Aurel Bacs will require little introduction to those invested in the watch industry. For ten years he served as the outgoing International Head of Watches at Christie’s, growing revenues from $8 million in 2003 to $126 million in 2012, an increase of 1575% in just a decade. Prior to joining Christie’s he served at both Sotheby’s and Phillips.
He is credited with creating a veritable retail experience at Christie’s, with a focus on bringing the end-consumer to the auction house. Bacs was able to grow the auction pool from “50 European and North American collectors” – on which the market depended – to roughly 1000 active bidders in each sale. One of his most memorable sales was that of a unique Patek Philippe reference 1527, which sold for $5’7 million.
His departure from Christie’s in 2013 sent waves of speculation through the watch industry as to his next move. As 2014 draws near to a close, little more is known about his next steps. But his presence can still be felt in the world of Swiss watchmaking, as president of the jury for the 2014 edition of the Grand Prix d’Horlogerie de Genève.
Ahead of the Grand Prix d’Horlogerie de Genève, we sat down with Mr. Bacs to gauge how the Haute Horlogerie segment is performing.
“ I think the overall health of the high-end watchmaking market continues to exude strength ”
How would you describe the overall health of the Haute Horlogerie segment?
The philosophical question of what constitutes Haute Horlogerie aside, I think the overall health of the high-end watchmaking market continues to exude strength. We have witnessed an explosion in terms of interest and awareness on five continents, when 150 to 200 years ago the buyers for high-quality watches only came from Europe.
In the 19th century America became the second continent for valuable timekeepers. In the 20th century, we had Asia becoming the third, then South America. We grew and grew and grew, and awareness for fine watches has grown beyond our wildest expectations.
There are some challenges, of course. If China is slowing it has an impact, the same can be said of Russia. I believe we should be very cautious. Brands cannot assume that every year the market can grow 5% to 10% as a given, but I would say we’re possibly complaining today at a very high level.
“ Haute Horlogerie, in my view, is a discipline, a state of mind ”
As the interest in watches has grown, so to have the number of offerings. Therefore, what do you personally define as a piece of true Haute Horlogerie?
Haute Horlogerie is in no way linked to a price tag or to diamonds or the advertising you see in the press for a specific watch. Haute Horlogerie, in my view, is a discipline, a state of mind. A state of mind where the people who produce the watch stick to values surrounding the making of a watch. That deserves to be called Haute Horlogerie.
We have Haute Couture as another haute domain. There, I think things are much clearer in terms of who can call themselves Haute Couture and who cannot. It’s defined. There are rules. There is in a board in Paris who decides which brands have the right to use this description and which do not.
I believe that in watches, it’s not just about how expensive, or how many hands or third wheels a watch has. To me, it’s about the authenticity of the piece. I’m not talking about authenticity in terms of whether it is made in Switzerland or in China. I’m begging the question; is it an original?
Omega Speedmaster, Dark Side of the Moon
Pre-selected for the 2014 Grand Prix d’Horlogerie de Genève, Chronograph
Is the product handmade or is it mass-produced by machines? How does the company – the watch manufacturer – treat its customers? Are they there 5 or 10 or 20 or 50 years later to help the client to service the piece? How transparent is their manufacturing process? How do they talk to their markets?
And how do the manufacturers treat their heritage? Are they respectful towards that history or are they ignoring it? Or worse, are they even in denial? Are they preserving knowledge and savoir-faire? Are they instilling the values of the watchmakers who started their brand into the next generation? Or just forcing turnover and profits?
At the end of the day I can liken it to fine food. For me Haute Cuisine is as well handmade ravioli prepared by an Italian grandmother with love, who spent hours and hours in the kitchen on one dish, even though it is ‘just’ pasta. Haute Cuisine is not frozen foie gras served for €100 in an expensive restaurant, despite the ‘haute’ associations.
Basically its not just what we see, it is everything that surrounds the end product.
