By Elizabeth Broomhall
Timex Group's Paolo Marai on the watch-maker's expansion plans, and why the jewellery market is proving ever more lucrative
Paolo Marai is one of those people who really suits his job. Smartly dressed and well spoken, he emanates an obvious passion for style, and being Italian, rather effortlessly markets the brands of his firm’s Italian fashion designer partners. “Maybe we chose Italian brands because I’m Italian,” he laughs. “It’s a bit of an ongoing joke.”
Marai took the job at US watch-maker Timex Group six years ago. By then, he was well versed in the world of fashion, working almost fifteen years with clothing, shoes and jewellery, not to mention high-end fashion brands such as Fendi, Dior, Vuitton and Kenzo. Given his experience, it seemed only natural that he be appointed to manage Timex Luxury Group Division, which at the time, was in its early years of designing, manufacturing and distributing fashion-branded, Swiss-made watches in partnership with Versace. Two years later under Marai’s leadership, the company added two additional Italian designers to its portfolio, namely Valentino and Ferragamo.
Of course, after seven years in operation, Timex Luxury Group Division is today ranked one of the top ten watch groups in the world, with Marai at the helm. In the GCC particularly, he and the rest of the company are working hard to further increase the firm’s presence, especially in countries such as the UAE, which is currently the eighth largest market worldwide for luxury Swiss-made watches.
“We have about 70-75 stores across the GCC, and we’re hoping to have more than one hundred by the end of the year,” he says. “Certainly the entire GCC is very important for us, as over 40 percent of our total turnover comes from this area.”
Asked how business has gone so far in 2011, with the region not long out of recession and still feeling the effects of political instability, and Marai is rather positive. He says that, despite the social unrest, sales have continued to increase, and to much higher levels than expected.
“In the GCC, we have already reached about 85 percent of our total sales for 2010. The truth is that we have not been scared about the political turmoil. Some companies have been frightened and diverted their investment to other regions, but we have maintained a focus here which has resulted in very impressive growth.”
He adds, however, that the firm is far from reluctant to change. Part of its success over the last few years he says, stems from the firm altering its product portfolio in line with varying market conditions. “After 2009 we completely changed our strategy in terms of products and consumer approach and we tried to deliver more affordable products, and this has proven to be a win-win strategy.”
Another lesson from the recession, is that you should never rely on one segment of the market. “In this region, we have different consumer profiles, in that we serve the local market as well as the visitors. The benefits of this were particularly evident during 2009. After the crisis a lot of brands were scared about the Middle East and Dubai in particular because sales were dropping heavily. But this was only true for those whose sales were based on visitors. Our sales weren’t affected,” he says, but admits that one of the good things about this year is the increase in visitors from China and Russia, both of these groups being among the key purchasers of Timex and designer products.
As for the locals, Marai has noticed some key trends in watch-buying which are very specific to this part of the world. As a result, the company has had to modify its collections to match Middle East demand.
“Emerging markets are typically different from traditional markets, in that there is a much stronger inclination towards fashion and designer brands,” he says. “There are two possible reasons for this. One could be the lack of heritage, they say the less heritage you have the freer you are to choose, and another could be the prevalence of new, young generations. In Europe, where the average age-range of customers in 40-45 years old, consumers tend to see watches as technology. In the emerging markets, where the age group is much younger, say 20-30, they are more concerned with the design and the brand.”
And of course, they prefer diamonds. Marai says that in an attempt to accommodate the expensive tastes of the market, Timex has gone as far as to make watch faces approximately 2mm larger than those sold in Europe, as well as to increase the number of diamonds embedded on each timepiece. “More than 60 percent of the watches we sell in this region have diamonds in them, compared to just 10 percent of the watches we sell in Europe.” Perhaps less surprising, is that just under 70 percent of all customers are women. “Men are less interested in fashion brands,” says Marai. “This tends to be the case all over the world, except in Japan and Korea. In those places men are leaders in consumption.”
Changes in consumer spending behaviour are also less specific to the Middle East. Since the recession, consumers have become noticeably more frugal when shopping, leading to reports of the growing value of budget retail market in one of the world’s most lavish cities. According to Marai, this is not because people don’t necessarily have the money, or even a direct result of the recession. Rather, it is a new trend of consumption, brought about (at least in the watch sector) by the need for more accessories and the ability to change watches to match certain outfits. “Back in 2008 you could easily sell a watch for $10,000, $15,000 or $20,000, but nowadays, people would prefer to buy several pieces at $2,000-$3,000 each.”
Separately, he refers to variations in the number of people within each portion in the market. “I would also say that the class of consumer has changed in the past few years. For example, we have a huge volume of sales between $700 and $1,500, a decline the market between $1,500 and $3,000 and then you go up again after $3,000. The middle class is disappearing.”
But having already adapted to changes in the market, the company now has its sights set on expansion. In 2011 alone, the luxury watchmaker plans to add 30 new points of sale to its GCC portfolio, increasing its presence in multi-brand stores around the region from 30 to 40 in Dubai, from 20 to 30 in Kuwait and from 35 to 40 in Saudi Arabia. At some point in the future, it is also mulling a new mono-brand, Versace boutique (in addition to its existing store in Dubai Mall) either in Saudi Arabia, Kuwait or Qatar, each having great potential for such an outlet due to population figures and growth forecasts.
“We currently have our mono-brand Versace watch and jewellery store in Dubai Mall. At the moment we don’t have plans to open up others in the region, but Qatar, Saudi Arabia and Kuwait could all be options in the future.”
Additional points of sale include duty free channels, and nine Versace branded boutiques around the region where the watches are sold alongside Versace clothes and accessories. Although the firm has specific plans to expand in these areas, it is hoping for major growth in at least the duty free channels during the second half of this year.
Other expansion plans are less about numbers of stores and more about sectors. According to Marai, 2011 will be an important time for the group to tap into the lucrative jewellery market, and a perfect opportunity to start looking at accessories.
“Now is the right moment to dedicate more attention to the jewellery market, which is four times bigger than watches. Also, all the fashion brands do watches today, but very few of them do jewellery. So potentially you have a better chance for a fashion brand to be successful in the jewellery business.”
The Timex boss adds: “We are also working on some new concepts for multi-product stores together with other accessories. Accessories stores are becoming an interesting new segmentation of the distribution, so certainly we are also moving in this direction.”
Paolo Marai: the right man for the job
Paolo Marai is the president and CEO of Timex Group Luxury Division, a subsidiary of US-based Timex Group. Passionate about luxury as well as fashion, he has spent almost fifteen years working with clothing, shoes and watches, and in different company departments such as marketing, sales and production. He is best known for his work with high-end brands such as Fendi, Dior, Vuitton and Kenzo among others.
Marai started his career at Thomson Consumer Electronics, responsible for audio equipment marketing. Just three years later, he set up his own company in Italy, Unicad Sistemi, offering innovative 3D CAD services. But of course, watches were always of more interest to Marai, and it wasn’t long before he took a position at Swatch Group. By 2005, he was ready to move again, and with a wealth of experience he was appointed president and CEO of the Timex Group Luxury Division, which at the time dealt only in Versace watches. Marai is responsible for the luxury segment worldwide, and under his guidance, in early 2007 the Timex Group added two prestigious brands Valentino and Ferragamo.For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.