This is, in its own way, the first validation of the atypical strategy that the company put into place for the brand. This unusual strategy was based on an in-depth and significant analysis of the market which showed “primarily a need to offer a Swiss Made mechanical watch with a ‘correct price’, which means between CHF 200 and 500 wholesale or, if you multiply by a factor of three or three and a half, a retail price of between CHF 600 to 700 and CHF 1,500 to 1,800, before tax.”

A potential of 600,000 watches
According to Alain Spinedi, this segment of the market represents about 600,000 watches per year for the Swiss watch industry today, out of a total of nearly four million mechanical timepieces. “It is a sector with a high growth potential.” Banking on the growing popularity of the mechanical watch as a category, this strategy also demonstrates the existence of a clientele eager to purchase a mechanical timepiece at an affordable price.
The limits to this growth are mostly of a structural nature and are to be found in the current bottlenecks of supply, whether in the movements—following the quota freeze imposed by ETA—or in the cases and other elements. “As far as movements are concerned, the only possible alternative that I see on the relatively close horizon is the rise in strength of Sellita, with its supply of ETA ‘clones’. As for the other elements, notably cases, this would require heavy investment and the employment of at least 4,000 more people to meet the new Swiss Made criteria—of which we are very near—by the year 2010. What is important to us, however, is not so much a dramatic increase in our watch production as it is to remain free in our choices and faithful to our values.”




EMOTION


Drastic cost controls
These values and this desired liberty thus mean a drastic control over costs as well as a finely tuned distribution strategy. On the level of the company’s operation, all savings are appreciated since each expense is translated directly in the final cost of the product. As an example, Alain Spinedi says that he flies about 250,000 kilometres a year around the world, all in economy class. As a second example, he insists that the brand is content to have a “modest stand at BaselWorld, costing around CHF 50,000, because a stand that costs CHF one million would add about CHF 50 to each watch on the wholesale level.”
This economic necessity also forces the brand to be inventive in terms of its advertising and communication. “Vast international campaigns are simply out of the question for us. We must compete using our inventiveness. We must offer window concepts that are particularly attractive.”




1931


Pressures of the large groups
As for distribution, the brand must exhibit patience, savoir-faire, and creativity. “The pressure of the large groups on distribution channels is becoming increasingly greater, making it more and more difficult to place product in the windows. At the same time, skyrocketing communication budgets and the shortage of mechanical movements only complicate the situation,” he says.
“But through the cracks in this gigantic wall, opportunities arise in terms of counter strat-egies. For example, the fact that large brands are opening more and more of their own shops offers us new prospects of forming partnerships with retailers who, up to now, could not—or would not—carry Louis Erard. We have demonstrated that we have good ‘sell through’, and that there is a specific clientele for our mechanical products,” he adds. “Our policy of 100-percent mechanical, the classic beauty of our models, our independence, and our exclusive approach to distribution, over the long term, are beginning to interest high-level retailers. What ‘turns them off’ a little even now, however, is paradoxically our modest price points and positioning.”




1931 Chronograph


Three new collections
Louis Erard has created three new distinct limited-series collections: Emotion, a feminine line, available in steel, steel and diamonds, pink gold, or pink gold and diamonds, all at an ultra-competitive price point; an evolution of the 1931 line in pink gold with a skeleton movement featuring GMT Grand Date (on a Technotime movement) and lunar phases; and a new 44-mm 1931 chronograph based on a Valjoux calibre.
But these limited collections do not mean the brand is changing its policy. The ‘volume’ production will continue. It is rather, according to Spinedi, a way for the brand to implement the famous saying of Deng Xiaoping: “One country, two systems”. These new collections will therefore be introduced into the so-called ‘value’ markets, such as Russia and Hong Kong. The 350 points of sale in these two important markets, as well as the more volume-oriented markets of Switzerland and Italy, currently account for 65 percent of the turnover of Louis Erard. Other markets that are being developed are primarily Taiwan, Ukraine, Germany, and Austria. The world is still a big place for Louis Erard.


Source: Europa Star December-Januar 2008 Magazine Issue