LVMH strengthens the foundations of its watch brands
LVMH’s Watch Week went digital this year and unveiled watch collections with big price tags and strong identities. This has become an indispensable anchor in the face of a pandemic that continues to defy all predictions.
By Cristina D’Agostino01 février 2021
The pandemic hit the watch and jewelry industry hard in 2020. Over the year as a whole, the sector saw a 21.8% drop in sales abroad, the equivalent of just under 17 billion francs. For the LVMH Group, the hit was even bigger – 23%, leaving the group with sales of just 3.3 billion euros (compared to 4.4 billion in 2019) and an operating margin shrinking from 16% to 9%. In the face of those figures, it’s no wonder that hopes were high for the LVMH Watch Week, which concluded on January 29th.
“The year 2021 is not really starting out as we expected,” explained Jean-Christophe Babin, CEO of the Bulgari brand. “The world is struggling with shortages of vaccines and virus mutations. But I remain confident, there are advances, new vaccines are coming, we did very well in last quarter of 2020 and the year 2021 should continue on this path. There is a lot of liquidity, you can see it on the stock market. Our customers have a hunger for life that is stronger than ever. I am certain that luxury has some very good years ahead.”
For one week, the three watch brands Zenith, Bulgari and Hublot (with Tag Heuer opting to save its innovations for an international launch scheduled for February) went into a frenzy of online events to unveil their new 2021 products to retailers.
No on-site guests, no chance to admire the new watches on your wrist. But digital channels, pre-recorded videos and Zoom conversations revealed the essentials. The models were all heavily imbued with each brand’s distinguishing assets: Zenith’s 100% self-manufactured movements, Hublot’s innovation, and Bulgari’s inimitable bling. Capitalizing on their strengths to jump-start the new season is what all the watch brands have been working on for months. Hammering home the message through their respective icons will be the mantra of 2021. The reason? It's reassuring and destined to pass the test of time, two convincing arguments in the COVID era.
Capitalize to conquer market share
“We need to put together an offer that makes sense,” said Ricardo Guadalupe, head of the Hublot brand. “When we create the new Big Bang Integral, we can’t simply hope to conquer a wider market share with a metal bracelet. Hublot has to stand out in terms of uniqueness, innovative materials and a design that is readily recognizable. This is why we are presenting it in blue, grey or white ceramic. This is an asset against competitors on the market and it is truly Hublot. The same goes for our automatic Tourbillon in orange sapphire. A first in terms of material and for our new evolved movement. We have to build starting from this very unique type of watch.”
Capitalizing on the brand’s iconic features to conquer a larger market share is also the objective of Julien Tornare, boss of Zenith since 2017.
For Zenith, the star product at this week's presentations was the new Chronomaster Sport, the second most relevant pillar of the brand. It features an evolution of the legendary El Primero movement to display 1/10ths of a second. Its launch has been eagerly awaited by many specialists. “I've never experienced such excitement on a launch day,” admits Tornare. “When I woke up this morning, my phone was blowing up with messages from retailers from all over. This watch will really help us in the first half of 2021. Of course, nothing is simple when the COVID-19 pandemic still raging, but our ambition is to start out strong in 2021, and bring home a higher figure than 2019, which was already a very good year.”
Bulgari shares the same ambition. “Ideally, I'm aiming to match our performance in 2019," confirms Jean-Christophe Babin.
We will certainly have the opportunity to find synergies when we finally sit at the same table, since the management of Tiffany has just been appointed. Complementarity is the strength of the LVMH Group.
Jean-Christophe Babin, CEO of Bulgari
Is boosting the Bulgari brand through its core business, jewelry, particularly important now that Tiffany has just joined the group? “Tiffany builds on a remarkable American heritage linked to diamonds,” Babin explains.
“Bulgari has its own remarkable heritage of Roman history connected to colored stones, volume design and la dolce vita. We are competitors but also complementary, sometimes we evolve in slightly different markets and segments. At Bulgari we have great respect for what they do, and we are happy that they have joined us. This makes LVMH the undisputed leader in jewelry, the fastest growing segment. We will certainly have the opportunity to find synergies when we finally sit at the same table, since the management of Tiffany has just been appointed. Complementarity is the strength of the LVMH Group.”
Creating value to increase the average price
Even if not all the new products of 2021 were revealed at this first digital trade show, it nevertheless made today’s trends in watchmaking clear.
This year we will see many limited collections along the lines of those created in collaboration with artists, like the Classic Fusion Takashi Murakami All Black or the Classic Fusion Orlinski in blue or black ceramic at Hublot, watches with complications, and pieces leaning heavily into jewelry at Bulgari, like the new Serpenti Spiga, with a destined-to-be iconic bracelet design that can be set strikingly with stones all the way around, or the Diva’s Dream Peacock, showing off the pinnacle of the brand's craftsmanship to spectacular advantages.
Since I joined Zenith three years ago, the average price has increased by 16%.
Julien Tornare, CEO of Zenith
In short, the idea is to create value in order to maintain or increase the average price, an approach that Zenith’s Julien Tornare echoes. “Since I joined Zenith three years ago, the average price has increased by 16%. Up to now the price of the Chronomaster was between 7,500 and 8,500 Swiss francs.
It will now be between 8,000 and 10,000 Swiss francs for steel. Our ambition is to double the business and increase volumes to 30,000 watches by 2025.
The brand is now healthy enough to do so.” The same trend is also rising at Hublot. “Indeed, average prices will increase, mainly through significant perceived value,” explains Ricardo Guadalupe. “We expect a significant double-digit rebound in 2021, if business doesn't come to another halt. We are back at 100% since September, so the rebound should be substantial and allow us to get closer to 2019 sales, that's the objective."
How to hit the desired business targets
It is highly likely that the brands will be targeting a return to production volumes equivalent to 2019 if possible, focusing their sales efforts on local customers and cementing the increase in online sales experienced in 2020.
The first real signals will come after the Chinese New Year and Valentine's Day.
Jean-Christophe Babin, CEO of Bulgari
For Bulgari's CEO, the year 2020 has been rich in lessons. “In 2020, our digital acceleration was significant. In March, Bulgari had eight e-commerce platforms; in September, we had seventeen. We have reached between 10 and 15% of sales in e-commerce in some countries. Our way of working has also changed with this digital frenzy, because Zoom allows for more meetings, involving more people. This has made our teams tighter; we meet our partners more frequently and work more efficiently. We have also innovated in our collection presentations thanks to a ‘Try On’ app that allowed our clients to virtually try on the new Barocko high jewelry collection. However, physical events will always be on the agenda. Mixing the two is now the future.”
All in all, therefore, there will be no shortage of investments in 2021. Babin concludes, “Our communication budgets will be higher in 2021, because we are determined to return to the business level of 2019. The first real signals will come after the Chinese New Year and Valentine's Day, which are unfortunately a little too close this year to capitalize on two sales opportunities. But we will be able to compare and take the pulse of the year's potential. Our efforts will focus on local customers, because COVID-19 has shown us that this is what we have to prioritize. We can no longer rely on tourism, because it is so volatile - in 2020, it stopped dead overnight.”
Share the post
Like most industries, Swiss watchmaking took some heavy hits from the pandemic, but the sector was already in the midst of a profound transformation. And according to Deloitte’s 2020 Industry Study, it looks set to come through it stronger.
Be notified of the latest publications and analysesRegister