“ How does the watch manufacturer treat its customers? How transparent is their manufacturing process? ”
Are there any trends that you have identified overseeing the 2014 Grand Prix d’Horlogerie de Genève?
We’re in such a globalized world today, with so many different aesthetics, tastes, budgets and consumer needs that every brand can really create its own industry for each market according to their history and DNA. But globally, in terms of size, I am noticing that watches are slightly and gradually coming back from over-sized or super-sized watch designs.
I have noticed a lot of retro. Many brands have, without abandoning innovation, taken a moment to reflect and revisited the drawing board, thinking about their values and what originally made their brands strong. Innovation is also a trend in itself, but in terms of design we are seeing clearer proposals, more experienced design language, less confusing designs, which I think is healthy.
If I may compare this again to food, after the explosion of Haute Cuisine and molecular gastronomy, we are now shifting back to more organic food, with a focus on sourcing the most outstanding produce, often on a local scale.
“ Many brands are thinking about their values and what originally made them strong ”
To this effect I believe that the watch industry as a whole is no longer just thinking “I need to sell a watch for $2 million because there is an oligarch or a new billionaire who will buy it”. It’s not necessarily about buying the ‘caviar’ of watches.
When you read the news today you realise there are important and difficult things happening in the world , it is not necessarily socially acceptable to feign ignorance and spend exorbitant amounts of money on frivolous things, which have explicitly been designed to be ‘expensive’. So I think this ‘overkill’ approach of ‘more is more’ is coming to a slowdown, which is a welcome trend.
There are also a lot of innovations in terms of materials and of course technology. Selection is one of the key words these days, selecting materials that come from specific industries and applying them to watches. I think overall, all of these trends are positive for the consumers.
Louis Vuitton, Tambour Monogram Tourbillon
Pre-selected for the 2014 Grand Prix d’Horlogerie de Genève, Women’s High Mechanical
Which nationalities are driving the most significant growth in haute horlogerie?
There are several ways of seeing ‘nationality’ as a growth driver. It goes without saying that a nationality that has a population of 200, 300, 500 million or even a billion, will easily outweigh a region of the size of Switzerland with 7 million, simply in terms of sheer size.
At the same time, we have, today, amazingly different economic indicators to consider. For example, how is the country performing? What about GDP growth? Is wealth increasing or decreasing? What are the key socio-political trends? These are all very important, as a watch, per se, is not something you need in life, like fuel, bread or water. Haute Horlogerie is something you consider purchasing for yourself if you are doing well and feeling positive.
The third element relates to the level of understanding and education regarding watches, either Haute Horlogerie or otherwise. There needs to be a baseline appreciation and a certain level of knowledge to appreciate haute horlogerie, regardless of the economic situation. This knowledge is sometimes stronger in struggling economies, yet in flourishing economies, it is sometimes less present.
So it is these three elements combined that make a market an important player, not one sole driver; the size of the country, the economic performance of the country and it is the affinity towards high-end watches. The combination can give us sometimes very, very unusual results.
“ Hong Kong is still one of the absolutely leading regions in terms of sales ”
Hong Kong is a great example, and one that is still absolutely leading in terms of sales. Hong Kong is nowhere near the size of Germany or Brazil or India, but the market has a very high-level of understanding and a very strong economic backup, which gives Hong Kong all the ingredients to be a top market for valuable objects.
At the same time, just to given you another example, over the last decade I’ve witnessed countries like Indonesia become one of the greatest and the most positive surprise supporters of this domain. The economy has consistently outperformed European countries in the past decade, supported by over 300 million inhabitants with an incredible appetite for fine watches.
Then there are countries where the market will shift depending on what the president says one day and what the banks decide on another day, making the market a challenging but interesting moving target. China, of course, has had its ups and downs with the crackdown on corruption and gifting. But overall, as long as one market is slowing by 10% and another market is up by 10% – provided that they are of the same volume or size – then for the Swiss watch industry, it’s neutral news.
“ Indonesia has become one of the most positive surprise supporters of this domain ”
Beyond nationalities, how significant do you believe the opportunity is for complicated women’s watches?
