In an effort to move from a pure traditional watch brand toa full-on lifestyle brand, the 151-year-old Swiss manufacturer, TAG Heuer, istaking some bold risks. As the world’s fourth largest luxury watch brand andnumber one worldwide in chronograph pieces, it is also launching its secondgeneration of luxury phones, called “Link”, the first luxury smart phonedeveloped on an android platform. Its expansion plan in the Middle East is noless ambitious. In July the firm opened its 10th boutique in the Middle East,in the Beirut Souks, with the Atamian family as their exclusive agent. Beirutwill be one of the first markets in the region to be exposed to the new “1887”,which is an update of the iconic Carrera watch, with a twist. Though originallylaunched in 1964, the firm is now a chronograph manufacturer, so movements aremade for the first time via the firm’s 100 percent in-house department, insteadof sourcing from Swiss suppliers of chronograph movements like Zenith and ETA.Executive got in on the details during a cozy bar room chat with GeneralManager of LVMH Watch & Jewelry, Middle East, Eric Vergnes. [TAG Heuer isone of the 60 brands under LVMH]
E How much doesit cost to produce the movement yourself?
It’s a huge investment… We are still at 25 percent of whatwe are aiming to produce in the future. But the difference in price would beonly around 10 percent.
E You don’tfeel that the people would rather choose the Zenith or the ETA movement?
The Zenith is very limited in terms of supplies, quantities.We have a Zenith modified movement “Caliber 36”, it’s on the very high-end,around $12,000, compared to $4,000 for the other ones.
E On apoint-of-sale level, how are you going to adapt your boutiques to allow thesenew models to be represented?
Our targeted customer is the feminine one; we have this verystrong image of being a masculine brand, but today, in the region, more than 50percent of our sales, in value, are done with ladies.
E Where doesthe strategy of diversifying away from watches come from?
We don’t have diversification in the main families of thewatches, which are the Carrera, Monaco 1969 and Grand Carrera. Seven years agowe launched the eyewear, and now, for every two watches we sell one pair ofeyewear, and 100,000 units of eyewear are sold every year. We are one of thevery few luxury brands making mobile phones. Of course we are very smallcompared to Vertu. For every 10 Vertu mobile phones sold, we sell one [Link].
E In the lastfour to five years the performance of luxury phone manufacturers was not verygood. How would you justify the Link [priced at $6,750]?
There was a survey that [said] that the market of luxuryphones will eventually be as big as the market of luxury watches. Nokia has haddifficulties, but Vertu is extremely successful in China, the Middle East andRussia. Our main competitors are stuck with their in-house software, but Linkhas a late generation of androids and the catalog of android applications.
E How much doesthe Middle East represent out of your total sales?
Approximately 5 percent, but we have huge potential forgrowth in the Middle East. We’re not very big in Saudi yet… Iran and the UnitedArab Emirates look very promising. We will not double the sales but we cancertainly grow by 30, 40, 50 percent.
E How did TAGHeuer manage the relationship with the retail agents around the world after thefinancial crisis?
All partners in the region (in mid 2008) had all of a suddennearly two years of stock. We didn’t push the selling, instead we did as muchadvertising as possible and by the end of 2009 they were back to one year ofinventory. No partner has dumped product.