Some time ago, Patek Philippe announced their plans to close about 30% of all their dealers worldwide. Moderator Patrick_y explores in an unprecedented article that's geared towards dealers as well as watch collectors, how dealers fearing closure can improve their operations.
Hiking to the top of a mountain with a Nautilus? Would Patek Philippe approve?
This is a rare article that is aimed not only towards watch collectors, but also to jewelry store owners and authorized watch dealers. Here on WatchProSite, we rarely advise watch and jewelry store management on how to run their businesses - but as more and more collectors are in fear that their favorite retailer won't be a Patek Philippe franchise in the coming years, I wanted to write an article to focus on how collectors can identify strengths and weaknesses in their preferred retailer. In the past year or two, Patek Philippe (and other brands like Vacheron Constantin, Audemars Piguet, A. Lange & Soehne) has been undergoing a major shake up of its authorized dealers. The plan at Patek Philippe is to close over 100 dealers worldwide and focus on extremely well run dealer network with either a long-term sales-team presence or a family presence in the store. Many authorized dealers that carry Patek Philippe do not want to lose their franchises - as Patek Philippe can easily account for 30% or more of a store's revenue. The median Patek Philippe transaction is around $50,000 USD at most authorized dealers worldwide, and the presence of Patek Philippe in a store brings legitimacy to the store's other wares. Thus, a Patek Philippe franchise is a very valuable component to most jewelry stores - in some jewelry stores it is THE MOST SIGNIFICANT REVENUE CONTRIBUTOR.
This article was written with the following words interchangeably: store, retailer, franchisee, dealer, and authorized dealer.
It's also important to note, that sometimes a Patek Philippe franchisee is closed due to no fault of the franchisee. There are sadly excellent family run franchisees who have been closed already - possibly with no fault to the franchisee - just sometimes simply the fact that Patek Philippe wants to head in a different direction. Thus, following all the rules is no guarantee a franchisee will remain a franchisee forever.
Here’s some baseline minimums to maintain a Patek Philippe franchise:
- Meet the company's strict standards. Patek Philippe has a rigorous set of requirements that franchisees must meet in order to maintain their status. These requirements include having a high-quality location, providing excellent customer service, and carrying a wide selection of Patek Philippe watches. Patek Philippe is also all about that family relationship and the brand especially appreciates watch and jewelry stores owned by a family - and with owners whom are active in the business.
- Be committed to the brand. Patek Philippe is a prestigious brand with a long history. Franchisees must be committed to providing top notch service. Top notch service really boils down to two aspects; forging relationships with LOCAL CLIENTELE and PRODUCT KNOWLEDGE. Most jewelers fail miserably on product knowledge. Patek Philippe dealers with sales staff who cannot explain the basic technical details of the watch competently ARE GOING TO BE AT RISK OF LOSING THEIR FRANCHISES. Many brands are not pleased when the average consumer knows more about their product than the average retail salesperson. It should be the other way around! A salesperson should have more knowledge than the consumer! But this is no longer the case in many watch and jewelry stores around the world.
- Patek Philippe tracks dealers' sales. Some dealers are also sending Patek Philippe corporate their sell-through reports on a monthly or quarterly basis. Patek Philippe also track the watch serial numbers as many owners register their watches to receive the Patek Philippe magazine. Using this data, Patek Philippe can actively track where the watches are going - are they sold out of country, are they sold to big collectors, etc. Patek Philippe primarily wants to see a healthy amount of local sales.
- Dealers need to keep their Patek Philippe Account Executive aware of what's going on in the store and the community. Patek Philippe sees the store as a business partner, they want to look out for the store's interests and they expect the store's management to look out for Patek Philippe as well. New hires at the management level should be introduced right away to their Patek Philippe account executive along with that individual's explicit authorization (does he/she have the power to sign purchase orders etc.). Also keep Patek Philippe aware of any major store events that would affect business - thus, if a dealer is remodeling, Patek Philippe's business will likely be affected, thus, it's only fair to include them in the talks and the planning. If a store is physically expanding, and Patek Philippe is a major revenue contributor to the store, perhaps it would be fair to give more physical space to Patek Philippe as well.
