EXPANSION PLAN FOR ‘THE TIME EMPIRE’ IN THE UNITED STATES PROFESSOR ALESSANDRO CANNATA LXFM 745 - WINTER 2018 SUBMITTED BY: HETA PATEL HIMANSHI SHAH
RUTUJA MAHAJAN NANTHITHA SHANMUHASUNDARAM
TABLE OF CONTENTS
1. Executive Summary
05
2. Company Analysis
09
3. Distribution
25
4. Competitive Analysis
29
5. Situational Analysis
39
6. Geographical Expansion
43
7. Market Analysis
49
8. Target Consumer
53
9. Store Design
61
10. Communication & Promotional Plan
79
11. Financial Plan
93
12. Conclusion
99
13. Bibliography
101
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EXECUTIVE SUMMARY
Compagnie Financière Richemont is a leading global luxury conglomerate headquartered in Switzerland. Richemont designs, manufactures and distributes premium watches, jewelry, leather goods, writing instruments, firearms, clothing, and accessories. The luxury watch brands under Richemont; Vacheron Constantin, A. Lange & Sohne, Jaeger Lecoultre, Piaget, Officine Panerai, Roger Dubuis, IWC and Baume et Mercier, are few of the best in the world in terms of product and complication. The brand, however, lacks in terms of distribution and growth when compared to its competitors Rolex and Swatch group. Richemont’s competitors, Swatch Group has its own multi-brand distribution store for both its premium and accessible watch products. However, we noticed, though Richemont has few of the best watch maisons in the world along with a strong financial background, the conglomerate hasn’t still invested in a multi-brand distribution store. It has nonetheless partnered with CTF to have all of its 8 specialist watchmaking brands under one roof (Time Vallee), but even its competitors’ watches are present in the 3 stores located in Hong Kong, Seoul and Nanjing.
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Hence, this proposal focuses on a strategy that would allow Richemont to invest in a new flagship store of its own that focuses on the 8 specialist watchmakers. The strategy encompasses a perfect location and space selection, design of a retail/educational flagship space, institutional and promotional marketing techniques, financial plans and budgeting while considering factors of sales potential, current aesthetics of the 8 brands, and the goals and objectives to be achieved through this new investment. The proposal is named “The Time Empire” as Richemont has an empire of connoisseur watches that have the best technology, handcrafted to perfection yet remaining true to its heritage.
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COMPANY ANALYSIS
The Compagnie Financiere Richemont SA was founded in 1988 by the South African billionaire Anton Rupert. The main business areas are jewelry, watches, pens and clothing. Richemont has grown with the creation and acquisition of Vendôme Luxury Group from 1993 through 1998 and the buyout of LMH in 2000.Several well-known brands including Cartier, Piaget, Vacheron Constantin and Baume & Mercier had been part of the Vendôme Luxury Group, which had also been under the influence of the Rupert family. From the sale of Mannesmann to the British phone giant Vodafone, the brands A. Lange & Söhne, IWC and Jaeger-LeCoultre, which were first possessed by the Mannesmann watches group LMH, newly arrived in 2000. Richemont is a global luxury conglomerate that owns 18 individual brands, in addition to having large stakes in others, including the platforms Net-A-Porter and Mr. Porter.
VISION
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“As a responsible luxury goods company, our vision is to create long-term value for our business and wider society, while preserving our heritage in quality, craftsmanship and innovation” "In today’s global world, strength is a matter of agility and responsiveness. So our workforce is unique, diverse, open, always learning and growing. Richemont cultivates these qualities in its people. "
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1988
1996
Formation of Richemont. Richemont owns minority holdings in Cartier Monde SA and Rothmans International, which also holds investments in Cartier Monde, Alfred Dunhill and, through Alfred Dunhill, Montblanc and Chloé.
Merger of Richemont's tobacco interests with those in South Africa held by Rembrant Group Limited, Richemont owns 67 per cent of the enlarged tobacco group. Acquisition of watchmakers Vacheron Constantin by Vendôme Luxury Group.
1997 Merger of NetHold with Canal+ of France, Richemont acquires 15 per cent of Canal+. Acquisition of watchmaker Officine Panerai and leather goods brand Lancel by Vendôme Luxury Group.
2000
2003
2006
2007
2008
2010
2012
2015
2017
Disposal of Vivendi interest, which represents Richemont's exit from pay-television and electronic media investments. Acquisition of Jaeger-LeCoultre, IWC Schaffhausen and A. Lange & Söhne.
Richemont acquires the final 10 per cent of A. Lange & Söhne that was previously held by members of the Lange family.
Richemont acquires Fabrique D'Horlogerie Minerva SA. Richemont announces that it has entered into a long-term partnership with Greubel Forsey (20 per cent).
Richemont acquires component manufacturing operations of Manufacture Roger Dubuis SA. This entity is named Manufacture Genevoise de Haute Horlogerie (MGHH). Richemont acquires the watch case manufacturer Donzé-Baume SA.
Richemont acquires 60 per cent interest in Manufacture Roger Dubuis SA. Richemont announces its planned restructuring. This involves the separation of Richemont's luxury goods business from its other interests.
Richemont acquires the majority of the shares of NET-APORTER.COM, the premier online luxury fashion retailer. NET-APORTER operates as an independent entity alongside Richemont's other luxury goods businesses.
Richemont acquires 100 per cent of the capital of Varin-Etampage & Varinor SA (VVSA), a high-end manufacturer of stamped exterior components for watches, gold refiner and producer of semi-finished precious metal products destined for the watch and jewellery industry.
Richemont merges The Net-A-Porter Group with YOOX Group in an allshare transaction. Shares in the combined entity, the YOOX Net-A-Porter Group, are traded on Borsa Italiana, the Italian stock exchange.
Richemont sells Shanghai Tang, a wholly-owned subsidiary, to an Italian entrepreneur.
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CURRENT STATUS The Richemont group has eight specialist watchmakers are among the most renowned in the fine watchmaking industry, which is concentrated in Switzerland. The Federation of the Swiss Watch Industry represents all Swiss watchmakers.
