Raluca Michailov: What has Frédérique Constant been doing since the pandemic? How did you manage during the pandemic and what has been the response from the brand’s audience?
Niels Eggerding: Oh, that goes back already two years ago.
Yes, and also in the meantime.
Ok, let me go back to two years ago, when we were preparing a new introduction of the Highlife. Our brand is historically very classical. And we felt that the consumer is slightly changing. The consumer was becoming more modern and if we look at the export numbers from Switzerland, about 80% of the luxury exports above €3,000 have an integrated bracelet design. Which means Rolex Daytona, Bvlgari, Patek Philippe Nautilus, Hublot, Audemars Piguet, etc. – all have an integrated bracelet. We didn’t have that in our collection. And three years ago, we launched the first integrated bracelet design, which you can see here. This is a rubber strap, but normally there is also a bracelet and you can change very easily. After that, the pandemic came, which brought some extra challenges, because we had invested in this. We had to recharge the organization with cash, maintain a tight cash management, sponsor our suppliers, and manage our employees, so that not everybody had to leave. I wanted to keep the value. This is what we did for like a year and a half. I was hoping that last year we would recover. While other brands had record years, we clearly saw that we needed one more year to recover in our price segment.
I was going to ask about that.
Typically, the mid-range needs longer. So last year was still a difficult year. This year we got back on track, and now, three years later, the Highlife is 40% of the business of the brand. So, if we didn’t have the Highlife, we would not have been able to grow. Now we are back at the 2019 level. So overall I’m very happy, we have strong innovative introductions, manufacture calibers. We are still very strong. We have a key-employee team that has been here for a long time, they have built a lot of know-how and they all stayed – which today is a challenge: people are leaving, youngsters are leaving… But we have them still on board and I’m ready for the coming years, although it’s not going to be easy.
No, it’s not. For a variety of reasons. I was actually attending a meeting today with the head of a big watch brand and he said he’s not worried about the competition. He’s worried about all the other global factors like war, inflation, energy crisis, social unrest and all that.
It’s never been so restless.
Never in my lifetime, as far as I can remember. And in your opinion, what are the main challenges for Frédérique Constant over the next two or three years? Because I think it’s very difficult now to plan and to predict for more than two or three years.
Yes, for sure. I would say the short-term internal challenges are keeping the current talent and finding new talent – these are two key priorities for me. Then we have the supply chain challenge. Overall, we have longer lead times now. Our previous lead times are now extended by 30%. That brings an extra complexity in our stock, in our planning, but also in the cash flow. It requires a much stronger financial management of our organization and that will go on for another two years. And I haven’t even begun to talk about the external factors that will impact the internal factors, because if you look at the supply chain, the energy shortage that we will soon have will force even factories maybe to close down, to take a break or to shut down for one day a week.
We have seen that already, across Europe: the big energy consumers are taking breaks – indefinite, or as you say, by cutting down the number of hours and the number of days in the week, which will surely have an impact on the end result, you know?
Two years of pandemic created an immense shortage in the whole flow. And this will be an extra challenge. That means the watch industry, the luxury industry will not get easier on the supply chain. You need to be able to act. A solution could be to make sure you that you double source, that you’re not relying anymore on one source of supply, but you double source. That’s one. Then you get a huge pressure on your production capacity. You need to have equipped stuff that is willing to work hard.
That’s the main challenge. I mean, I think it boils down to this. Having a great team that is able to adjust.
Yes, flexible, agile – that’s key, yes.
And you were saying something – which is really interesting in my opinion – about consumers changing. And I think they’ve been changing – not slightly, but quite radically over the past two and a half years. And I was wondering what steps are you taking to keep them, to open new segments, to engage them – on social media or in the boutiques – and how are you working to strengthen your relationship with the customers?
It’s all very digital driven. First of all, we have two ways. One is retail. I feel retail is 90% of the asset we have as a company. Thus the retail is high value and has direct access to consumers. Then, it is very important to keep your loyal customers, to make sure they stay with you because they are really well appreciated and you treat them well. And then, of course, you have the digital experience. The digital experience is a big funnel where you get much more data about what your consumer wants and there’s the CRM that analyses all this information. But we have learned. If you look back ten years ago and compare things then and now, now we know much more about what the customer wants than we did 10 years ago. This really helps us anticipate the customers’ expectations of the end product: what kind of after sale they expect, what kind of strap they expect, what kind of quality of the product they expect, what kind of color of dial they want… It helps me simplify my supply chain.
You are right. I’ve been noticing – maybe increasingly this year, in the past year, but very much this year – a drive of the brands towards sustainability and they are trying all kinds of things: sourcing ethically-mined gold, growing black diamonds and not doing leather straps… How do you view this phenomenon?
