have to overcompensate in marketing what you lose in distribution. That's why usually the basics of e commerce is a multiple of four from the production cost. My quest was a multiple of two because I was erasing both distribution and marketing cost. That's why our watches were so accessible and are still so accessible. It has nothing to do with less quality. We're not cutting anything in the quality property of the watches, we're just cutting the rest of the margins. Now, again here we're only speaking about rotation, margins, technical terms on something that is highly emotional. I went to 25 brands in Switzerland saying, guys, I have a theory that. Excuse me, but I was teaching this in many universities, MBA in Europe, very known MBAs. And I pretended that that was a new business model that would help a lot the watch industry to reintroduce extremely high value in entry prices, which is eroding now. And I received as many no as I asked. So that's why I started this brand as a laboratory and I did it because nobody wanted to do it with me. So that was not supposed to be a brand. It was just an experiment. And it turned out that it was so strong and that I was a bit right that it started to grow and it became a brand. And why am I saying this? Because if at the beginning it's just mathematical equation, I am from the watch industry and I love and respect this. That's why I went even further saying, look, if we are to make a brand, let's do it properly. So we have our headquarters here in the heart of Neuchatel, which is the heart of the watch valet with La Chautron. And we design in house, we assemble the watches by hand in house. We make everything properly and we create the best possible and most beautiful watches. So there is an emotional component to something that started as being very mathematical. And I don't forget that when people buy a watch, they just want not to buy by kilograms or centigram, but they want to buy an emotion. So I am very sorry to the people listening to that podcast. It's not just about margin. Here we are talking about things and when it comes to a tourbillon that you know is both with an emotion and a goal and that is hand over to other generations. I'm not trying to paraphrase a famous slogan, but you indeed do. Without watches. They are all automatic, they're all you can all repair. And it all goes through decades and centuries. So we are doing very high sensitive and emotional watches, but still adding a component and not forgetting the basics of it, which is to make it accessible.
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C
So on that point, and I was going to ask you another question, but you've set something off. So in the watch industry there's basically three ways to make money. It's you raise prices. You can sell more watches to the people that already have them, or you can grow the pie, or you can
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squeeze, or you can squeeze, sorry, the suppliers and tell them that they are selling you too much and too expensive the products. And that's a bit insane, I'm sorry to say. When you understand that the watch is 15% of it and you're squeezing those 15%, which is insane. That's why I am. Yeah.
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C
So we'll get back to that. And with that added, I think the watch industry does 1, 2 and 4 very well. I think 3, bringing new people in, they don't do as well. And it's becoming harder and harder because of the fact that as you said, this price segment is sort of eroding. So going to your clientele, it seems to me like you're still a niche brand but you offer this value that would actually be great to have more people come in and discover mechanical watches. So can you give a bit of a breakdown in terms of who is buying your watches and maybe what strategy you have around which segment you're actually pursuing?
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A
Look, when it comes to segment, it's a bit blurry in my brand because we go for things that we're passionate about and you find in our brand very beautiful watches at 6,700 US dollar and it goes up to 13,14,000 US dollar when it comes to flying tourbillon with moonfanes, et cetera, et cetera. So we go across mainly three segments and brands usually don't cross more than two segments. So that's unusual, but I don't care. We're just doing things that we like and that's it. And if you look at what it should cost, we're definitely across more than four segments because our flying tourbillon, 100% Swiss made. When it costs 12,000, it should cost, by the way, 50 or 60,000, which is definitely another segment. But anyhow, what was the question?
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C
So regarding the mix of customers that you have and that you're pursuing the
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A
mix of customers, that was it. Look, we are selling most of our watches now here in the Watch Valley. So you know, first when a cook eats his own soup, it's, it's a good news. Go to that restaurant and we sell to people here in Switzerland. We are very aware about brands, quality, etc. So our customers, I would say there are mainly two types, those who are passionate about watches that don't care about going to the mainstream, which I definitely respect, but want something a bit more, a bit more untold or you know that not everybody has the same watch at the party or at the dinner and are very happy to go for a higher segment at a price where usually they would get something much, let's say less accessible. And the second one, which we're very proud of as well, our collectors watch aficionados that have very high end watches, very expensive watches, but they see us as something promising, something interesting and somehow they would like to test those watches and say is that possible, Tourbillon? With those parameters, at that price, Let me try. And so we ended up convincing a very interesting and influence that people that have a lot of influence among the watch collectors that say let me try this. And they usually are extremely bluffy. I don't know how you call it in English.
