Thierry Stern is trying to persuade CEO Middle East that he doesn’t usually wear a $1m watch. “It’s very rare that I wear a watch like this but it’s a new model and I wanted to test it. But at $1m people are too afraid to wear it so I have to,” he laughs, holding up his arm and admiring the timepiece on his wrist.
As the president of Patek Philippe and the fourth generation of his family to control the luxury watchmaker, Stern is well-positioned to be wearing such an expensive timepiece. But he is clear to add that for the Geneva-based firm, the customer always comes first.
“As a family we are not very good customers because we have maybe three or four watches each. Sometimes I change for a new model, but I never carry a new model; the new collection should be for our clients so normally I wait two years [after its launch] to take a watch that I like,” he says.
It is perhaps this attention to detail that has helped Patek Philippe maintain its reputation as one of the most coveted watch brands in the world and the manufacturer by which all others are measured. Established in 1851 by the Polish watchmaker Antoni Patek and Adrien Philippe, it wasn’t until Stern’s grandfather Henri — whose father and great-uncle purchased the brand in 1932 — took over the helm and developed its US market and international network throughout the 1950s and 1960s that Patek Philippe secured the global reputation it continues to enjoy. Today, the firm produces around 50,000 timepieces annually and is one of the only family-owned and operated Swiss watch firms.
With a starting price of $21,800 for a man’s watch, Patek Philippe’s financial success remains dependent on exports and is susceptible to fluctuating economies around the world. But while previous global recessions in the 1970s and 1980s were devastating for luxury watchmakers, coinciding with the appearance of quartz technology, Swiss watches have continued to defy Europe’s debt crisis and concerns of a slowdown in the US and China. Watch exports from Switzerland for the year to November increased 12.6 percent to $21.5bn, a record high, according to figures released by the Swiss Customs Office.
“The US market is starting to come back now and the rest is quite stable for us,” says Stern. “I must say we didn’t have any trouble; some markets are down — Greece for example — but most of the markets are quite good. Russia is going well, as is China so we are quite happy. People have the money to invest but they are more cautious. There are a lot of watches that are fun but there is no real value behind them so those brands suffer. Those that have value don’t suffer,” he adds.
The fact a Patek Philippe watch holds its value far better than a sports car continues to make it an attractive purchase, regardless of the economic outlook. In a November 2012 Christie’s Geneva Important Watch auction, a platinum chronometer Patek Philippe wristwatch broke world records for a watch without complications when it sold for just under $4m. At the same auction, eighteen of the top 20 lots were manufactured by the Geneva-based firm with three selling for more than $1m. Rival auction house Sotheby’s held its first dedicated watch auction in 1980 and the recent surge in interest now sees it holding two a year in London, New York, Geneva and Hong Kong.
“It’s not just about buying a watch,” says Stern. “We are talking about a piece of art; it’s more than something that just tells the time. People want to wear something that doesn’t have a battery, that doesn’t need charging every night like your cellular phone does.”
“There are two different types of buyers; you have the watch collector who never wears it but he will look at his watches every night and enjoy it and then you have the one that spent $1m on it, who likes to wear it and use it,” he adds.
Like many Swiss watchmakers the oil-rich Gulf is becoming an increasingly important market for Patek Philippe. Consumers in the UAE purchased 23 percent more Swiss watches in 2012 compared to the previous year, ranking the Gulf state the world’s ninth largest market, according to the Federation of the Swiss Watch Industry. Saudi Arabia, which accounted for $331m of sales during the same review period, was the fourteenth largest market globally.
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Consumers in the Gulf have become much more discerning watch buyers in recent years, says Stern. “Not too long ago people in the Middle East were more concerned about the aesthetics of the watch,” he explains. “What is interesting is that when I started [to come here] consumers were never concerned about the movement. When I started to talk about the complexity of the movement very often they would say ‘that’s okay we know enough’. It was difficult for me in one sense because we work so hard in terms in precision and accuracy.
“Today, there is a major change. People are looking for something that they can wear every day. I wouldn’t say they are more discreet but they are not willing to wear a watch that is fully pavé today every day and they have become much more knowledgeable about the complications,” he adds.
Qatar’s Sheikh Saud Bin Mohammed Bin Ali Al Thani was in November revealed as the owner of the world’s most expensive watch, a pocket watch known as the Henry Graves Supercomplication, which he bought for a record $11m in a Sotheby’s auction in 1999. Sheikh Saud is part of a growing number of watch collectors and consumers that are becoming aware of the value of a Patek Philippe.
“People in the region have seen the results at auctions for some watches and want something rare, which becomes more valuable over time,” says Stern. “It’s a good investment and it’s something that [could]be carried around very easily. I think they like to show their friends and say ‘I have this complication, it’s very rare’. That is exactly what is happening here today. It’s a nice game to tease your friends and in two-three years time you can see the increase [in value],” he adds.
Swiss watch sales may be defying the economic downturn but that doesn’t mean Patek Philippe will be increasing its production any time soon. The luxury watchmaker treads a fine line between satisfying consumer demand while maintaining the exclusivity its customers demand. “Everyone tells me you should produce more but when the client receives the watch, they are the first ones to say to me, you should stop now,” he laughs.
“The balance is always a little bit tricky but the result is that we have been improving in this market,” he adds. “Today, for the Middle East we are talking about 8 percent of the global market and I see that growing because you have a lot of Chinese and Russians coming [to Dubai] so it’s not only local clientele.
“I always say to the local retailers that they should reserve some of the watches for the local clientele. Selling to Chinese [tourists] is a good sale, it’s quick and easy but it’s the local clientele that will come back,” he adds.
Stern adopts a similar approach when it comes to Patek Philippe’s overall management. “We are not just aiming to make money; Patek is a long-term brand. If worked in a clear manner I think people will always respect the brand. That’s the advantage of a family business; you can control the strategy and you don’t change your CEO every three years,” he explains.
“You cannot have a sporty line one day and become a classy line the next [because] it’s very hard for the customer to follow and even worse for the retailers because they are carrying over 40 brands. The second point is to maintain quality; there is no concession in terms of quality. We are always [striving] to improve the quality and the accuracy of our watches.”
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