Yes… I have a different look on it. I think if you really want to do something, you really need to do something. I cannot disclose a lot of what we are doing, but we took a firm position that for the coming 10 years we’re going to work very hard even from the beginning of the campaign for the transparency of supply, but also finally to really rewrite our purpose to do something good for the environment. Much more financially-driven than commercially- or marketing-driven, because I think you really need to do it well before you’re going to use it and communicate. Especially since there are brands today that are planting trees in Malaysia or Africa and then they pretend they’re CO2 neutral, which is, of course, ridiculous. I mean, that’s fooling yourself and we can no longer neglect the challenge we face regarding the environment. It’s never been so warm. It’s never been so dry. I’ve got kids and I just want to save the world still for my grandchildren. So, I am firmly committed to it.
Going back to the product, can you tell me something about this year’s novelties? I would like to know what drove you to launch or relaunch a certain range.
Here we have basically four watches from Geneva Watch Days. We have two introductions. Many brands will show you either an automatic watch or a manufacture watch. We have both. We have a manufacture caliber and we have the “bread and butter” quartz-driven Lady Art Déco.
A very nice ladies’ watch. I love this one.
I think that’s typically what we wanted also. Art Déco is for us a very classical feminine collection, launched in 2007 and very successful ever since. But it is much more a jewel than a watch. We have it in three versions: round, oval and the recent carrée one. Very elegant. It starts from 895 EUR, bracelet, no diamonds for this price, a convex sapphire crystal, the quaint satin of the case, a really basic elegant caseback, then you have the lugs set with diamonds and the full diamond version. Thus we go from EUR 1,295 to EUR 2,395.
A great price.
Yes, it’s a fair price.
And you can wear it any time. It isn’t pretentious or flashy or…
It’s a good combination (laughs). And for the gents we have a redesigned watch this year, Classics Heart Beat Manufacture – the most iconic caliber we have ever had. It started back in the 1990s, when the founders Peter and Aletta Stas were sitting around a kitchen table and they were saying: listen, what’s the difference between a quartz and an automatic? We don’t see it. But they started opening up the dial where you can see the balance wheel moving, sweeping for an automatic watch, that was never patented. They never even had people or lawyers around them to manage that. So other brands have been copying it. And back in 2000, Peter and Aletta decided to build their own manufacture calendar. That resulted in 2004 in the first Heart Beat Manufacture. It was the first in-house caliber and it was hand-winding. 30 calibers and almost 18 years later, we are also launching the Open Heart, but in a newly-designed case. The trend overall is that it goes slightly smaller and this is hosted in a 39 mm case.
Which is perfect – for women and for men.
Yes. It is a limited edition of 930 pieces and we have it in gold. We also have a 93-pieces limited edition in 18-karat gold. The first one is slightly below EUR 4,000 and the second one is slightly below EUR 17,000.
What are the main markets for Frédérique Constant now?
Europe’s dominant. Actually, Europe is 50% of the market share. Asia goes to 30-35%. And then we have the Americas. Latin America is difficult. America is now climbing again, which is good. Although it’s a recession for us, they are climbing.
So, given this interesting evolution of things, which countries are you thinking about consolidating or perhaps expanding?
Western Europe – I still feel very strong growth happening there. We also have room to grow. Eastern Europe is quite stable so far, although it is very close to the war. I don’t feel there’s some major impact for now. UK is also interesting, with the Brexit and everything…
And just one more question: you mentioned digital, and you mentioned digital retail and normal retail – are you planning to concentrate your growth efforts more on the digital side or to open new boutiques, new retailers…
Definitely more retail.
Everyone is doing that. Only two or three years ago everybody was going on and on about digital…
Yes. A lesson learned the hard way. You can push digital education – that’s what we do. I think it is much better than whatever you can do. You can reach very easily into the living room of the consumer. But it is still difficult to make a sale. That means if I push hard on the digital platform to sell a watch, we might sell a hundred pieces. Unless you do a unique collaboration – we did The Naked Watchmaker and we will do several watchmaking collaborations. But if I’m selling to my retail network, for example if I sell a watch to each of the 2,500 points of sale, I will have 2,500 pieces sold.
Easy. On top of that, it’s an extension of your brand, so it’s very nice to work with. I like it. It’s a marketing tool. People still like to shop; they still like to pass by shops, look in the windows and have a nice experience. Besides, all analysis shows that the youngsters want to go back to the shop, to feel it and to live it.
Thank you so much. It was a very nice talk.
*This interview featured in the printed edition of Lifetime Magazine, issue #16, Global Edition.