Swiss luxury jewellery and watch conglomerate, Richemont, has been quietly busy making several important changes over the last few months. The group is now the proud owner of not one, but two, premium online retailers, a new watch brand, and has been fighting the battle against unauthorised dealerships. Other brands could learn from Richemont’s flexibility, bending its traditions to fit a new era. For more information see Luxury Goods Retail – International, August 2017, Jewellery & Watches Retailing – UK, September 2017.

What we’ve seen

  • Richemont has recently launched a flurry of initiatives, most notably online, with the takeover of online luxury retail group Yoox Net-a-Porter and second-hand watch site watchfinder.co.uk.

  • The conglomerate also announced the launch of a new Millennial-friendly watch brand, called Baume.

  • Richemont has also been battling the grey market, first by buying back old stock from wholesalers, and now by utilising blockchain technology to track its product.

Digital invasion

Unlike most of the luxury jewellery and watch brands, such as Omega and Rolex, that still eschew online retailing and do not allow consumers to purchase product on their websites, Richemont’s chairman Johann Rupert has decided that the old mantra of “if you can’t beat them, join them” certainly rings true when it comes to embracing online retailing.

The June 2018 takeover of Yoox Net-a-Porter (YNAP) made Richemont one of the biggest players in the luxury e-commerce market. According to Richemont’s Chief Financial Official, Burkhart Grund, prior to the acquisition e-commerce accounted for just 1% of the group's revenues. Post-acquisition this figure should jump to 17%. Online retailing is increasing in popularity within the luxury market. According to Mintel’s Luxury Goods Retail – International, August 2017 Report, online sales accounted for 5% of the total luxury goods market in 2016, and luxury online sales had increased 20% between 2015 and 2016.

Figure 1: Richemont brand IWC Schaffhausen on Mr Porter, 2018
[graphic: image 1]
Source: Mr Porter/Instagram

The buyout of YNAP will also give Richemont access to digital expertise which will help the group develop websites for its luxury watch brands that have so far avoided selling online. Until this happens, YNAP is an excellent platform for Richemont to showcase its high-end jewellery and watch brands, and is an authorised distributor of six Richemont jewellery and watch brands (IWC Schaffhausen, Jaeger-LeCoultre, Piaget, Panerai, Montblanc and Baume & Mercier), some items selling for as much as £30,000. Richemont’s star brand, Cartier, already has its own transactional website, with almost two fifths (57%) of product sold online.

Baume with the kids

As well as tackling the online world, Richemont has been trying to come up with a solution to entice a generation of Millennials who may not be as au fait with the intricacies and craftsmanship of ultra-luxury timepieces. Additionally, there is a move towards experiences, so even those with the money may be more likely to split it between high-end goods and trips abroad.

Enter Baume: an entry-level premium watch brand, released in May 2018, specially designed with Millennials in mind. Unusually for Richemont, the Baume brand has not been acquired but started from scratch in-house. Confusingly, the brand does not have much to do with fellow-Richemont watch brand Baume et Mercier. The pieces start at an ‘affordable’ £430, and while they are assembled in the Netherlands, with Japanese movements, rather than being Swiss-made (a trademark of Richemont); it is assumed this is not a priority for the Millennial generation.

Figure 2: Customisable Baume watch, 2018
[graphic: image 2]
Source: Baume/Instagram

Rather than fancy movements, the watches are fully customisable, with many different straps and bezels available. In fact, the Baume custom series can be put together in over 2,000 different ways. Additionally, the watch brands other USP is the fact that it is eco-made, using recycled parts. Customisation and sustainability are big business, particularly with the Millennial crowd. According to our Jewellery & Watches Retailing – UK, September 2017 Report, over half (53%) of Millennials would like retailers to sell more ethically sourced jewellery, and a similar number (52%) would be willing to spend more on jewellery or watches that can be personalised.

Figure 3: Jewellery and watch shopper behaviour, by generation, July 2017
Base: 1,346 internet users aged 16+ who have bought jewellery and/or watches in the last 5 years
[graphic: image 3]
Source: Lightspeed/Mintel

Shades of grey

As if Richemont has not been busy enough, it has also been trying to tackle an issue pertinent to the high-end luxury jewellery and watch market – grey market sales. Websites selling second-hand super-luxury items have gained traction over the past few years. Unauthorised online marketplaces such as Chrono24 (the grey market heavyweight), sells watches second-hand or from online dealers who have been known to purchase stock from authorised dealers that have failed to sell. The pieces are sold at a fraction of the full price.

Going online is often the first touchpoint when searching for such a high-end product, indeed, figures from our Jewellery & Watches Retailing – UK, September 2017 Report reveal that over three in five (62%) will research jewellery and watch prices online before visiting a store. Even more disturbingly, figures from the upcoming Jewellery & Watches Retailing – UK, September 2018 Report show that almost two fifths (37%) would happily purchase a luxury watch from an online marketplace such as Chrono24.

Figure 4: Watch purchasing behaviour, July 2018
Base: 832 internet users aged 16+ who have bought watches in the last 5 years
[graphic: image 4]
Source: Lightspeed/Mintel

Richemont has decided to take control of this process in several ways. Firstly, just as it had with the YNAP deal, it decided to do things under its own terms. In June 2018 it announced a deal to buy second-hand site watchfinder.co.uk. Watchfinder.co.uk is the world’s largest seller of pre-owned premium watches. Secondly, in July 2018, Jin Keyu a non-executive director of Richemont announced that the group has decided to start using blockchain technology to trace its product. Not just to know how and where it was made, but also to track watches throughout their life.

These moves supersede a controversial buyback programme Richemont began enforcing in 2016, in which it bought back watches worth €278 million (£250 million) of product, mostly Cartier, sold wholesale. This was done in order to prevent the retailers from selling these back to the grey market, where they would be sold at a discount, thus damaging the brands’ reputation. Over two years Richemont bought back €481 million (£430 million) worth of product. This cost the group, and according to Grund, its gross profit was reduced by €135 million in 2018 as a result. Richemont has since reduced its supply to meet the demand, in order to stop the flow of leftover stock.

What it means

  • Richemont has been implementing several changes to bring it to speed with the current retail – leapfrogging its rivals, particularly with its YNAP acquisition.

  • Luxury groups and brands have got to come to terms with the way people are now purchasing goods. Luxury products are not immune to price-sensitivity and people shopping around online, even someone who can spend £30,000 on a watch will still check online to see if it is available for a fraction of the cost.

  • Rather than reacting to changing consumer behaviour, Richemont has begun to act, pre-empting any challenges facing it. From a more Millennial-friendly brand to using new blockchain technology to keep track of its goods.

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