- Be financially stable. Patek Philippe franchises are expensive to operate. Franchisees must have a strong financial foundation in order to be successful and to weather bad economic times. Patek Philippe wants franchisees in the best neighborhoods, high shopping streets, and in the most visible shopping districts in the world as this elevates the brand. Dealers in secondary locations will lose points - and will have to make up for this in other ways. Also, a franchisee's inventory matters too - if a store sells Patek Philippe watches, the accompanying products need to be of a high grade as well - selling crudely made silver plated earrings next to expensive watches is not a good image for Patek Philippe. Many of the most financially stable dealers are big corporations - and while Patek Philippe likes this stability, there is a big problem with some of these corporations - they rarely provide superlative service and they don't have a business owner on site. Business owners whom are active in the store keep customers coming back because the customers feel they have a close relationship with the family that runs the jewelry store. Thus, expect to see Patek Philippe close some (but not all) of these corporate doors - even corporate stores that are performing well.
If you can meet these requirements, you will be well on your way to maintaining your Patek Philippe franchise. And for watch collectors reading this, hopefully you can better evaluate the likelihood of your dealer's continued relationship with Patek Philippe. Watch collectors with a relationship with a specific store should urge their store to continue investing mostly in training. But here are a few more tips for watch and jewelry store owners to keep their Patek Philippe franchises:
- Training. Training. Training. A salesperson who says, "that's a beautiful watch, it looks great on you and it matches your outfit" or something to that effect is simply not going to cut it at this level. Multiple brands and vendors have told me and other journalists that they are tired of stores with mediocre sales teams whom sell on emotion only and cannot sell on the technical and qualitative aspects of the product. While sales have been very good in the past few years even without in-person sales, the brands believe in the long-term an educated customer is more likely going to buy a watch than an uneducated customer. Furthermore, and this is a fact that is not understood by most people, A PERSON WHO ALREADY OWNS A HIGH QUALITY WATCH IS MORE LIKELY TO BUY A SECOND OR THIRD HIGH QUALITY WATCH THAN A FIRST-TIME BUYER. Meaning that customers are becoming increasingly knowledgeable and savvy, and the brands want those savvy customers to be nurtured by sales staff to create repeat sales.
- Why do retailers dislike training? Training is a very significant investment for retailers. Corporate owned retailers generally have generic training programs which really doesn't do a very good job - as they're generally very generic video presentations that their employees take on the computer sometimes followed up with a little quiz on the computer. What happens is the employee doesn't take it seriously - they approach it like they approach online traffic school or sexual harassment training on the computer (or if your a lawyer in New York, the New York Bar Association asks its members to do an online substance abuse training seminar every few years) - merely clicking on the next screen as quickly as they can while they eat their lunch in front of the computer. Corporate retailers don't want to invest in expensive training because their employees will only retain a small percentage of it, retail employees are known to transition in and out of the retail space as retail employee turnover is historically high, training is costly because it takes a salesperson away from the sales floor, and the training itself is VERY EXPENSIVE as a watch expert has to usually fly in, spend the night, give an educational seminar to the staff, etc. which costs thousands and thousands of dollars. Alternative trainings cost even more as sales staff fly to Switzerland (usually in Business Class or First Class) to attend a training seminar - and these costs are sometimes passed down to the retailer.
- Who pays for training? How expensive is it? Generally the retailer pays for it. A two day training seminar can cost a retailer $10,000 to have a certified trainer fly in and train the staff for two days. The best recognized training is done by the Foundation of High Horology a non-profit Swiss Foundation. Furthermore, the staff is often trained off-site, and thus they lose a day or two of being on the sales floor - so the costs are very significant and thus family owned retailers really dislike this - not only are they paying for expensive training, but the sales team is off the sales floor and not making any money. Family owned retailers have no problem paying hundreds of thousands or millions of Euros/Dollars to build a beautiful store (and sometimes remodeling the store in as little as 3-5 years), but ask them to invest $10,000 in training their staff every year and they don't want to pay it! Retailers need to prioritize training as highly as store beauty.