GROWTH PLANS Richemont is the holding Company for some of the world’s leading luxury goods companies. It’s Maisons encompassing jewelry, watches, premium accessories and other luxury products. The Group is managed with the objective of growing value for shareholders over the long-term, recognizing that the most important assets of the Group its Maisons have almost all been in existence for over a century. The independence of each Maison within the Group is fundamental to Richemont’s overall growth strategy. Each Maison focuses on increasing awareness and desirability by developing creative products and appropriate marketing programmes. The Group’s luxury businesses operates globally. The Group believes in diversity of its geographical operations, with a lack of dependency on any one market, represents a long-term competitive advantage. Group’s strategic objectives are: • Long term organic growth through investment in Maisons • Maintain high product quality and outstanding customer service • Attract and retain creative management and skilled craftsmen • Increase investments in manufacturing (R&D, integration, flexibility and capacity) • Adapt the selective distribution model to changes in the environment • Maintain long-standing commitment to doing business responsibly • Further enhanced business models allowing leverage and control
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RICHEMONT MAISONS
VACHERON CONSTANTIN
BAUME & MERCIER
Founded: 1755
Founded: 1830
Founder: Jean-Marc Vacheron and Francois Constantin
Founder: William Baume & Paul Mercier
Headquarters: Geneva, Switzerland
Headquarters: Geneva, Switzerland
A. LANGE & SÖHNE Founded: 1845 Relaunched 1990 Founder: Ferdinand Adolph Lange Headquarters: Germany
JAEGER-LECOULTRE
OFFICINE PANERAI
PIAGET
IWC SCHAFFHAUSEN
ROGER DUBUIS
Founded: 1833
Founded: 1860
Founded: 1874
Founded: 1868
Founded: 1995
Founder: Antoine LeCoultre
Founder: Giovanni Panerai
Founder: Georges Edouard Piaget
Founder: Florentine Ariosto Jones
Founder: Roger Dubuis & Carlos Dias
Headquarters: Switzerland
Headquarters: Milan, Italy
Headquarters: Geneva, Switzerland
Headquarters: Schaffhausen, Switzerland
Headquarters: Geneva, Switzerland
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Product: Outstanding hand-finished mechanical timepieces, known for innovative engineering skills and traditional craftsmanship Property: Boutique at 785 Madison Avenue (2,500+ square foot boutique, a suspended three dimensional Lange escapement, the displays are broken up mostly by collection and then by color) Promotion: Hosts global competitions for young watch makers, participation in vintage car show, workshop for design and craftsmanship community People: At A Lange & Sohne the watch is the hero, we don’t want Brad Pitt: Anthony De Hass, Head of Development
Product: Fits brand territory which is inspired by the Hampton lifestyle – a unique balance of relaxed and timeless elegance Property: Chongqing, china (fits brand territory which is inspired by the Hampton lifestyle, a unique balance of relaxed and timeless elegance) Promotion: Sponsors Wheel’s & Waves California event (Motorcycle race), Sponsors Forbes’s Annual Under 30 Summit to encourage young entrepreneurs People: Campaigns and event in China with the brand ambassador Chen Kun
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Product: Crafts exquisite timepieces which combine innovative ideas with pure, distinctive designs Property: Rue du Rohne, Geneva (100 sq.mt attractive layout with sales and lounge on different levels, interiors feature the typically elegant IWC design – soft beige tones, dark wood accents, glass and natural stone) Promotion: Partnership with Film Festivals such as Tribeca, Beijing, Dubai, Singapore, BFI London and Zurich People: Numerous high profile IWC brand ambassadors and global stars are perhaps more useful to brand in motivating their distributors and dealers
Product: Forefront invention in fine watchmatching Property: Tokyo, Ginza (100 sq. mt single floor enclave of refinement & discreet luxury entirely devoted to showcase timepieces, serene intimacy and elegant refinement) Promotion: Art Deco inspired events to celebrate artic movements, association with Polo and top Polo players
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Product: A sports brand featuring a high degree of know-how, deeply rooted in Italian design and innovative technology
Product: Among its technical skills, Piaget is known for its boundless creativity shown in each new breathtaking thematic collection
Property: Rue de Faubourg Saint-Honore, Paris (sleek minimal aesthetic featuring the brand’s collections and exclusive models, 3 sections – entrance for fast appointments, selling points to welcome guests with comfort and waiting room with library)
Property: Flagship Boutique in Abu Dhabi (156 sq. mt with latest architectural concept, boasts contrasting materials in gloss and matte that have been accented with theatrical lighting on some of Piaget’s exceptional pieces)
Promotion: Sponsorship of the America’s Cup conveys its commitment to the most advanced sailing technologies, partnerships with influential designers, institutions and events underscore design and innovation
Promotion: Showcased collection at Fashion week in Singapore and Art Dubai Fair, scientific prize for candidate with innovative research project
People: One of the most popular celebrities on the Chinese screen, Wallace Huo is now brand ambassador for Greater China. Huo is the brand’s first official ambassador
People: Sponsorship of Film Awards led to many actors and actresses wearing Piaget watches on Red Carpet worldwide, Ryan Reynolds – International brand ambassador who possesses ‘elegance and charisma’
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Product: Range of audacious, hand-crafted, all mechanical timepieces combining inventive calibers with powerful and daring designs Property: Harrods, London (2016 – Roger Dubuis x Harrods in a prominent exhibition featuring three stand-out themed windows at Harrods on London’s Brompton Road and a unique pop-up environment inside, neon light represent lightness, deepness, transparence, infinity as Roger Dubuis calibers) Promotion: Events held in key cities like japan, China, the US and Europe will offer original and powerfully staged experiences of its standout models
Product: Technical excellence, inspired aesthetics and superlative finishing Property: Dubai Mall (Distinguished and elegant experience that mirrors the other Vacheron boutiques around the world, marries modern design with timeless style and grace, clean lines and cozy interiors) Promotion: Partnered with renowned photographer Steve McCurry and share its passion for travels through an exhibition presented around the globe, from New York to Tokyo
People: Rashad Jennings, football running back for the New York Giants of the National Football League, as an ambassador for the legendary Excalibur collection
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DISTRIBUTION Richemont conglomerate includes one of the best heritage watch brand majorly based out of Europe. The eight brands that we are focusing on majorly sell their merchandises through various distribution platforms. According to Deloitte report, own mono-brands boutique will be the major focus for the sale as oppose to the rest of the sales channels.1 Distribution channels are: BOUTIQUES: All specialist watch brands have their individual boutique located in major cities exclusively selling their merchandises along with providing experience of the brand to their customers. AUTHORIZED RETAILERS: These watches are also available in various department stores, third party retailers in major cities. Also, in Countries where establishing a brand is difficult, these brands tie up with local partners or stores to have their merchandise available in these stores. E-COMMERCE PLATFORMS:
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Connoisseur brands have a website but does not sell through this platform, whereas affordable luxury brands leverage the e-commerce platforms as one of their distribution channel. Hodinkee is one the e-commerce platform specifically dedicated for luxury watches and have special collection, which are exclusively designed to be sold on this platform. For instance, Vacheron Constantin’s modern watches are available on Hodinkee.
