In the aftermath of the quartz crisis in the 1970s, when many traditional Swiss watchmakers either shut down or got acquired, Audemars Piguet did not just survive, it came out with a product that changed the landscape of luxury watchmaking. According to industry lore, designer Gerald Genta was asked to come up with a watch with maximum durability and water resistance in 1971. Genta had one day to come up with an idea and if that wasn’t daunting enough, he had to design a watch made of stainless steel. When the Royal Oak—a two-hand watch in an octagonal steel bezel and integrated steel bracelet that would cost more than 3,000 Swiss francs—was launched at the Basel fair in 1972, it was at the other end of the spectrum from traditional Audemars Piguet watches: thin dress timepieces packed with complications in precious metal. What could help in understanding the difficulty in making a watch of such finesse in steel is the fact that Genta made the first prototype in gold. Understandably, it was dismissed as a gimmick. It took more than three years to sell the first 1,000 pieces.
More than four decades on, there have been over 100 variants of the original Royal Oak and they have been spotted on who’s who—ranging from German fashion designer Karl Lagerfeld to tennis star Serena Williams. Very few watches or products have achieved such cult status. Over the 142 years of its existence, Audemars Piguet has redefined innovation and risk-taking a number of times. It remains among the last few luxury Swiss watchmakers to be privately owned by its founding families.
“We enjoy being independent. And we see that as a strength rather than a liability,” says Jonathan King, 46, chief executive officer (CEO) for South-East Asia at Audemars Piguet. “We don’t have to report to shareholders, we don’t have to publish quarterly numbers and we can take longer-term decisions.”
King joined Audemars Piguet as CEO of Japanese operations in 2012, and was moved to his new role in August.
On a recent India visit, King spoke in an interview about the Indian market and the new challenges faced by the Swiss watch industry. Edited excerpts:
What brings you to India?
I moved to Singapore three months ago to take up the position of CEO, Audemars Piguet South-East Asia, that includes Australia and India. It is my first trip to the country and I plan on spending some time here to look at and understand the Indian market.
Does the timing have anything to do with the fact that the Chinese market for luxury goods seems to be stagnating?
No, not at all. It is not a pivot. We have done very well in the last three years even as some brands have been deeply affected by the perception of a luxury slowdown in Greater China. In fact, I am here to visit a country where we have been present for many years now, to make sure we can develop the market in a way that can create more value and delight for our customers.
Where does India sit in Audemars Piguet’s scheme of things for the future? What are your growth plans for India?
We have got two partners here—Kapoor Watch Co. in Delhi and Time Avenue in Mumbai. So we have a modest footprint and modest sales in the country. But I would caution against that being the yardstick because our global data shows that a good number of Indian residents are buying our watches outside the country. So you have to take into account direct sales (through distribution in India) and indirect sales (outside India) to get the true picture. In the future, with perhaps the advantages of GST (goods and services tax), we will see more Indians buying in India.
In terms of growth, I’d say all options are open. The mission for India in the future would be to make sure that we give the best possible ownership experience to our customers here—from bringing the best selections to the best services.
Are you happy with your performance in India?
I think we are very satisfied. We are a small, fiercely independent, family-owned watch brand. We make 40,000 watches a year. The Americas make for about 20-30% of our global business, Europe and the Middle East would be around 30% and 30-35% would be Asia—Greater China and South-East Asia.
So yes, we would love to sell more in India but the truth is that we are at our maximum capacity right now. In the future I think we will look at how to grow organically in India. And once more Indians start buying our watches in India, the business will evolve naturally.
Why do you think people are buying outside India?
We are present in only two cities and that could be one reason. And then there is the elephant in the room; I think the tax structure may have been a strong influencing factor in purchasing decisions.
Is the smartwatch threat over for the Swiss watch industry?
I think, as a brand, Audemars Piguet faced a bigger threat during the quartz crisis. That was a paradigm shift for the industry; mechanical watches went almost obsolete overnight. That was a bigger existential threat. The evolution of smartwatches is rather like a different flavour than a new recipe altogether. They are electronic, they are quartz, they offer more features and functionality but they don’t represent a paradigm shift. And I don’t think a mechanical watch has been a necessity for a long time.
We don’t believe smartwatches are a mutually exclusive ownership proposition. We have many customers who happily tell us about the smartwatches they have. So we know, smartwatches aren’t an issue for us. In a different range, let’s say $1,000-3,000, you might have a completely different scenario but that is not our segment.
What is the next big challenge for the Swiss watch industry?
I think there are multiple challenges. We need to continue to delight our customers; we need to continue to innovate and experiment. We need to maintain originality and quality while bringing newness to the table.
The Royal Oak is a cult watch. What is your next cult product?
The Royal Oak in 1972, the Royal Oak Offshore in 1993 and the Royal Oak Concept in 2002, these were the three key milestones. The Royal Oak was conceived as an avant-garde reaction to a dramatically changing watch landscape during the quartz crisis. That’s why we broke some rules. And we continue to do that. Many people don’t realize that producing steel in 1972 in the kind of finish that we had in our watches, it was a huge technical challenge. We broke the rules again in 1993 when we introduced the Royal Oak Offshore—a 42mm large, open gasket, hyper-masculine piece. And then again in 2002, with the Royal Oak Concept which was made of alacrite (an alloy from the aeronautical industry, the hardest material available at the time) and had 500m water resistance. And, even though those around us thought we had lost our minds, history has proven that we were on the right track. And we will continue with that innovative spirit.
Are challenges different in South-East Asia compared with Europe?
Yes and no. Whether you are in Europe or South or South-East Asia, I don’t think the values change. Creativity, invention, these things are universal. Artistry, savoir faire will always be appreciated. Beyond that you will have markets that will enjoy one shape or one material of a timepiece more than the other, which I think is a minor adjustment.
Did demonetization and GST have any effect on your sales here?
Not really. The impression I get from my conversations with our partners and consumers here is that while these were major policy changes, the overall sentiment for the future is positive. They might have created a short period of uncertainty but that seems to be stabilizing.