- Participate in the marketing co-op. Jewelry stores are often asked to advertise with Patek Philippe in local magazines. Patek Philippe will generally ask a jewelry store to spend around 1-2% of revenue with their brand on advertising. Patek Philippe may even match some of the advertising spend if they approve of the message and method of the advertisement. Perhaps the jeweler is putting together a small event for daughters and moms to enjoy afternoon tea together and has Patek Philippe as the marquee brand for this event and if Patek Philippe approves of the event, then Patek Philippe may contribute a portion of the costs. This close working relationship allows Patek Philippe to see what the franchisee is doing and it shows the franchisee is not just keeping all the profits - but reinvesting it into the community. Some jewelry stores publish their own magazines and opt to use their advertising co-op money in this magazine, Patek Philippe will likely be more selective about these magazines in the future and be more critical about the content and quality of these magazines.
- Owner on site. Patek Philippe is a family run business. Patek Philippe is not just an independent brand, but also a FAMILY RUN BUSINESS. This is rare and it's rarer than being independent. There's only one other large brand in the Swiss watch and jewelry industry that's run like this. That being Chopard! Patek Philippe really expects its franchisees to build deep relationships and forge strong connections to the local community and to its clients. Patek Philippe believes this is best done with a charismatic owner or a managing partner on site. There are many successful stores without an "equity stakeholder" on site, in such cases Patek Philippe strongly believes that a long-term, charismatic, and socially outgoing general manager who is accessible to clients is a worthy substitute. Corporate stores beware - you better REALLY INVEST IN TRAINING.
- Corporate stores special advice; a lot of the doors Patek Philippe are closing are stores with bad performance figures or stores too close physically to another Patek Philippe retailer. But among the stores that were shuttered with good performance figures, most of those stores are corporate run stores. Some gut-wrenching corporate store closures have even been Patek Philippe dealers for over 100 years! These stores really need to figure out how they can step up their game.
If I ran a Patek Philippe franchise, this is what I’d do…. An IDEAL Patek Philippe Retailer looks like this...
1. A sales team with extensive training. This is the part where most retailers miss. This is The Foundation of High Horology (FHH) is analogous in some ways to the Court of Master Sommeliers (CMS). The Court of Master Sommeliers, headquartered in the UK, is one of the few organized bodies that can grant the highly coveted "Certified Sommelier" title to wine and restaurant industry professionals for most of the world. It administers three very difficult tests and an applicant came gain up to three levels of certification; Certified Sommelier, Advanced Sommelier, and Master Sommelier. The Master Sommelier title is extremely rare; there are only about 273 individuals who have attained the status since 1969 according to the CMS website. The Fondation de la Haute Horlogerie (or the Foundation of High Horology, FHH) is the sole organization worldwide that can give the recognized title of Certified Watch Sales Professional in the industry. The Fondation de la Haute Horlogerie has three levels of Certification; 1-star Watch Advisor, 2-star Watch Specialist, and 3-star Watch Expert. Worldwide, there are only about 2000 individuals with any certification, and the 3-star Watch Expert ranking is very rare – in my extensive travels I have yet to meet one at a watch store – and my travels bring me to some of the finest watch stores all over Europe, Asia, and USA. Ideally a Patek Philippe retailer should have at least one 3-Star Watch Expert on its sales team, and ideally all of the staff should have at least a 1-star Watch Advisor certificate upon joining or within their twelve months on the job. This is a very high standard as this test is not easy. But simply, customers shouldn’t know more than the trained sales staff – if a customer knows more than the sales professional – then that sales professional isn’t representing him/herself well, nor the retailer, and nor the vendors. Sales staff should be very knowledgeable about the product! Sales staff should invest in their careers with a certification from FHH, regardless if their employer pays for it or not (a lot can be self taught). Learn it, love it, or find another job!
2. A sales team that can set the time and date on the watch properly. A lot of dealers don’t know that there is a specific sequence to setting a Patek Philippe annual calendar or a perpetual calendar. I’ve seen three or four employees over the past decade or so randomly use the pushers in no specific order in a bad attempt to get the watch set. Instead, you have to set the watch first to 6AM and there is actually a specific order of how you set the day, date, and month - the order is not usually followed at many authorized dealers. This is potentially damaging and can ruin the image of the Patek Philippe brand to the consumer, who will soon realize that their calendar watch isn’t working correctly and think their brand new watch was broken from the factory when in reality it wasn't set properly by the dealer.