1. Deloitte. "What Sales Channels Will You Be Focusing on in The next 12 Months?*." Statista - The Statistics Portal, Statista, www.statista.com/statistics/303608/sales-channelsluxury-watch-brands-will-focus-on/, Accessed 11 Mar 2018
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A. LANGE & SÖHNE
VACHERON CONSTANTIN
• • • • •
• • • • •
Present in 60 countries 17 Boutiques 43 authorized retailers Main focus: Europe Presence worldwide
BAUME & MERCIER
72 Boutiques 346 authorized retailers Main focus: China Presence worldwide E-commerce: Hodinkee
ROGER DUBUIS • • • •
• 1688 authorized retailers • Main focus: Italy and France • Presence worldwide
JAEGER-LECOULTRE
OFFICINE PANERAI
• 880 authorized retailers • Main focus: Europe • Presence worldwide
• • • •
IWC SCHAFFHAUSEN • • • •
881 authorized retailers 33 stores in China Main focus: China E-commerce: Website
Present in 73 countries 63 Boutiques 536 authorized retailers Main focus: Europe, Japan, China) • Presence worldwide • E-commerce: Website in USA and China
25 Boutiques 162 authorized retailers Main focus: Europe Presence worldwide
PIAGET • • • • •
94 Boutiques 134 authorized retailers Main focus: China Presence worldwide E-commerce: Website
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COMPETITIVE ANALYSIS
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ROLEX
PATEK PHILIPPE
LVMH SPECIALIST WATCHMAKERS
SWATCH GROUP
HISTORY
Founded in 1905 by Hans Wilsdrof in London. First wrist watch maker to receive the Swiss Certificate of Chronometric Precision. In 1919 it moved to Geneva, Switzerland and is currently headquartered there. According to Forbes, May 2017, Rolex is worth $8.7 Billion According to Bloomberg annual turnover is around $4.5 billion. Logo & name are the easiest to remember and pronounce. Pioneers in new technology – world’s first waterproof and dust proof watch, the self winding mechanism with perpetual rotor, reducing the component of a complicated watch yet enhancing the functions. Owns Tudor since 1946.
Founded in 1839 by Antoine Norbert Patek in Geneva. 1845 Jean Adrien Philippe joined and in 1851 the company was renamed Patek Philippe & Cie. Last independent family owned Genevan watch company currently owned by the Stern family since 1932. Company is fully self-financed even its future projects are. According to Forbes 2014, the brand is worth $3 Billion and its sales is around $1.3 Billion. Created The first wristwatch in the world in 1868. “Supercomplication”, The world’s most complicated watch without the help of technology (had even an alarm). The World’s first 24-time zone wrist watch. The double-faced wristwatch with 12 complications by hand.
Founded in 1987 with the $4 Billion merger between Louis Vuitton and Moet Hennessey. LVMH is valued at $28.8 Billion according to Forbes May 2017. Annual sales in 2017 is over $53 Billion according to their website. Annual watch and Jewelry sales is over $3.8 Billion in 2017 according to Statistics brain. Has 3 specialist watch makers: Hublot – 1980, Geneva (athletics, bright colors, art of fusion and sporty). Zenith – 1865, Le Lcole (daring, business, achievers, gentleman like). Won 2,333 watch making awards. Tag Heuer – 1860, La Chaux-De-Fonds. (push back boundaries). Has a watch making school.
Founded in 1983 by Nicolas Hayek, and is headquartered at Biel, Switzerland. It is the world’s largest watch producer with a vertical manufacturing structure. It manufactures all its movements as well as used to for other brands. It also supplies parts and components to the entire watchmaking industry. Annual revenue according to their financial statement 2017 is $8.6 billion. According to Forbes May 2017, Swatch group is valued at $19.3 billion. It has 18 brands that addresses different segments of the market. Prestige and Luxury range brands include – Breguet , Harry Winston, Blancpain, Glashutte Original, Jaquet Droz, Leon Hatot, Omega. Premium brands include – Longines, Rado, Union Glashutte. Accessible Luxury brands include Tissot, Balmain, Certina, Mido, Hamilton; Calvin Klein watches + Jewelry. Mass brands include Swatch and Flik Flak.
IDENTITY
The brand is associated with sports, endurance, speed, precision, perfection and unbeatable. This is a perfect example of the iconic “Daytona” watch. It is a star brand
The brand evokes perfection, artistry, improved/best, intricate design and technology, independency, heritage to pass on, in the mind of customers. It is a connoisseur brand. Their logo symbolizes good luck that the founders wished to bestow on every wearer.
LVMH watch brands fall under three categories connoisseur Hublot, star brand Zenith, and premium luxury brand Tag Heuer. Hublot –known for its art of fusion in watchmaking with bright colored ceramics with sporty looks. The brand is also associated with athletics. Zenith – the brands watches are more on the daring, business style. It invokes daring, achiever, persistent, business/professional and gentleman like, in the minds of customers. Tag Heuer - vocation is to push back the boundaries and defy convention.