Complications for women are undoubtedly the most challenging and interesting segment. Women, as we naturally understand, constitute 50% of the planet’s population, so technically speaking we can tap into this market. We are seeing women’s wealth increase, which is great news, obviously not only for the watch market. But there are many, many parameters to be considered in realising this opportunity.
Whether it is that – and I say regrettably – decision-makers in the household are still by a vast majority, male. There is also a question as to the level of interest that women may have towards a mechanical chronograph and mechanical perpetual calendar and a mechanical repeater, versus nice, stylish, practical watches that maybe even have a quantum mix.
I believe when you think of women and their past in the 20th century, how women have started to become CEOs, Prime Ministers, smoking cigars, driving SUVs, drinking scotch or joining the army, society is indeed changing. And the interests of women are changing, which I conclude will certainly be reflected in the years to come in their interest in mechanical, complicated watches.
Chaumet, Precious Watch Attrape-Moi… Si Tu M’aimes
Pre-selected for the 2014 Grand Prix d’Horlogerie de Genève, Artistic Crafts
One of the trends I have noticed is that women are looking for bigger watches. It was an absolute faux pas twenty or thirty years ago for a woman to wear a watch that was more than 25 millimetres in size. In fact, watchmakers would compete to be able to produce the smallest mechanical watch, which was also beautiful. Today women are wearing diver’s watches, pilot watches, men’s watches, as much as they drive Range Rovers and Harley Davidson motorbikes.
I think that the woman’s watch as a concept is possibly going to be revived. Of course, nature will continue to suggest women’s watches need to be smaller due to its own definition, a lady’s wrist is smaller, but women also like SUVs for practical reasons, for status, for security. In watches, many women say, “Well, on the watch I inherited from my grandmother I couldn’t even read the time. It’s too small.”
Sometimes maybe it’s just that we need, as an example, an Oprah Winfrey to tell the world in her TV show that she’s fascinated by wearing a mechanical split-second chronograph, and we may see that next week that women buy such a watch. Sometimes you just need that trigger. But eventually it will happen. I’m absolutely sure.
“ Today women are wearing diver’s watches, pilot watches, men’s watches ”
And what about millennials? How can Haute Horlogerie engage the next generation of luxury consumers?
I agree that Haute Horlogerie is a baby boomer market. There have been no world wars in some years, growth has continued despite a few bumps and hiccups, but overall the world population has been allowed to discover and enjoy the beautiful things in life. Travel is one of them. Art is another. 200 years ago, it was only the elite who could even consider such luxuries.
Today, art is something that has become much more democratic and accessible. You don’t need to be a professor in art history to afford or enjoy art, nor a billionaire. Watches are no exception. Even though in hindsight we call it Haute Horlogerie, a wristwatch 50 years ago was not a collector’s item.
For the moment, the baby boomers will support this market. But what is the next generation going to do? The next generation may not even want a mechanical wristwatch. They may want an Apple watch. They may want no watch at all and say, “My mobile phone in my pocket is actually doing everything that the grand complication of my grandfather is doing.”
“ Even though in hindsight we call it Haute Horlogerie, a wristwatch 50 years ago was not a collector’s item ”
This is a challenge. This is a real challenge. I think the watch industry will survive despite the challenges and attacks from new gadgets and new time-telling devices. When you look at wine it is a unique beverage in the sense it does not address thirst, not like water or sports drinks do. Wines from Bordeaux and Tuscany don’t quench thirst yet still they are here today, at the heights of their production because wine is considered culture.
Watches are culture too because it’s no longer about time measurement. We all read the time on our dashboard in the car or a clock on the oven or on our smartphones. Instead Haute Horlogerie is an expression of culture and a level of sophistication within society. It is a celebration of beautiful things and an expression of education and savoir-faire..
Breguet, Classic Tourbillon Quantième Perpétual
Pre-selected for the 2014 Grand Prix d’Horlogerie de Genève, Calendar
Overall, what do you feel are the most pressing challenges the industry is facing?