3. A great location. The best retail street in the area. Be it Ginza in Tokyo, Fifth or Madison Avenue in New York City, Bond Street in London, Rodeo Drive in Beverly Hills, a great location that brings the right image to the brand. Also, offer a large amount of window display space and a spacious presence for Patek Philippe within your establishment. Patek Philippe makes your store a destination as there are some people who will seek you out, but you should also be easy to find!
4. A charismatic manager or charismatic owner on site. It should feel like an old family run restaurant where the staff recognizes the client and the client's entire family by name. A jeweler should know details about their clients and even be involved; job successes, important birthdays and anniversaries, big family events such as graduations and marriages. The owner’s family members and children might even have a presence in the store. The family should also be involved in the local community, performing arts, charity events, etc. The retailer needs to be a presence in the community!
5. Treat your customers like extended family. Yes, a lot of people say this. But what does this actually mean? And how many years of trust and relationship building does it take to get to this level? Yes…. It’s not easy. But overall, this is another part that’s seriously missing from the industry. For the past few years, customers have felt like they’ve been treated like a number. For the past few years, customers feel like they’re begging for a watch and being told it’ll take 24 months to get it. The tide really turned and customers did not have the upper hand. This really requires a magic touch – and it’s difficult.
6. Treat your employees like extended family. Again, a lot of people say this but it’s easier said than done. But there’s constantly a principal/agent problem going on here. The constant problem is that stores hire mercenaries, managers who want to turn around a floundering retailer, get a huge bonus if they do, and move on to the next project. Few employees if any are in it for the long haul. Employees are also not necessarily loyal to the store, they may jump ship if they see the winds change favorably for another ship. Retailers need to make the right hires, and the ones that are good for the company long-term, not just short term. Lots of short-term experts out there – they’re successful too, and you’re lucky to be able to hire such a credible expert. But after they’ve done their magic, they leave…. And then what…. You’re back to where you’ve started….
7. Be good to your vendors. Don’t overextend the business financially, don’t be overly conservative neither. Do what makes good sense. Keep your vendors informed. Build community. Give back to the community and to your clients. And while making a profit is important, don’t look at profits as the sole part of your business. During the pandemic, jewelry retailers saw unprecedented profits approaching 30% of revenue. Going back to a 8-15% profit margin is going to be difficult – but don’t tighten up your purse strings on training or other necessary investments.
Thank you for reading this long 3000 word article! Again, this is a rare article that is partially aimed at retailers, and it covers a big topic. Despite the length, we’ve only scratched the surface – and the difficulty is always in the execution.
I trust WatchProSite readers will gain a lot of insight here and have more empathy for retailers and a greater understanding of the challenges retailers face. It also helps collectors on WPS to identify and grade the performance of their favorite retailers.
The article above focuses highly on training and product knowledge. A topic that I will reinforce in another coming article that will focus on the FHH Academy’s Certification Process.
This article was written with Patek Philippe in mind, but Patek Philippe is not the only vendor ending contracts with franchisees. Vacheron Constantin has closed multiple doors. A. Lange & Søhne has also decided to transition to a new sales model as well. Audemars Piguet and F.P. Journe have already mostly completed their closures and have already implemented their new retail strategy. Thus, this article can be applied towards many watch and jewelry retailers, and not just Patek Philippe retailers exclusively.
Thank you for reading. As always, I'm interested in reading your thoughts and comments.
This old pocket watch belongs in the Patek Philippe Museum. It's a special AUTOMATON that depicts the biblical figure Moses who taps on a rock - the rock revolves and reveals a flowing water stream. I estimate more than 50% of watch sales professionals worldwide can not even describe what an "automaton" is. Patek Philippe finds watches like these, buys them, restores them, and puts them in their museum. The brand finds these watches interesting and important. If the vendor finds automatons important enough to spend hundreds of thousands of Swiss francs to purchase and restore them and millions of Francs to house them in a museum, then perhaps the retailer should at least train their staff to be aware of what an Automaton is.