It is known as the world’s best watchmaker and innovator. Some of the brands’ like swatch watches itself stands for fun, playful yet elegant. Swatch group has one or the other brand that fulfills the identity of gentleman like, playful, strong, athletic, perfection, business /professional, daring and so forth. Its large portfolio allows it to cater to all the segments in the watch sector.
GROWTH
Their Asian and American market are developing and the brand is expanding into these markets.
The brand is growing at a very small pace as the quantity of their product cannot be increased rapidly without compromising perfection. Hence, in an interview with Luxurysociety.com, Thierry Stern says he had to launch in China that year with leftover 120 pieces Future market India.
Compared to 2016 LVMH watch and jewelry revenue from Asia has increased by 4% according to their 2017 revenue snapshot. And America and Europe grew by 1% each. The brand aims to grow in Asian Countries.
Watches and jewelry segment sales increased by 7.3% in 2017. Dynamic growth in all price segments, with the strongest increase in the prestige and luxury segment according to their annual report 2017. Asia / Pacific had the strongest growth rate in both wholesale and retail. Net income increased by 27.3% to $810 million. 31
ROLEX
PATEK PHILIPPE
LVMH SPECIALIST WATCHMAKERS
SWATCH GROUP
TARGET MARKET AND CONSUMER DYAMICS
Rolex – Upper-class and upper-middle class men and women who are strong, achievers, established, persistent, unbeatable at their game, powerful and athletic. They also target collectors and artists. Age isn’t the matter it is the persistence that counts.
They target upper-class powerful men and women who are collectors, understand and are willing to educate themselves about the product, respect heritage and are willing to pass it down through generations. They also target independent self-made women who are willing to buy their own watch and not rely on their spouses or parents.
Hublot – Upper-class men & women who are athletic, enjoy a mix of art and sports, powerful and enthusiastic. Zenith – Upper-class men (mostly men) and women who are business minded and aim to achieve something great. The customers should be strong, powerful and unbeatable. Tag Heuer is aimed at upper and upper middle-class men and women who are on their way to stardom or achieve greatness and have a strong and daring nature.
The mass and accessible luxury products are targeted at consumer aged from 15 to 40. The premium luxury products are catered to 33 and above customers. The prestige and star brands are targeted at upper class customers of all age. The characteristics of these customers can be anything as the brands address most of their traits.
PRODUCT CATEGORIES
Rolex wristwatches.
wristwatches & pocket watches Jewelry & accessories (cufflinks, earrings, rings)
LVMH – fashion, jewelry, watches, distribution, Spirits. Hublot – wristwatches Zenith – Wrist watches
Watches Jewelry Hotel
WATCH STYLES/ MODELS
14 series –113 stlyes with can be created with choice of dial, bracelet, material, size.
9 series with 204 watch styles. 41 models of jewelry and accessories. 48 rare handcrafted (diamond/artwork) watch models.
Hublot - 5 series around 150 styles. Zenith – 4 series and 104 styles under it. Tag Heuer – 7 series and 388 styles with 14 different movements.
Prestige and Star brands Breguet – 8 collections with 108 styles. Harry Winston – 11 pieces Blancpain – 6 collections with 341 styles. Glashutte Original – 4 collections with 216 styles. Jaquet Droz – 8 collections with 230 styles. Omega – 5 collections with 700 styles.
PRICE RANGE
Rolex $6,500 to $50,000. other products are priced higher with price on demand. Auction pieces sell up to a $17.8 million.
$12,500 to $1.5 million. Auctioned watches are sold for up to $23.98 million.
Hublot $11,000 up to $380,000 (high-end - 1 million to 5 million). Prices range from $70 on the mass brands such as swatch and goes up to $2 million from the prestige brands like Glashutte, Blancpain and Breguet Zenith - $8500 to $ 250,000 Tag Heuer - $1,350 to $27,000 (limited editions - $53,000, $75,000 and 180,000 – only 3 pieces).
PRODUCTION
Rolex The brand relies on 6,000 watchmakers in 4 of its locations in Switzerland. Produced 800,000 watches annually. 400 patents. All movements are hand made to precision.
Independent manufacturer with vertically integrated production. Creates and generates all movements and external components inhouse. Produces 55,000 watches a year. 10,000 use quartz movement (perfect for ladies watches small size) 12,000 manual watches. Roughly 33,000 are all automatic movement. The watches that are top of the range have a waiting list.
Hublot recently started manufacturing in-house when Jean Claude Biver joined. (in between 2007-2010). Zenith is completely manufactured in-house with vertical integration model. Tag Heuer recently started manufacturing its movements in-house.
Employees 36,000 people in 50 countries. Has 156 production centers under 14 companies that does each production aspect of the products all aroud the world. All the brands’ products are manufactured in-house. Approximately the middle range and entry level watches produced were $20 million (12 million pieces for Swatch, 4.2 million for Tissot, 1.3 million for Longines, 300,000 for Rado, 720,000 for Omega, and 2 million for Breguet, Blancpain, Go, Mido, CK Watches, Hamilton together.
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ROLEX
PATEK PHILIPPE
LVMH SPECIALIST WATCHMAKERS
SWATCH GROUP
SERVICES
Servicing of the watches Cleaning of watches Vintage watch price evaluations.
Services and repairs every watch made since 1839. Very particular on aftersales. Provides retailers the option of transfer of pieces to another market depending on the performance of each market. Vintage watch price evaluations. Repurchase of watches. Provides estimates on price increase or decrease of the watches to its customers.
LVMH has personal assistants if one wishes to show at Le Bon Marché. Zenith has specialized watch service retailers separately. The particular brands provide watch repair and maintenance services and how to take care of your watch guide.
Repair and polishing services Blancpain allows the customer to go see all the complications and movements as well as how the engravings are done as part of the learning process before buying.