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C
Impressed. Impressed.
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A
Impressed by what they have in their hand because it's not just photoshopped. And that's another public that we try as well a bit to leverage because we know they have influence, we know they are active in forums, we know they speak online. And if we do try to leverage on this, it's always with the same goal, is that if it reaches your ears as we do today and thank you for listening, that's all the money I don't have to spend because I'm not paying you to make that interview, I can testify. And that's all the money I will inject on your wrist because that's not the money I have to pay to make you aware of my brand. So we are heavily counting and hoping that the people experience the brand. If they're happy, they make it known and they let people know about the brand. And this is how we're spreading now. Should we push more and develop harder? Yes, but no. As I told you at the beginning, we are having a good problem. But still it's a problem is that if there is overheating and we cannot produce and supply, then we just create a frustration and B is people reselling the watches because there is shortage, reselling the watches at a much higher price. That's not my goal. I know it sounds very sexy. If you see my tourbillon and you have to wait four, six months to get it or you have it directly because it's online at three, four times the price. Some or many brands do use this leverage, real or artificial, to make people think that, wow, this brand is heavily sold, good for them. I'm not into this. I am into people wearing my watches because they love it, not reselling it. So I'm trying to avoid this overeating. And still when you have 50% growth, it's half of your production that you have to double in one year. And that's a big challenge. Capacities, cash flow, quality, et cetera, et cetera. Overheating of the team. It's not something that happens so easily. So we're happy that people know about it. If just one market, we're doing 2,300 watches a year, 20, 25, imagine that just UK, US get passionate about my brand, we're done. Because what is 2,300 watches? It's nothing for a big brand. And actually we had that done in the US when we launched the Chapter 8 and it was one day, two days after the introduction of the tariff of 39%. Like we were saying, okay, nothing will happen in the States. That article came out on a big media and it dried our stock in two weeks, literally. And even with the tariff Hostenger, is it possible? And you know, I called sometimes customers saying guys, are you aware of the 39%? They said, yes, but that's why we're buying your brand. Because even with 39%, you're still much cheaper than the other one we cannot afford. But the problem is that it completely dried our stock and we reached Christmas which should be the best selling season and we had zero people would buy to put something under the tree. We missed that opportunity because the first delivery is now in January. Because you cannot just, you know, it's not the printing, you have to produce the parts, produce the movement, place your order and it takes a lot to make a beautiful watch. So when it comes to developing, yes, but you know, little by little.
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C
So I want to touch on the production aspect. But before I do that, I just want to tie up what we've talking about with one more question that I want to get your take on. So a couple weeks ago we recorded an episode about a watch from Atelier Wen and their, their value proposition is basically to merge east and west and really highlight Chinese craftsmanship. And that led to a discussion on the fact that actually a lot of Swiss made watches incorporate Asian parts. And we were okay with that, that's totally fine. But that led to a discussion about transparency in watchmaking. And that's something that we're thinking is a bit of a movement in the micro brands. And the question we asked ourselves was because so much of the watch industry is based on the magic, and I'm using quotes, is there such a thing as too much transparency? And I want to get your point of view on that question, please.
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A
So let me understand exactly question. Is it good to be transparent? Is there transparency? What is exactly the question?
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C
Well, I think we can agree, and you may be certainly more than I can because you're in the business, there probably isn't much transparency in the watch industry now relative to things like Swiss made and ad campaigns. And just as you said, there's a lot of marketing and image building that goes onto these products. So as there is a move towards transparency with brands such as Atelier Wen and yourself, even though you're going about that in different ways, is there a point in the future where maybe the consumer does lose a bit of that magic and then a watch from one brand just becomes somewhat identical to a watch from another one? It's just parts being built up together.
