Demand on the high finish of the watch market is booming — and Audemars Piguet, the Swiss watchmaker whose cult Royal Oak timepieces will set consumers again between $50,000 and $100,000 for hottest types, is making a killing.
Over the previous 5 years, Audemars Piguet’s gross sales greater than doubled, surpassing 2 billion Swiss francs ($2.2 billion) final 12 months, the family-owned watchmaker informed BoF.
Whereas it’s nonetheless smaller than trade chief Rolex, Audemars Piguet has overtaken Patek Philippe to turn into the world’s second-largest impartial watch model, and efficiently cemented itself as one of many trade’s most coveted labels, favoured by rappers, rockstars and horologists alike. As gross sales of luxurious timepieces rose 4 p.c to $55 billion final 12 months, Boston Consulting Group estimates, Audemars Piguet grew by a minimum of 25 p.c, in accordance with BoF evaluation.
At the same time as second-hand costs for a lot of watches have cooled from document highs in the course of the pandemic, consumers proceed to pay excessive premiums on retail costs for Audemars Piguet’s Royal Oak, which might be tough to trace down on the first market as a result of restricted portions and surging demand.
“Audemars Piguet might be the singular most in-demand model on the planet from a product perspective. It would even be extra fascinating than Rolex proper now,” mentioned Ben Clymer, founding father of Hodinkee, the influential watch media and retailer.
Audemars Piguet — or “AP” as its colloquially identified amongst followers — isn’t merely driving the wave of post-pandemic demand. Whereas the worth of the market is at a document excessive, the amount of recent watches being exported from Switzerland has roughly halved since 2000 amid the rise of sensible watches. The corporate is pulling forward in a sector that has turn into extra polarised and premiumised, with progress pushed by only a handful of top-end manufacturers.
Many credit score the work of outgoing CEO François-Henry Bennahmias, the model’s chief govt since 2012, for reworking the model’s fortunes and catapulting it to the “champions league” of the watch world, as Swiss watch analyst Oliver Müller places it. Bennahmias is about to step down on the finish of this 12 months to pursue different alternatives.
When Bennahmias took the highest job, Audemars Piguet watches have been languishing in shops, with about 30 p.c of the model’s international stock greater than three years previous, he informed BoF.
Clymer remembers when Royal Oaks traded at appreciable reductions. “I’ve distinct recollections of being supplied Royal Oaks at 40 p.c off — 50 p.c off at occasions — at retail. They have been simply seeking to transfer stock,” he mentioned. “It’s exhausting to think about now.”
Bennahmias, who started his profession as a professional golfer earlier than leaving sports activities behind for the posh trade, overhauled the Swiss watchmaker’s enterprise mannequin and model. He eschewed its longstanding wholesale mannequin in favour of direct-to-consumer distribution and fostering shut relationships with purchasers, whereas an early embrace of avenue tradition and collaborations helped the model get a head begin on rivals because the viewers for luxurious timepieces turned youthful and extra various. By bolstering Audemars Piguet’s supply of ultra-high-end fashions and restricted editions, Bennahmias burnished the model’s picture, excited the market and boosted revenues in addition.
“The imaginative and prescient was to deal with making every little thing higher, as an alternative of extra: so higher product, higher high quality, higher distribution, higher reference to individuals,” Bennahmias mentioned.
The deal with promoting on to the buyer has helped Audemars Piguet develop its revenues quickly with out drastically ramping up manufacturing, because the model captures hefty retailer markups on every sale and has a tighter grip on its stock administration. Manufacturing at Audemars Piguet stays nicely under rivals: in 2021, it offered 45,000 watches, in contrast with 68,000 at Patek Philippe, 600,000 at Cartier, and over 1 million at Rolex, in accordance with Morgan Stanley estimates.
The DTC mannequin stays a rarity within the high-end watch world: In 2021, Rolex, Patek Philippe and Swatch-owned Omega all relied on wholesale for over 70 p.c of gross sales, Morgan Stanely estimates present, whereas Audemars Piguet drove over 70 p.c of income from its personal shops. Solely Richard Mille, which sells simply 5,000 watches a 12 months solely in its personal shops, has a tighter management of its distribution among the many trade’s massive gamers.
Drastically shrinking Audemars Piguet’s wholesale publicity additionally meant Bennahmias’ might deal with sustaining fewer, however higher, retail places. Now the model has simply 99 factors of sale globally, in contrast with with 470 a decade in the past.
Bennahmias’ strategy to retail has been to focus investments on well-trained workers and high-touch providers, reasonably than vying with luxurious conglomerates like LVMH for high-visibility retail areas. In 2019, the model debuted its “AP Home” idea: non-public boutique areas that feel and appear extra like five-star residences than retail shops. The inaugural location, above a Church’s retailer on London’s Bond Road, has no retailer frontage at avenue degree. Its foremost room is outfitted with a bar, a grand piano, and even a pool desk, inviting purchasers to have a relaxed, intimate expertise.