DISTRIBUTION MODELS/CHANNELS
Rolex Mono-brand stores Official retailers/distributors. Not on E-retail
3 own salons in Geneva, London, Paris. Relies on handpicked 13 distributors. Relies heavily on 441 third party retail partnerships. 52 service centers around the world. Not on E-retail
LVMH Has 405 stores for watches and jewelry. Uses his high-end departmental store - Le Bon Marché to sell watches from its own brand and others. It has Le Bon Marché’s e-store as well. All the brands have mono brand boutiques (Hublot has 68). All sell through third party retailers. Hublot and Zenith doesn’t sell online while Tag Heuer does on its website and third parties.
Owns 2 multi-brand retail store; Tourbillon and Hour Passion boutiques. The prestige brands are also represented at the Tourbillon multi-brand boutique. The premium brands are represented by Hour Passion in European and Asian cities and at airports. Most of the brands have mono-brand stores and are sold on a wide network of multi-brand prestige watch boutiques. Except the Prestige and Luxury brands, others are available on E-stores through the brands website depending on the country. In 2018 collaborated with Tmall, China’s largest third-party platform.
PROMOTIONAL ACTIVITIES
Rolex Endorsements in sports (golf, tennis, motor sports, yachting). Its celebrity sport star ambassadors are Roger Federer, Phil Mickelson, Tiger woods, Lindsey Vonn. Strong presence on s
Multi-touchpoints Ensures to be part of all top events to personally talk to consumers and retailers. Tries to promote to local buyers than tourists. Chooses not to actively engage on social media. Moto is “You never actually own a Patek Philippe, you merely look after it for the next generation.”
Hublot – endorsement partnerships with Usain bolt, Ferrari, Pele, Borna Coric and numerous player from various sports. They also have artists and musicians as ambassadors. Good presence in social media. Zenith – doesn’t use endorsements. Present on social media. Tag Heuer – endorsement partnerships with artists, actors, athletes, sports teams. Strong social media presence.
85% of the brands under the company have a strong social media presence. However, some of its connoisseur brands have very small number of followers of 21,000 on Instagram. Depending on the brand different promotional events such as showcase at the museum specifically for Omega.
MARKET PRESENCE
Rolex has a strong presence in 118 countries.
They control growth as they choose who to give. Present in 68 countries. Market focus - 25% Europe, 15% America, Asia 25% and 35% Middle east.
Hublot – 115 countries. Zenith – 96 countries. Tag Heuer – 154 countries. LVMH watch and jewelry Market revenue – 6% France, 25% rest of Europe, 9% America, 13% Japan, 31% rest of Asia and 16% rest of the world.
Breguet – 447 boutiques & retail stores (79 countries) Blancpain – 263 stores in 72 countries. Longines – 148 countries. Glashutte – over 25 countries. Has the largest presence among the competitions. 35
COMPETITVE MAP
This graph summarizes the strengths and weakness of each brand in comparison with its competitors. The graph shows that Richemont is lacking in distribution and growth. Distribution aspect considers channels of distribution, the control over the channels, and the market reach. Richemont’s overall growth was negative according to their 2017 annual report snapshot, which is way behind its competitors growth rate. This creates an opportunity to expand distribution and instigate purchases through education and awareness. Hence, this proposal will further address the strategy to successfully solve these issues along with brand building.
PERCEPTUAL MAP
The positioning map has been drafted on the basis of market segment and number of complications in a brand’s watch. The market segment takes into consideration the range of products and pricing, and the type of consumer; based on mental and market space. The complication is an average based on the different categories of mechanisms and complications. The size of the circle represents a brand’s market size and the circle color suggests parent brand. Rolex has the largest market share followed by Swatch Groups Omega and they also have both high and minimum complication in watches. Swatch group has brands all over the spectrum and hence, has captured a wide market share as a group. The aspect of Baume et Mercier being an accessible luxury brand with a wide price range and product offering could be leveraged to generate revenue. Richemont also has more Connoisseur brands than its competitors hence, it is important they generate revenue through the accessible brands to make their investors happy, so as to not worry about diluting the connoisseur brands’ density to make money. 37
SITUATIONAL ANALYSIS
WEAKNESSES
STRENGTHS • • • • • •
Maximum number of connoisseur watch brands Strong financial background Heritage meets technology In-house R&D and production Excellent craftsmanship Leverage global distribution channel
• • • •
Reduction in sales from 2016 Brand awareness Reliance on large number of connoisseur brands Lack of wider distribution
SWOT
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OPPORTUNITIES
THREATS
• Leveraging YOOX Net a porter • Leveraging on time Vallee in right locations • Flagship store specifically for Richemont watch brands • Auction house for watches
• Excess inventory • Competition from connoisseur brands targeting different demographics • Economic and political threats • Technology intercepts craftsmanship
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GEOGRAPHICAL EXPANSION
INDIA, MUMBAI AT Kearney ranked India No #1 on its retail index for the year 2016, making it a very strong country to expand into. It also has the second largest retail sales in Asia and it is in the maturing stage according to AT Kearney, as the consumer spending has expanded significantly, the desirable real estate is more difficult to secure and the local competition has become more sophisticated. India also recently eased its FDI policy which opened paths for foreign firms to invest in the country. However, we chose not to open our first store in India as the country is not yet strong like the USA or Hong Kong in terms of luxury purchase inside the country, and its citizens prefer to shop for luxury goods outside the country to enhance their social status. Another issue is that the import duty for luxury products is almost 30% which make the products very expensive to purchase in the country.
HONG KONG
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Statista ranks Hong Kong as the No #1 luxury watch importing country in the world with $8.3 Billion in 2016. It is a developed state and better than any city in Asia with more than 7.4 million individuals residing in it as of 2016 (Business Insider, Sept. 2017). It is ranked #10 in the world by Business Insider for attracting 9.25 million international visitors and 56.7 million domestic tourists in 2017. However, we eliminated Hong Kong as CTF's Time Vallee is present in the city and it houses all of Richemont’s 8 watch brands under one roof. Swatch group’s Tourbillion also has a strong foothold in Hong Kong thus, creating a strong competition.