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A
Look, in any case I don't think it will lose the magic because magic happens. And I can tell you when you see the customers just doing the last operation which is encasing putting the hands on the watch, it takes about one hour and a half here. Just when they do that operation, you can see that they have a completely different perception of what is a watch afterwards because it's still magic. And when you come to watches that are completely made by hands, as some very high end watch brands do, it definitely keeps the magic. Now look, if it's not clear then it means there is something not clear. And this question of the full transparency of course make many brands not feeling at ease because it's a reality. And I'm, let's say I have a privilege of having my own brands and I don't care. That's why I can answer that question that most of the people will elude or not give any precision if you ask them. And I don't think knowing the truth makes things less valuable. You know, the quest when we were hit in the quartz Crisis in the 80s was to reduce the production cost because we had to fight quartz. And the answer by Swatch, Mr. Hayek, he was not alone, but the history, remember his name, was to reduce as much as possible the production cost. So automation here in Switzerland was one answer, but the other answer was to send the production to places where it cost less to. Do you know why? La Chaux de Fonds is one place that is heavily developed in the watch parts. And most of the parts of the watches are produced in La Chaudefond because that's up there in the mountain where I was born. And it's high, it's cold, winter lasts many months. And this is where poor people were going and living because nobody wanted to go there. And that was the Asia of the past. And that's why watchmaking developed there in the mountain, because they were poor farmers and as there were five months of snow, they could not farm. They were doing watches and they were underpaid. So paying less is something that comes back to centuries. It was in La Chauxfond before and it's in Asia now. And look, I know it's highly political criticizing the Chinese, but let's be honest, they do things extremely well when it comes to quality. You have of course to follow up, but they have exactly the same machine because we sold them the cnc. So why would the result be different? The quality is excellent, it cost way less than what we pay here. And you know, I always remember my people remind my people, you know, when you criticize Chinese, don't forget it's a bit less now. But don't forget that 10 years ago, nearly one out of two watches in the world were sold to Chinese. So don't buy the hand that nourish you. So not only were they producing a lot of parts, but they were the guy buying the watches they have produced, paying the high price, thinking it's coming only from Switzerland. So be humble and thanks the Chinese. That's why I have many, much respects for Athely Wen, because they are just, they have a momentum and they do it and they play it very well of boosting the pride of the Chinese people. And my gosh, they have the right to because many times they are the guy in the shadow producing this. Now, not everybody, not everything is produced in China, but we do for our watches as most of the other brands, but we say it produce parts in China, but we are in constant contact with them. We pay them extremely well and respect them. And all the operation, the background is made here in Switzerland to produce for instance, some watch cases for the steel. It's extremely well doing it here, as I would not name because I wouldn't have time to most of the brands, but then there is nothing to be ashamed of. And not less quality and it's not less Swiss made, whatever or most of the things that now you're acquiring is the results of a working collaboration from many Countries think of the cars, think of many things and that's fine. I mean there's no issue about this. Now what I have some problem with is that when you do produce stuff in China, I will not name. But let me tell you something, there is a bar under here where we stand. And one day I have a friend, a very good friend that work for big cooks that say, hey look, I want to introduce you to Li Xiang Wang. I don't know his name, but anyhow, he was a Chinese guy and I met the guy, very decent person. They say he specializes in doing, in doing watch cases of very high quality in titanium. And as we have titanium in our tourbillon, a grade five produced here in La Chautautefonds, he thought it was interesting to introduce me. This guy said, yeah, thank you, but for the tourbillon we only go for Swiss made production. And I said, but nevertheless it's great to meet you and what do you do and who do you work for? And the guy showed me the watch he has on his wrist. It was a brand that you would, you would pay 200,000 for this. And I'm sorry, that fucking case was made in China. I'm sorry, I shouldn't say it, but I'm saying it. And why I hate this because my tourbillon costing 8,000 US dollar, everybody is coming after me. But are you sure there is not even 1 0.1% of blah blah blah. But nobody's challenging these guys selling at 200 bucks because at that price nobody would think. And this is where I have some issues. Yes, that I think fair.
- [45:28]
C
That's a fantastic answer. That's why we call it the Real Time show. We want real opinions and that's a real opinion. And what I want to do now is pivot back to something we've talked about. So as you said about 10, 15 years ago now, China was a huge buyer of watches. They cracked down on, I guess gifting you can call it. That led to a downturn. We are now in another downturn, which is due to another factor. So we are in a downturn. However, you have grown at 50% and you are having trouble finding manufacturing capacity and I'm having trouble squaring that. So how is it that in a down market you are having trouble finding manufacturing capacity for your watches?
- [46:09]
A
Look, first it's very easy for me to come and boast saying that we have 50% growth. It's very easy because we haven't started yet. So any new market that we open, imagine uk, imagine Germany getting a bit aware of my brand, can easily double the capacity. So there is nothing, let's say to be arrogant of having this growth because it's a natural growth versus established brands that are operating in every market and see a downturn in two main markets that make big portion, let's say 40% of sales, mainly China with its proxies or markets that are Hong Kong, that was one of the big hub for Asia and China and the other one being us. Now us accounted for 20% mostly or nearly off watch exports. And because of the tariff instability, et cetera, et cetera, of course that market was affected, it's coming back, but it was affected, it was a big hit to the industry because nobody would like to pay 39% more or even 10, 15% more. So yes, that has very much impacted. And plus there are self accomplished prophecies in that industry or in every industry is that we bet on how things will go. And if everybody bets negative, then the things will go negative because they start to panic and the retailers are anticipating maybe too much stock because everybody shipped before the tariff come in place. So the retailers are full with stock. So they don't. Or they postpone orders to the distributors and the distributors not seeing the orders coming from the retailers, postpone the orders to the brand and the brand stop producing parts. Which is exactly what's happening now. And the one suffering are those poor guys in the mountains here in Switzerland producing the parts because they cut all the production because they anticipate something negative. And that has two impacts. The first one being, I'd say negative for them definitely. But for brands such as me, it's kind of positive at the beginning because you have more production capacities available. But. And that's what's happening now. If that lasts and it's the case, then they're simply cutting or they go bankrupt and then there is no more capacity. And that has happened many times in the industry that it slowed down. They kill the production because it's dry for too long, so they cannot survive. And then when it starts again, and that has been exactly the case because of the COVID for one, two years, it completely falls. People got out of job, they stopped. You know, basically brands, you know, big groups and big brands such as Rolex make 80% of the business. And these guys have secured in house production capacities. And then they use subcontractors, suppliers to absorb the heating. Okay? And these guys have another layer of independence, small independence. And these are all my friends here, La Chaudefond in the Surroundings that absorbs the, the sur capacity from the suppliers, that absorb the sur capacity from the brands. And these small independent guys are, you know, they're self employed and if they don't have jobs 1, 2, 3 months, they switch to something else. And so it goes very fast. And then the suppliers, they have to put people on hold. They're paid for 18 months here to lower the capacity so they don't have to fire the people. But these guys cannot come and work. And you don't call them overnight saying, hey, come back. No, you have to reorganize, say, okay, I will rehire them so that the state stops paying them. And that takes time. And it's like something out of the fridge which is frozen out of the conge latur, a frozen thing. You don't just put it like this. And you have to go from frozen to unfrozen liquid and then to warm. And that's exactly the same in the watch industry. So this whole process take time and that's, that's, that's a problem now we're facing in the industry.
- [51:01]
C
So do you have a view on vertical integration versus the, the multiple steps that used to be historically how the Swiss made watches, I mean, for us, just generally, because I mean, if you look at the last also 10 or 15 years, there's been a big push among the larger brands to vertically integrate. That was apparently a sign of luxury. Whereas it sounds to me like you might be partial for a lot of reasons to the old atelier methods where everyone, you know, someone made an escapement, someone made a case, someone made hands.
- [51:31]
A
That's exactly what, what we do now.
- [51:33]
C
Yeah, and, and I guess, do you have any. Is that based on the fact that it's more efficient to do it that way or. It sounds like you're very emotionally invested in this, in this model as well.
- [51:44]
A
Yeah, but look, of course there is one person that know how to do something. The best is the best in the world, best in class to do it. So we use those guys. If you want to master everything in house, it takes a lot of time, hire the right people, buy the right machines, etc. It's very complex. Nevertheless, of course, big brands secure this verticality by buying most of these people. They are of course still independent, but a lot are working for brands exclusively. Or to make it easier, they don't work exclusively. Take Renaud Papis, they work of course for Mar Piguet, but they do produce as well movements for Richard mille, for others, etc. I mean, they work for many other brands. And it's fine like this. And so there is a lot of verticality, but still a lot of independence available for small brands like us. Now, do we have interest in doing things vertical here? Absolutely not. Because mastering all this is extremely complex. We don't have the right persons. And even if we would do so, the result is that we would have to multiply by 10 or prices, because that's the job. I admire the real guys on their workshop doing everything. Like we collaborate with the very famous now watchmaker, Olivier Maury. He's in La Chaux de Fonds. This guy is amazing. He literally creates the parts of the movements to make the watches. And this is the guy equipping our tourbillon. And this guy literally see him designing. We spend sometimes evening, I see him from a piece of metal creating the part in the movement that will create the calendar or the moon phase and literally creates from the raw material. And that's the job. That is amazing. Yes. But if you have to do everything by hands. Yeah. Then it's less industrial and much more expensive.