“At our worth level, the publicity and area we have to host individuals the suitable means,” Bennahmias mentioned. “We’re solely promoting 50,000 watches. I wish to get to know the 50,000 people who find themselves shopping for yearly.”
The set-up has labored wonders, with purchasers spending three to 4 occasions as a lot as they might in a conventional retailer. In 4 years, the model has opened 15 AP Homes, together with in New York, Shanghai, Tokyo and Zurich. “In our future, possibly 50 p.c of our places might be homes, and 50 p.c might be [traditional] retail,” Bennahmias mused.
Audemars Piguet is about to launch a pre-owned watch programme in-house throughout the subsequent 12 months. Whereas second-hand watches are a posh enterprise for manufacturers — and never simple to make worthwhile — the transfer will add an extra layer of management over its model picture and relationships with customers.
Bennahmias’ personal ardour for sports activities and music has closely influenced Audemars Piguet’s transfer to embrace and domesticate its position in widespread tradition in a means that few different watch manufacturers have finished. In 2005, when Bennahmias was AP’s North America chief, he spearheaded a tie-up with Jay Z, releasing a limited-edition Offshore watch with the rapper at a time when collaborations with hip-hop stars have been extraordinary within the luxurious trade. Since then, the model has repeatedly rolled out limited-edition product collaborations with athletes and artists starting from Lionel Messi and Sachin Tendulkar, to LeBron James and Quincy Jones.
AP’s extra inclusive strategy to constructing relevance in sports activities, music and avenue tradition paid dividends as millennials got here of age and the worlds of luxurious vogue and streetwear collided: the model has come out forward of rivals relating to attracting a youthful and extra various buyer base.
The model’s collaborations proved a successful technique, serving to animate their flagship product in new methods whereas partaking quite a lot of totally different communities. Much more off-beat tie-ups proceed to drive hype as urge for food for distinctive items soars amongst luxurious customers. Take final 12 months’s collaboration with Marvel on a Royal Oak Idea impressed by the Black Panther film: a one-off particular version fetched $5.2 million at a charity public sale in the course of the collaboration launch occasion.
“Francois noticed the potential in what widespread tradition might imply to high-end watchmaking actually, actually early — and he embraced it in a means that no one did again then, and only a few even do at present,” Clymer mentioned.
A successor has but to be named to comply with up Bennahmias’ transformative tenure when the chief exits later this 12 months.
“The problem for [the next CEO] is kind of excessive,” mentioned Oliver Müller, trade analyst and founding father of consulting agency LuxeConsult. “His or her mission might be to stabilize progress, and get right into a mode the place they’ll nonetheless develop however in all probability in a much less spectacular means.”
Analysts say there’s loads of room for the model to continue to grow with out diluting its attraction. Whereas the flagship Royal Oak drives over 90 p.c of revenues for the model in accordance with LuxeConsult estimates, demand for the watch isn’t set to die down anytime quickly, as manufacturing stays restricted and new consumers compete with AP die-hards, who generally gather a number of editions of the basic mannequin.
However Bennahmias’s impending exit and up to date adjustments to the corporate’s board have set off hypothesis a few potential sale of the model. Italian luxurious govt Alessandro Bogliolo was named chairman of the board final November after Jasmine Audemars, great-granddaughter of the model’s co-founder Jules-Louis Audemars, retired. As identified by revered trade weblog Miss TweedBogliolo’s specialty will not be luxurious watchmaking, and he has a repute for promoting luxurious companies at a excessive worth: Bogliolo was behind the blockbuster sale of Tiffany & Co. to LVMH in 2020.
LVMH can be a reputable suitor: AP’s estimated 15 billion swiss franc valuation ($16.1 billion) would make an acquisition one among luxurious’s largest ever offers — and worth out most different potential purchasers.
Nonetheless, because the model prospers as an impartial firm, there’s little strain to drive household shareholders to money out. “Due to Mr Bennahmias and his groups, the networth of the model is about 10 occasions what it was when he got here in,” mentioned Müller. “If I’m a shareholder at Audemars Piguet, why would I promote if the model pays me an excellent dividend yearly?”
The corporate mentioned in a press release it was drawn to Bogliolo’s “sound understanding of family-run companies” and his expertise creating luxurious manufacturers at a global degree.
Bennahmias denied there have been any intentions to promote the corporate after his departure.
“We’re extraordinarily agency on the message that we’ve been delivering for ever, saying that we’re very happy with our independence, and we’ll preserve working that means,” he mentioned.