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USA, NEW YORK CITY
POLITICAL
The USA is the second largest watch importing country according to Statista, with $5.7 billion in 2016. It is stronger than Hong Kong as its watch demand dipped only 15% during the recession in 2015-16 while Hong Kong lost 33% in demand. New York city is the strongest location in the USA with 60 million tourists visiting annually (Business Inside, Sept 2017). It is ranked #8 in the world by Business Insider in terms of International tourist with 12.7 million visitors. NYC also has a large population of 8.6 million residents. New York is the strongest contender as it doesn’t have Richemont’s strongest competition (Swatch groups Tourbillion and CTF’s Time Vallee) in terms of Multi-brand watch stores.
On political stability Index - 0.35 (ranking 77th) and it is strong but not the best. (Definition: The index of Political Stability and Absence of Violence/Terrorism measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism. The index is an average of several other indexes from the Economist Intelligence Unit, the World Economic Forum, and the Political Risk Services, among others.) Employment and operational laws are complex and ever-evolving as federal, state and local laws are different from each other. While some states adopt federal law some have their own. Government influences and shapes development priorities. The president, congress and federal courts share powers. Trading policy is strict yet open strict as if laws are broken the punishment is sever. Tax policy – Businesses can report tax in low-tax foreign countries instead of USA. Its nearing country Canada has a stronger stability (1.24) (Select USA Govt.) allowing for future expansions by Richemont. Citizens view the government negatively even though the government has numerous policies in place for its citizens. Ranked 18th on corruption perception index which is a good ranking as it is one of the least corrupt countries. (Select USA Govt.)
ECONOMIC World’s largest consumer market with a GDP of $18 trillion and 325 million people. Prices increased by 2.1% (Statista 2017) in 2017 and the country tries to maintain a less than 2% inflation rate. Import Luxury watch tax is between 11 to 15% (HTS codes) as the tax is levied on each component, hence, changing the rate for each watch. Incentives are given by the government for training and retaining talented employees. Ease of doing business: ranks 6th in 2017 according to Statista 2017. Wide range of funding sources The United States remains the largest single recipient of FDI in the world (Select USA Govt.) Switzerland is the 7th largest Foreign Direct Investor in the United states (Select USA Govt.) Dollar rate is strong. 45
SOCIAL
LEGAL
Highest household spending in the world - $13 trillion (Statista, 2016) Median household annual income exceeds - $55,00 (Census, USA Govt. 2016) Population estimated to grow to 3.5% by 2022 (Census, USA Govt. 2016) 89% have high school diploma and 33.4% have college graduate. (Statista, 2016) Population is evenly divided between generation Z to Boomers II or Generation Jones.
Stable democracy with a transparent and predictable legal system. Freedom to choose - From location to business structure. 16% - Portion of U.S. federal corporate income taxes are paid by foreign companies (Select USA Govt.) Overlapping and non-covered aspects in legal system creates confusion. The system is fair to both national and international firms. Special focus on antitrust laws. Not paying tax can be a civil or a criminal penalty case. Ranked 11 on the most open law system by World Justice Project.
ENVIRONMENTAL TECHNOLOGICAL
United States is home to vast and varied landscapes with abundant natural resources gas and metals. The renewable energy industry generates hundreds of billions in economic activity
According to Pew Research 28% of American are early adopter, 45% are early and late majorities, 26% are laggards. USA relies on large number of outsourcing in terms of manufacturing and its technologies. 36% higher work output/hour than OECD countries (Select USA Govt.) Highest number of registered international patents (Select USA Govt.) Govt. provides incentives to develop technology. (Select USA Govt.)
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MARKET ANALYSIS
In 2017 2nd quarter high-end watches ($3,000 and upwards) outperformed with 5% increase in sales worldwide, which accounts for 66% of total Swiss watch exports (Deloitte 2017, Luxury Watch Market). Apart from continuing to develop new technologies and products 55% of the luxury watch brands are focusing on E-commerce platforms according to Deloitte’s 2017 luxury watch report. And growing demand for transparency and education on a product is the cause for brands to focus on their E-platforms.
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The United States of America is still the world’s largest consumer with a spending of $13 trillion in 2016 according to Statista. Despite the stagnating luxury goods industry in the USA, the Luxury watch segment according to Bian & co. is growing and the country still remains to be the largest consumer of all luxury goods. New York City and San Francisco house the largest number of the world’s richest individuals. Hence, the American market is a perfect choice as its residents also have a large spending power and the country doesn’t solely rely on tourism.
Source: Statista
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ONLINE VS BRICK AND MORTAR
KEY PLAYERS IN NEW YORK The luxury watch market is dominated by key players like Rolex, Hublot, Swatch, Kering and LVMH. Precision, Quality, design, and craftsmanship has coupled with high tech industry in the luxury watch industry combining traditional Swiss values in a traditional Swiss product, and as a highly export driven sector, it conveys these values to the wider world. The global watch market is dominated by only a handful of countries, the clear leaders being Switzerland and China.
DIRECT COMPETITORS INDIRECT COMPETITORS
Research Online Purchase Offline (ROPO) has become the new norm of luxury spending with 90% of luxury sales still happening in-store according to Deloitte’s 2017 luxury watch report. However, an equal number of individuals use E-platforms for before, after and during purchase experiences to gather information about the purchase and compare products along with educating themselves on the intricacies of the products. Online authorized dealers are expected to be the most important sales channel in the next five years. This is what led to brands like MBF and connoisseurs like Vacheron Constantin to partner with online magazine/platform Hodinkee to launch limited edition-collections. Interviews conducted by Deloitte with 4,500 individuals show that in the USA 68% of individuals still purchase products in-store and they get influenced to purchase a watch through in-store events and social media. 45% of the millennials according to Deloitte, 2017 luxury watch industry, prefer a luxury watch over a smartwatch. As seen in Pestle, Americans are early adopters of new technology, hence, using different platforms and touch points to reach customers has become preeminent to the luxury industry.