- [53:57]
C
So on that point, one topic that I always come back to when we come to watchmaking capacity is labor skilled watchmakers, because as you said, it's a skill. Do you employ any watchmakers in house? And can you maybe speak to this? I hear there's a shortage of watchmakers, but then at the same time, we're at a downturn, which means layoffs, unfortunately. Do you have any. Any views on the current state of the watchmaking? The watchmaker market, rather.
- [54:21]
A
So we do have to. Another senior watchmaker is. Is coming. I mean, he will act as head of production. He's currently employed in a big brand and he resigned to come to my brand because he loves the adventure. So we'll have three watchmakers that can assemble up to tourbillon. So it's not just starters. So that's the answer for my brand, for the rest of the industry? Let's be honest. I cannot answer your question. I don't have that visibility and I would not pretend I know everything. No, as a matter of fact, I know there is a lot of layoff which you don't hear of, but we hear it because it's our friends, cousins and friends of friends that are losing their jobs here in the watch valley, which is a bad sign. So there is a lot of availability in the market. Yes, that's what I can tell you now. You know, things can start again and maybe next year it's a different story, hopefully.
- [55:24]
C
Yeah. No Absolutely. I guess just to. Just to add to that. I think it's always unfortunate when that's the first thing that companies seem to do. And I know in Switzerland it's harder to do that. Obviously, I grew up in America. It's much easier to let people go. I think the Swiss have a different way of going about it. But you do hear about it and I think it's a shame because, you know,
- [55:45]
A
they have buffers, let's, you know, speak two minutes about a lot of people that hire. If you have a contra durie interminer un. I don't know how you say it in English.
- [55:59]
C
It's an indeterminate length contract, so there's no end date.
- [56:03]
A
You hire someone, it's part of your team, but you have a lot of cdd, as we call it. So it's a defined time and you renew it year by year or semester by semester. And these guys, it's just like temporary people, and you just don't renew. And that's the buffer a lot of big brands are using. And that's happening pretty much. And that's just, oh, I'm sorry, we're not renewing. So thank you. Goodbye. And that happens a lot, unfortunately.
- [56:34]
C
And then of course, when things get better, it costs even more to hire people back or train them.
- [56:38]
A
So come back. Yes. Yeah.
- [56:40]
C
Great. Well, this has been a fascinating conversation. We're going to wrap up with one more question. You've already told us about your plans for 2020, talked about the magic in watchmaking, we've talked about manufacturing. Is there anything that you want to leave listeners of the Real Time show with before we sign off today?
- [56:55]
A
Well, we have spoken very few about the upcoming product. Please tell us. And you know, every year I say guys to my team, Guys, let's cool down. We have a launch program that is equivalent to a 30, 50 million turnover watch brand. And we're just crazy. And the fact is that we can't stop because there are so many cool things we want to launch. So we have approximately every month or every other month novelties that are coming. I cannot spoil it. Of course. We are announcing tomorrow a beautiful limited edition on the Delta watches, which is this unique manufacturer complication that describes the time in a triangle, which is unique in the world. It's patented. So that's the tomorrow's launch. Then we have another thing next month and another. Well, we'll wait March. Nothing in March but April. They are the salon in Geneva. We'll be there at time to watches and we'll be revealing two novelties that are amazing and that's recurrent every other month. And we are targeting towards the end of the year, early 2027, our own fully 100% manufacturer movement which trust me, I'm sure we will be doing another podcast about this.
- [58:23]
C
We would love to have you on. Well, so we love to offer scoops to our listeners and that is a fantastic scoop to end. We'd love to have you on.
- [58:30]
A
I'm in love with that product. Wow.
- [58:33]
C
Fantastic. So listeners, please watch this space because we're gonna, we're gonna be in a great place.
- [58:39]
A
Ba111od.com or ba110official on Instagram and you'll be the first to know or follow me on LinkedIn because I spoil many times. I'm very active on LinkedIn Toma Bayou and I post a lot about, you know, the novelties, what we do here and a lot of about behind the scene. As you have heard, David and Rob, we're just being very transparent here. We just want to do what we know best, doing beautiful watches and explain how and why. And I think we're not spoiling anything. We're just adding a bit more knowledge to the people that are listening.
- [59:17]
B
A fantastic set of answers as ever, Thomas. Thank you for taking the time to talk to us both again on the Real Time show and we can't wait to meet up with you again at events in the near future. If any of our listeners have questions for Thomas and please do get in touch via the usual channels. You know where to find us on Instagram @therealtime show or via the contact form on the website www.therealtime.show. we'll be back soon with more top quality watch content and interviews with the industry's finest. Until then, stay safe and keep on ticking. It.