CEO Frédéric Arnault lays out his retail strategy for the Swiss watchmaker.
(Bloomberg) — On July 12, Swiss watchmaker TAG Heuer held a grand opening party for its new flagship on Fifth Avenue in Manhattan. Celebrities including Patrick Dempsey, Kieran Culkin, Natasha Lyonne, Alexandra Daddario and Thomas Doherty turned up for the celebration, which was presided over by Frédéric Arnault, chief executive officer of TAG Heuer, with his father, LVMH CEO Bernard Arnault in the wings.
There was a lot to celebrate: The new Fifth Avenue boutique is twice the size of the previous one, and the party marked the launch of the Carrera Skipper watch—an homage to one of the brand’s regatta watches from years past. The $6,750 watch features teal and orange accents, a 15-minute countdown clock for sailers to use as they await the start of a race, and a chronograph function for timing.
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The day before the launch, I sat down with Frédéric Arnault, 28, to discuss his strategy for the brand. Arnault joined TAG Heuer in 2017, first in a strategy role, and was elevated to CEO in 2020. As we’re seeing with other brands under the LVMH umbrella, including Tiffany and Louis Vuitton, he’s moving many the product lines to more expensive price points while cutting out stores and product models that don’t match an elite vision.
So far, he says, the strategy has been a success in revenue; while LVMH doesn’t release numbers per brand, Arnault cites “double-digit growth” in the past few years, not through selling more watches, but selling more expensive ones. Our conversation below has been edited for length and clarity. A teaser of the interview appeared earlier this week in the Pursuits Watch Club newsletter.
How important is this store for the brand?When I joined as CEO, we defined a new retail strategy. We wanted to invest a lot in our mono-brand stores. With mono brands, we can have the full brand experience and develop strong customer relationships. Being present on Fifth Avenue with great visibility was important as a brand statement. We had a flagship already, but it was not strong enough. So it was about elevating the overall experience. This store is more than double the size.
Globally, what have you done in that shift toward mono-brand stores?We drastically reduced the number of point of sales from 4,000 to 2,300, but we more than doubled the total number of mono-brands. [TAG Heuer has 260 boutiques worldwide.] In many places we had a boutique, but it was not necessarily in the best location or with the best floor arrangements. So we significantly elevated the current network. And we are opening a boutique every week, basically. Either us directly or with partners.
Tell me how TAG has been doing since you took over.Very well. One of the key objectives for us was brand elevation—growing through value and investing in our icons, especially the Carrera and the Monaco. The last launches we’ve released proved to be very successful: The new Carrera glass box has such an iconic and differentiated look and feel, and the new Monaco skeleton gives a very different flavor to this iconic piece.
We also pushed the boundaries in high-end watchmaking when we introduced the lab-grown diamonds with a totally new, innovative setting [in the Carrera Plasma line].
And also, we are reentering the world of high horology with high complications; The first expression of that is the Monaco that will be auctioned in the Only Watch auction. For the first time ever, we are doing a split seconds chronograph wristwatch. And then we will reenter the sports chronograph complication space in high watchmaking.
Has there been a reduction in product lines?We have fewer individual models than in the past, but in terms of lines, that hasn’t changed. It’s more a strategy of elevation in the existing collections: the Formula 1, the Aquaracer, the Carrera and the Monaco mainly.
My own first nice watch was a TAG. I still have it. It was given to me when I graduated from high school, and that’s the case for a lot of people. Is there a plan to move away from that entry-level luxury for people?Definitely not. We believe it’s an amazing strength for the brand. Everybody’s talking in the luxury industry about how to target Gen Z and be desirable to this customer base. And we have this strength already with our positioning. For most people, their first watch is offered as a gift. It’s not something they would buy for themselves. And this tradition of the first watch being TAG Heuer naturally helps us to stay top of mind for this young clientele. We want to then bring them into the brand and make sure that the second one that they would buy for themselves is a TAG Heuer.
Are you planning on raising prices further?Every year we are raising prices, and we also are introducing products at higher prices than generally they were before. For example, this Monaco skeleton is about $10,500 when previously, the models were more like $6,000.
Would you do a certified pre-owned program?We are not looking to entering the certified pre-owned space. Maybe longer term. We’re focusing on first-hand watches, first-hand customers.
How many watches are you selling annually these days?We don’t communicate on the volume, but what I can say is that we are not growing through volume. The volumes are staying what they are. It’s really the value of the pieces we’re selling that’s increasing significantly.
And how are sales in terms of dollars going? Double-digit growth, healthy in the past few years.
What are the most popular models by direct revenue?As a line, the No. 1 line for us is the Carrera, both the chronograph and also the three-hand steel-strap watches. The ones with the day/date complication are really bestsellers. But Monaco is growing very strongly.
What’s the watch—other than the plastic Formula 1 watch—that everybody wants you to make? This was one [gestures at Skipper on wrist] of them. I think what people are waiting for is the reentry in high complications. And we are doing some small choreograph complications here—the flyback. But collectors, they’ll talk about the Monaco V4 [a concept watch from 2004] and the Mikrograph. They ask when are we going to introduce such exceptional, unique, differentiated complications—and we are coming back on the segments with a very strong proposition.
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