• • • • • • • • • • • • •
LVMH Rolex Patek Philippe Hublot Omega Blancpain Breitling Audemars Piguet Tag Heuer Vacheron Constantin A.Lange & Sohne IWC Breguet
• • • • • • • • •
Cartier Céline Hermes Tiffany & Co. LV Graff Harry Winston Chanel Burberry
Multi Brand Retailers • Wempe • Tourneau
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TARGET CONSUMER
MENTAL SPACE Audience: Male They are well aware about the watches and are knowleable about the mechanisms and the various moments of the watch. They care about the source, from where the watch is manufactured and appreciate heritage and craftsmanship. They are looking for authentic sources. They are also amongst the ones who are watch collectors.They love to have various timepieces from connoisseur brands and specially made from Switzerland. When any new product is launched, they are the first in line to buy. There are many buyers who are wealthy and appreciate right watch but go with recommendation about the watches from the salesperson. They look for an experience and good service. Mainly Grey dollars are a part of this category. MARKET SPACE Audience: Male and Female
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Blogs, forum and social media are making customers more educated and demanding, thus brands are offering better value at lower prices. Young professionals and entrepreneurs who are into new technologies and use social media as their communication of their choice. Some brands are developing designs which are more like a fashion accessory to target females. This target consumer falls into the category of HENRY (High Earners Not Yet Rich) who are between the age group 25-34. digital savvy group Young customers who have a choice of spending money where and however they have, they go for the look, brand and the name.
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Name: Sameer Oberoi Age: 55 Gender: Male Status: Married Location: India Education: Masters in Finance Income: Money machine Wealth: King Time: Balanced Profession: Businessman Personal preference: Understated Level of Knowledge: Luxury explorer
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Name: Samantha Lawson Age: 42 Gender: Female Status: Married Location: New York Education: M.D. Cardiology Income: High Flyer Wealth: Financially independent Time: Busy bee Profession: Chief Surgeon Personal preference: Opulent Level of Knowledge: Luxury native
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Name: Anthony Miller Age: 33 Gender: Male Status: Single Location: California Education: Masters in Science Income: High Flyer Wealth: Financially free Time: Work obsessed Profession: Software Engineer Personal preference: Superstar Level of Knowledge: Luxury tourist
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STORE LOCATION, DESIGN, PRODUCT HUDSON YARDS Richemonts first fine watches Flagship store will be located in the New York City in Hudson Yards new development project, located in Midtown Manhattan on the west side. Hudson Yards’ whole retail space totals up to 1 million sq.ft. which is estimated to bring over 26 million individuals to shop annually (Hudson Yards Report). Apart from the retail spaces, the development has 18 million sq.ft. for multiple commercial and residential spaces which will house 400,000 affluent individuals. There is also 14 acres of park and public space with attractions like observation decks which will bring in more than 3 million tourists annually (Hudson Yards Report). It is the perfect location as Richemont can have access to a large retail space of 20,000 sq.ft. in a well-developed location with other well-known luxury brands and attractions. 1st Flagship store for Richemont’s fine watches. Location: NYC, Midtown Manhattan Development: Hudson Yards (770,000 sq.ft. retail space) Size of Richemont store: 20,000 sq.ft 26 million visitors are expected to visit Hudson yards to shop. The observation deck will bring in 3 million people annually. Houses 400,000 affluent individuals will reside in the property.
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SALES POTENTIAL Placement and visibility: corner on main road. 60 million individuals visited NYC in 2016 and spent $43 billion in NYC. According to USA Census, Manhattan has approx. 751,244 household in 2015 145,323 individuals in NYC earn more than $200,000 annually. 163,401 individuals in NYC earn $100,000 to $200,000 annually.
ESTIMATING COMPETITION Direct Competition – a) Patek Phillippe – A Swiss watch manufacturer with heritage of 178 years is known for some of the most complicated mechanical watches b) Rolex – A Swiss luxury manufacturer is the largest single luxury watch brand producing about 2000 watches per dat. Rolex has a strong brand identity and has a strong brand identity and has been established for a long time. c) Watches of Switzerland – A British retailer of Swiss watches sells multiple brands. They also sell used watches and promote Rolex on their channels of distribution. Indirect Competition – Dior and Chanel
Hudson Yards is called as the next popular location for shopping after 5th and Madison avenue. According to US Census Bureau since 1790 NYC has been ranked based on household income, spending powers, government, business, population etc. The Mall is located right next door to Hudson Yards building 30. Top executives work in the building from CNN, HBO, Wells Fargo, Warner Brothers (ICSC.com & Hudson Yards repost). Seasonality: Holiday season (Nov – Jan).
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AREA ATTRACTIONS
New York has over 60 million annual visitors (Business Insider, Sept. 2017) and has numerous attractions like The Statue of Liberty (over 120,000 per day visitors), Empire State Building (over 3.5 million annual visitors), Metropolitan Museum of Art (about 7 million annual visitors) Central Park (35 million visitors annually) and Times square (425,000 per day). Apart from the touristic attraction Fifth Avenue generates annual sales of $7.5 billion in retail spending. There are other retail attractions being built and Hudson Yards is one of the them. ATTRACTIONS NEAR AND IN HUDSON YARDS Attractions in Midtown Manhattan brings millions of tourist’s year around. Existing attractions include Chelsea Market, The Meatpacking District, The Garment District, Hell’s Kitchen, Momofuku Nishi, Madame Tussauds, and FIT & PARSONS. Apart from these new attractions being built by Hudson Yards such as the 14-acre public and park space like the High Line, an interactive center piece called the Vessel, and The Shed; a creative place for self-expression. AREA FACTORS OF MIDTOWN MANHATTAN Pedestrian traffic: Midtown Manhattan has more pedestrian than 5th avenue Infrastructure: 4 airports within a mile radius. Penn station, No.7 subway station and Hudson Yards Subway station. Public transport: Subway, Lyft and Uber with NYC taxis, Train out of city, 5 min walk to pier 79 ferry, port authority bus terminal in 5 min walk. Parking: 1800 parking spots, 1500 bike racks, public parking is available.