First of all I think that Swiss or European high-end watchmaking should look much closer and listen more carefully to the needs of its clients, not just in the short term but also in the long term. An industry driven by immediate goals risks losing sight of the bigger picture., when the immediate goals are market share, sales, shareholder value and growth.
A lot of houses are not sufficiently thinking about what do they need to do in order to be well-positioned vis-à-vis the market in five or ten years from now. They are thinking about how to increase revenue and to perpetuate the stellar performance of the industry over the past decade.
But I believe the industry needs to refocus on sustainability, on sustainable growth, to think beyond the next Baselworld launch or watchmaking competition, Perhaps brands should consider limiting growth, just as has been the strategy of some AAA car manufacturers or famous workshops producing maroquinerie. I know this is not the goal of any businessman, but we need to ensure the longstanding desirability of this non-necessity object, which no-one actually needs, especially not to tell the time.
“ I believe the industry needs to refocus on sustainability, on sustainable growth ”
The industry also needs to understand that year after year, consumers are much better informed and there is almost a demand or need for transparency. Watch manufacturers must realise that the times where you could just cut corners are definitely over in today’s world.
That means that they can only adhere to the purest, most diligent, most sincere business practices if they want to create long-term loyalty and cultivate respect from their clients. Once you have decided to spend thousands, tens of thousands, or even hundreds of thousands on a timepiece, it’s not just about the product. It’s the manufacture, the knowledge, the retail experience and the after sale service.
“ If you take your customer very seriously you can grow without ruining your image ”
In terms of protecting the positioning of a luxury timepiece brand, at what point should growth be officially limited?
It’s an extraordinarily interesting question in my view. Personally, I don’t think there should be a limitation to growth even though some brands have, in my view, pushed the limits too far. Volume can endanger the status of a brand but mustn’t necessarily. And I say that because in many industries we see very successful examples of managing this balance. If you are a brand and you take your customer very seriously, you can grow without either ruining your image or ruining the idea of being a luxury to your consumer.
Take Rolex as an example, where it is believed that over one-million pieces are manufactured each year. There are official reports that can be found in the industry that confirm the number of chronometers that they have tested each year and the quantity of gold they are consuming for their production. And Rolex, in my view, is taking their client very seriously.
They offer an excellent product. And when consumers purchase their product they understand that they are not just one of a select few. They take their customer very seriously and offer an excellent product, thus they continue to be a luxury brand in my view.
Porsche is another good example in the car industry. It is a brand that remains a ‘gold standard’ in the industry in terms of quality and performance, despite the fact you will see many of their cars throughout the world. Porsche has really done their homework in terms of managing quality and pricing, alongside innovation and tradition, to show that ‘luxury’ can be done at numbers that Ferrari or Lamborghini couldn’t even consider. So I think it can be achieved.
Graff Multi-Coloured Butterfly Watch
Pre-selected for the 2014 Grand Prix d’Horlogerie de Genève, Jewellery
Finally, what do you feel are the biggest opportunities facing Haute Horlogerie?
The ever growing and opening markets in Asia, in South America and in Africa. Africa has not even been tapped in on the surface, in my view. There are an inordinate number of people who have not yet had the pleasure to discovering and explore Haute Horlogerie.
There are many people on the planet and there are many priorities, understandably. But with the markets coming together and communication now being so much easier thanks to the tools we have, I think that the watch industry can expect that the world-wide community will continue to grow, over the coming decade.
And this will be I think, enough growth. The industry must be careful to manage both the old loyal client and the new, and not lose sight of just chasing new markets or generations in the quest for growth. Brands must continue to be faithful to their clients, as they hope that their clients are faithful to them, to keep their own communities together.
Just like a shepherd must keep together his herd, the watch industry must look after every soul interested in timepieces. By giving them what they deserve and what they rightly can expect.
For more in our series of conversations with Luxury Leaders in the timepiece industry, please see our most recent editions as follows: