Published 17 May 2021 in Strategy • 4 min read
For most, it has been a nightmare; for some, a disaster. But for François-Henry Bennahmias, head of Swiss luxury watchmaker Audemars Piguet and one of the keynote speakers at OWP liVe in June, COVID-19 has been nothing short of an inspiration.
Lockdowns and collapsing travel prompted a crisis for Switzerland’s luxury watchmakers, many of which rely on global tourism and duty-free shopping for sales. After surfing on the back of rising global affluence, particularly in China, 2020 was a disaster. Export statistics – the only aggregate industry data available – showed foreign sales fell by almost 22 per cent last year, year on year. While sales have recovered somewhat, many brands laid off staff and shuttered stores.
COVID-19 followed earlier threats from a rising Swiss franc and disruption from wearables, notably the Apple Watch. While not as life threatening as the quartz revolution decades before, such developments forced top mechanical watchmakers like Patek Philippe, Breguet and Audemars Piguet to respond.
Some observers went so far as to predict the demise of the industry. “It didn’t happen. Currency fluctuations can be dealt with, as you can always find ways to adjust. And the effect of smart watches has not really impacted high-end watches,” says Bennahmias, who will speak at OWP liVe on 30 June. “You can have a fast food place and a three star Michelin restaurant close by, and both can flourish. Expensive mechanical watches still appeal to younger buyers.”
But Covid-19 has been different, he concedes. While Asia had experienced SARS and the Middle East MERS, “there had been nothing like this before. My number one goal was to secure the integrity of our people. I was determined we shouldn’t lay off a single person.”
Support from the Audemars and Piguet families, who control the company that traces its roots to 1875, “provided the peace to weather the storm”, he says
To keep them informed, Bennahmias started weekly videos for employees. In one, he asked for ideas from their children. “I received emails, videos and drawings. All shared one message: true love. Not the love like a Facebook message or a greetings card, but genuine emotion. And it was clear that youngsters felt we were responsible for what was going wrong with the planet.”
“I realised this pandemic marked a break. Perhaps we’d have come to the same conclusion in two or three years’ time. But those responses crystalised things for me: for years in the luxury goods industry, we’d been competing to outspend each other.”
“Assume a brand needs refreshing roughly every five years. That costs about $200m, or $40m annually amortised over five years. Then there’s rent. And you haven’t said hello to a single customer yet! That’s crazy way to set your priorities.”
“So, I said, we have to reassess our business model. We have to care much more about clients, especially local clients. All these years, trade was so good, there were so many tourists from Asia, watchmakers had forgotten their local clients. Many had become so dependent on Asia it was impossible to change overnight.”
“I asked our employees to consider what we were doing right, and what wrong. Everyone was on board. It fired up people’s imaginations, stimulated creativity and released energy. We had to refocus on the local, find ways to sell watches with stores closed, and engage with loyal customers, even when there wouldn’t be a sale.”
The exercise, which lifted local sales to 75 per cent of group revenues from 50 per cent in 2020, meant total sales fell just 8 per cent in Swiss francs (CHF), and 4 per cent in local currencies last year compared the record 2019. Sales this year should be around CHF1.2bn while the workforce will rise from 2,000 to 2,200 by year end.
Much of that success stems from Bennahmias’s commitment and energy, which recalls other Swiss watch industry luminaries such as Nicolas Hayek, creator of the Swatch Group, and Jean-Claude Biver, another sector legend.
Does it require a special personality to run a watch company? “People say I’m tough, but fair. I’m not always the easiest person to deal with. I love going fast from A to B. And I love simplicity. If someone comes to me with something complicated, I say, make it simple”, admits Bennahmias.
“You need vision and you need to be close to people. If there’s no fun in it, this business isn’t for you. These are values that allow companies to thrive, even in a crisis”
But he acknowledges decision making can sometimes be easier for a family-owned company focused on the long term. “Quoted companies have to grow no matter what. You always have to push to make the numbers for the next quarterly results. But for us, revenue growth is the result of great strategy, not an objective in itself.”
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