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HUMAN RESOURCES THE TIME EMPIRE
LIFTMEN
MERCHANDISE MANAGER
STORE MANAGER
STAFF
WATCHMAKERS
DOORMAN
BARTENDER
SALESPERSON
Merchandise Managers: They will be responsible for management of the inventory, advertisement and promotional activities. alos, they will be taking care of the visual display and strategic placement of merchandise depending on the season and the collection. Store Managers: They are responsible for the budgets and annual reports of the store. At the same time, they will handle the human resources and their training and be looking over the staff, watchmakers and salesperson. Staff: The staff includes doorman, liftmen, attendant and bar tenders. Watchmakers: There will be 4 watchmakers who will be responsible for repairs and services of the watches. Salesperson: They are responsible to deal with clients and convert the merchandise to sales. They are people who have love and interest to wards luxury watches, knowledgeable, well coming and friendly. 67
STORE DESIGN
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Private Area/ Restrooms and Instalations bellow private area Retail
Office
Stairs to private area
Lobby
Concierge
Elevator
Interactive Museum
Storage
Bar on private area/ Watchmaking area below the bar
LEVEL 1 Lobby Concierge Restrooms Instalations Watchmaking Retail Interactive Museum Offices Storage Elevator
LEVEL 2 Private Area Elevator
LEVEL 3 (INSIDE PRIVATE AREA) Bar
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ENTRANCE
CONCIERGE
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EXHIBITION AND SELLING AREA
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PRIVATE AREA
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COMMUNICATION AND PROMOTIONAL PLAN
PRINT MEDIA Traditional media like magazines, billboards and catalogs are still relevant for luxury brands today. Even though the media is leveraging on digital platforms, traditional media still holds strong. According to CNBC, high luxury companies like Zenith have allocated 73% of their budget on print media in 2016 and 2017. For outdoor billboards, companies have allocated around 8% of their budget. Print media is making an impact even today. MAGAZINE Magazine are very effective and still have an impact on many customers. Specially, while travelling, passengers with longer layovers prefers to relax and read magazines. So having a advertisement in the magazine, will educate the customers about the presence of the store in New York. Watch time stands as the best magazine for watches in America. Also, Revolution magazine, is another magazine well known for luxury watches. Magazines like these will be a good platform for The Time Empire to increase it’s awareness.
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BILLBOARDS Billboards are being used by many luxury brands as a source of awareness and brand presence. Traditionally, billboards were printed but nowadays because of the digital integration, digital billboards are used. The store plans to have a digital billboard near the area and also around Times Square. Images of the eight luxury brands will run through the billboards also will be great platform when there will be events and exhibitions in store.
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SOCIAL MEDIA
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MAGAZINE
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BILLBOARDS
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FINANCIAL PLAN
The financial forecast provides an overview of the investments in store, personnel, promotions and in collaboration projects. The investment would break even in 5 years approximately, however, the as the store is more for a experience and educational purpose a large profit isn’t the end goal. There are other ROI’s like instigating purchases in other stores, building brand equity through artistic collaborations and creating new associations. The following data provides an overview of the budgeted costs for each activity performed.
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GANTT CHART
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CONCLUSION
The Time Empire is a Luxury watch retail/educational space that will enhance the brand equity of Richemont and its 8 watch brands. Being located in a central location, in Midtown Manhattan will allow the store to educate customers and create brand awareness and associations in the minds of potential customers, and a good conversion rate would be the after effect. The store has both educational showcases and installations that will create curiosity and increase the brand equity by elevating the high-tech aspect of the brand. Associations with different craftsman and artists will build brand density and awareness for the store, which could be used to enhance the image of the 8 brands in return. This store will also allow Richemont to leverage its accessible luxury brands like Baume et Mercier and IWC to generate revenue, thus, satisfying the investors and the same time letting the connoisseur brands remain exclusive and build brand equity instead of spending it.
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BIBLIOGRAPHY
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https://www.statista.com/statistics/288267/leading-watch-importing-countries/ https://www.statista.com/statistics/288198/swiss-watch-export-value-by-country/ https://www.lohud.com/videos/money/business/2016/06/08/85399274/ https://www.hodinkee.com/articles/still-too-many-watches-in-the-world-says-richemont-group https://www.cnbc.com/2017/04/18/the-advertising-world-goes-digital-but-luxury-brands-spend-on-print.htm https://www.forbes.com/sites/marymeehan/2016/12/15/the-top-trends-shaping-business-for-2017/#202dc5ec6a8a http://www.digitaljournal.com/pr/3468598 https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/fact_sheets/2018%20Budget%20Fact%20Sheet_Infrastructure%20Initiative.pdf https://www.selectusa.gov/why-invest https://www.selectusa.gov/servlet/servlet.FileDownload?file=015t0000000LKO2 https://www.forbes.com/sites/marymeehan/2016/12/15/the-top-trends-shaping-business-for-2017/#202dc5ec6a8a http://www.digitaljournal.com/pr/3468598 https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/fact_sheets/2018%20Budget%20Fact%20Sheet_Infrastructure%20Initiative.pdf https://www.selectusa.gov/why-invest https://www.selectusa.gov/servlet/servlet.FileDownload?file=015t0000000LKO2 https://learningenglish.voanews.com/a/top-25-cities-in-america/2744774.html http://www.travelandleisure.com/slideshows/americas-most-expensive-cities#28 (Wempe) – 55th and 5th. http://www.scmp.com/magazines/style/watches-jewellery/article/2076373/luxury-watchmakers-wise-and-target-womens-market https://0-www.statista.com.library.scad.edu/statistics/781727/luxury-watch-preferences/ https://0-www.statista.com.library.scad.edu/statistics/781698/luxury-goods-personalized/ https://0-www.statista.com.library.scad.edu/statistics/781719/luxury-analogue-watch-ownership/ https://0-www.statista.com.library.scad.edu/statistics/241916/watch-and-jewelry-brands-owned-by-affluent-americans/ https://0-www.statista.com.library.scad.edu/statistics/241916/watch-and-jewelry-brands-owned-by-affluent-americans/ http://wwd.com/business-news/financial/swiss-watch-exports-rise-11132261/ https://0-www.statista.com.library.scad.edu/topics/1991/luxury-watch-industry/ 105